Efficiency, Savings, and Consolidation: A Proven Approach for Sourcing Energy in the Digital Age

By Paul Shagawat, Co-Founder and Managing Partner, Transparent Energy

I recently sat across the table from the CFO of a large global brand who was interested in modernizing his company’s approach to buying energy. His articulation of what he wanted his next energy management firm to provide was crisp and compelling: “We need a partner who will bring efficiency, savings, and consolidation to our energy sourcing process.”

Efficiency. Savings. Consolidation. Those three words really hit home. They crystallized what I have been seeing as a growing consensus – and realization – among large energy buyers that the old ways of sourcing energy are incompatible with the scale, speed, and financial goals of today’s digitally-driven businesses. And this disconnect, i.e., using outdated analog processes to source what is for many a top operational expense – energy – is costing Fortune 500 and other large companies billions of dollars.

The good news is there is a better way, a game-changing way to source energy that delivers efficiency, consolidation and savings. Here’s what a modern, innovative, digital approach to sourcing energy looks like.

Creating an Efficient Marketplace for Sourcing Energy

One reason large energy buyers have struggled to develop a truly efficient way to source energy is that energy markets are inherently opaque. In a way, these markets are stacked against the individual buyer, no matter how large, because the price of energy commodities, whether electricity, natural gas, or renewables, varies from supplier to supplier and from renewable project to renewable project. And that puts the burden on the buyer.

Transparent Energy has disrupted this old way of doing business, turning the tables in favor of the buyer. Using our online digital marketplace, suppliers have to reveal their prices up front, and then bid them down, stoked by an ultra-competitive online-auction environment.

In a Transparent Energy online auction, as many as a dozen suppliers will compete for your energy contract. And because the process is digital, we can easily run an unlimited number of auctions, testing different variables, including:

• Term length: How will the market price an electricity contract for 12 months vs. 24 months vs. 36 months, etc.?
• Product type: How does a fixed-price contract compare with assorted variable-term contracts that float with the market? Again, because Transparent Energy’s platform is digital, it is easy for us to customize our live auctions to the specific needs of our clients, drawing on various product types, term lengths, and even legal language – over 100 variables essential to getting you into the right energy contract!
• Renewable energy: What are the cost implications of investing in “additionality”-creating renewable projects or offsetting an energy purchase by buying renewable energy certificates? Transparent Energy is the market leader in applying technology and process to help large energy buyers select the right renewable-energy product(s) at the best price to advance their sustainability goals, including RECs, carbon offsets, community solar, onsite solar, PPAs, VPPAs, etc.

The point here is that there is no way an old legacy process for sourcing energy could efficiently or effectively test these 100+ variables and provide the kind of price discovery only found on Transparent Energy’s auction platform. Put another way, over the course of these auctions (which typically take less than 30 minutes), suppliers may collectively bid hundreds of times, each time bidding their price lower, to win your energy contract. When the auction is over, you the buyer get to evaluate the results, working with Transparent Energy to identify the best product at the best price for your business.

Having run 10,000+ energy sourcing auctions for thousands of customers over the last 15 years, I think Fortune 500 buyers inherently understand the savings aspect of our online auctions. Multiple suppliers bidding prices down = savings. Yes, absolutely. And even more so compared to legacy, paper-based processes.

Yet there are other kinds of savings delivered by our process and platform. Transparent Energy’s approach to sourcing energy also saves our clients money, because our expert analysts help optimize the timing of your energy buy, i.e., when you go to market. Additionally, we have the largest supplier network in the industry, which enhances competition for your energy load. And because we have refined this process down to a “t,” more than 98 percent of our auctions result in a signed energy contract that same day, enabling suppliers to eliminate added risk premiums, which inflate the cost for buyers.

In addition, having worked closely with these energy suppliers for more than a decade, we have productive relationships with them, built on a history of successful transactions and trust. This enables us to streamline and customize legal agreements between suppliers and our customers and facilitates the development of National Master Agreements for Fortune 500 buyers.

Efficiencies for Energy Buyers

Hand in hand with savings, come a slew of efficiencies generated by our process and technology. Nowhere else in the market can you get this kind of energy price discovery. Nowhere else in the market can you gather this many suppliers to bid for your business in real time, enabling them to react to competitors and further compress margins. And nowhere else in the market can you find such a repeatable and scalable process for attracting suppliers to compete for your energy contract in every energy market in the U.S.!

Other efficiencies abound. Big consultancies can often take several months to execute a sourcing deal. At Transparent Energy, we’ve compressed this process to 10 days from start to finish. That’s in part because we work with hundreds of vetted, accredited suppliers. We know the competitive field, and we know how to work with them – digitally. As process experts, we also know how to work efficiently with clients to get them ready for auction, further compressing time-to-market.

For example, in Q1 2024, we worked with a large hospitality firm with hundreds of hotels in its portfolio. With our digital, scalable process, we ran energy sourcing auctions for 40 of its hotels in a half-dozen states in just one month, successfully getting each facility into a new contract that met the owner’s budgetary and risk requirements!

Consolidation, Too

What may be less obvious is that behind the efficiencies and savings delivered by our digital sourcing process is a skilled and dedicated team of energy experts. Sourcing energy is still a “people” business, although one enormously enhanced by digital efficiencies and competitive dynamics.

I bring this up because many large energy buyers have defaulted to decentralized sourcing strategies that in effect allow local energy managers or procurement specialists – each with their own approaches and relationships – to buy energy for their local buildings. Transparent Energy enables Fortune 500 companies to consolidate the energy sourcing process, providing an expert team AND a centralized, proven, scalable, and uber-efficient process to optimally execute energy buys anywhere in the country. This ultimately means Transparent Energy customers require less human capital to source their energy and that we deliver a hugely beneficial one-two punch: reducing human capital and Opex at the same time for all of our customers.

Gain an Advantage for Sourcing Renewable Energy

Importantly, this digital approach to sourcing energy applies equally to sourcing renewable energy, delivering the same efficiency, savings, and consolidation benefits. Transparent Energy is just as active with renewable project developers as it is with traditional retail energy suppliers. This is important, because the renewable energy market is equally opaque as legacy energy markets, which again disadvantages the buyer.

Applying the same principles we use to help large buyers source electricity and natural gas, Transparent Energy leverages its inherently efficient procurement process to help customers buy a wide array of renewable energy products. Recently, we helped a leading distributor shave $2 million off its commitment to offtake more than 1.5 billion kWh of electricity from a new solar farm. In another instance, we helped provide a Fortune 10 company a wide choice of local renewable project options, securing a contract for them with a local solar resource that reduced their carbon footprint while delighting local employees.

In both these cases, and across our portfolio of clients, Transparent Energy’s digital approach to sourcing energy is helping large energy buyers execute their sustainability plans. While sustainability “roadmaps” are important, companies can’t reach their desired destination without an “engine” and “accelerator,” both of which our sourcing process provides.

Innovation in Energy Sourcing

While Fortune 500 companies continue to invest vigorously in modernizing their businesses, many are only now examining their energy-sourcing practices – and finding them lacking. With greater stakeholder attention focused on clean-energy adoption and environmental stewardship as well as the bottom line, how a company buys energy matters more than ever.

Welcome to the Innovation Era of energy sourcing.

The choice couldn’t be clearer: Leverage a transparent, digital process that streamlines every aspect of purchasing energy, maximizes supplier participation and competition, and delivers measurable savings, or stick to a legacy, analog status quo that is neither sustainable nor desirable.

###

For more information about bringing your company’s energy-sourcing practices into the digital age, driving efficiency, savings, and consolidation, contact us at letstalk@transparentedge.com