Understanding & Managing Your Organization's Electric Power Costs

In addition to the cost of energy – the commodity – itself, let’s take a look at three non-commodity costs often passed on to end users:

  1. The cost to maintain utility infrastructure, such as poles, wires and other grid technology
  2. Capacity and other costs to guarantee grid reliability and long-distance transmission
  3. Renewable Portfolio Standards (RPS) related costs for environmental and renewable energy programs

Most indications suggest these costs are likely to become more volatile.

Traditional supply and demand will drive commodity price volatility, along with legislation and geopolitical factors. But, commodity prices are only a fraction of what electricity buyers need to monitor. The evolution of electricity markets has introduced other variables into the equation.  And to further complicate things for buyers, these variables can vary significantly by market area.

Energy complexity requires you to balance security, affordability and sustainability.

Clearly, there’s more to electric bills – and potential cost savings – than many companies realize. Managing all of these complex variables can be overwhelming. But if companies truly want to save on electric power, they have no other choice.

The environment that we’ve been in for some time is quite tactical and commoditized. A lot of companies simply treated buying energy like buying any other commodity. But the big shift is going from that world of tactical to strategic and optimized.

And as power generation moves increasingly toward renewables, that shift is coming whether companies like it or not. Companies that accept this reality and make the necessary investments in infrastructure, personnel and policies stand to save significantly. As an added bonus, making those changes also prepares them for what’s certain to be a coming era of higher power prices.

Understand your cost drivers. Then manage them to reduce your cost.

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