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‘Flexible purchasing’ a way of staving off escalating energy costs

Posted on 24 Jun 2022 and read 557 times
‘Flexible purchasing’  a way of staving off escalating energy costs Photo: shofloor at Skymark Packaging International in Scunthorpe which has adopted ‘flexible purchasing’

Manufacturing SMEs are being urged to consider flexible contracts as a way of staving off escalating energy costs. Control Energy Costs (CEC), which works with hundreds of companies around the UK, has seen a 50% rise in the number of firms looking at this form of ‘purchasing’ and is now offering industry the chance for businesses to pool their usage together as a collective.

This means they will be able to take advantage of ‘flexible purchasing’ for the first time, as normally it is only reserved for organisations that tend to consume more than 10GWh per annum and thus require a more sophisticated buying strategy.

Liam Conway, head of sales at CEC, said: “Flexible contracts are the alternative and certainly something industry — regardless of size of company — should be considering now. It could literally mean the difference between keeping production going or not.

“Energy suppliers will simply not entertain the idea of offering a flexible contract to a standalone client using less than that 10-million threshold meaning a different approach is required to take advantage of this method.

“A way around this is to group lots of firms together under one framework so, in essence, we create one super user. We can then make lots of smaller purchases over time when the market looks the most attractive to do so. It also means customers don’t have to fix their energy prices on any one given day.

“In our opinion, the flexible contract will give management teams the ability to ride out the current situation and give them the breathing space to find a far better and more cost-effective longer-term plan.”

This approach is not new, in fact CEC launched the ‘Wholesale Market Access’ basket in 2018 to offer this very method within a collective agreement. It has proved successful for those involved, but the number of organisations wanting to take part has increased rapidly in the last six months and the business now has more than 50 companies involved in the framework with more waiting to join.

Recent sign-ups include global manufacturers, SMEs and construction businesses, who have — on average — seen a 150% rise in energy prices on what they were paying in 2021.

Mr Conway added: “It is easy to take part — our flexible purchasing team will liaise with the business to gain a thorough understanding of your current issues, desired strategy, budget, value at risk and future objectives.

Strength in numbers“This consultation process helps determine what the firm needs now and what they may need in the future across both fixed and flexible purchasing options.

“Even for businesses who might not have renewals due for a few years, they should still explore the flexible contract now, given it should be part of a long-term strategy. A word of caution. It is important that management teams understand the product and how it works, as they will see variations month-to-month, and this can be unsettling if they have not been told to expect it.”

Scunthorpe-based Skymark Packaging International, a leading manufacturer of innovative packaging solutions, is one of the firms benefitting from a flexible purchasing agreement arranged by CEC.

The company has used this approach to forward purchase its entire energy allocation until 2026 and this is helping shield it from the escalating price rises threatening to bring industry’s emergence from the lockdown to a halt.

This is translating into the management being able to offer its global client base — spanning converter films, food, healthcare and pet foods — smaller price rises and, importantly, allowing it to invest millions of pounds into developing new sustainable packaging in the form of SYMONO, SKYMONO P and SKYPAPR.

John Turner, Skymark Packaging managing director, said: “Our production measures are very energy intensive, so we have always looked at ways where we could minimise costs or invest in technology that is more efficient.

“Part of this process was working with experts to explore different ways of managing our energy and this was really frustrating until we started to work with CEC.”

Mr Turner added: “The company took time to drill down on our operations and explore what techniques it could use to offer us a more sustainable strategy and this led to us adopting a flexible purchasing approach to gas and electricity some five years ago.

“This was one of the best decisions we have ever made and helped us consolidate all of our manufacturing operations on our site in Scunthorpe, while also supporting our growth plans going forward.”