News

By Dustin Scarpa, Managing Partner and Co-Founder, Transparent Energy

What a difference a year makes.

In a series of articles we published last year, including this one for Supply & Demand Chain Executive, we alerted large commercial, industrial, and institutional energy buyers that the historic low natural gas prices of July 2020 signaled the end of the party – that natural gas prices, a proxy for electricity prices, would rise, and rise precipitously, an opinion seconded by many others, including Goldman Sachs and Raymond James.

And rise they have. A recent Wall Street Journal article noted natural gas prices have doubled year over year, and that prices are more likely to continue to rise for the foreseeable future.  The boat is leaving the dock – but it hasn’t departed yet!

At Transparent Energy, we have been actively advising customers and prospects of these rising energy costs and, as a result, have successfully helped hundreds of large REITs, commercial real estate and family-owned building holders, PE firms, data centers, manufacturers, universities, hospitals and others “go long,” locking in great rates.

Missed the Boat? Don’t Despair

But for a variety of reasons over the past 12 months, many others were unable to act on the opportunity, and may be feeling like they “missed the boat.” In some regards they have, but the boat is still not out of the marina! Our job at Transparent Energy is to help you get in the right supply contract at the right time.

For example, some very good news came out of PJM recently, affecting electricity buyers in Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia:

Capacity costs decreased by more than half, something that will lower your electric bill.

For energy buyers with buildings in PJM, we see these lower capacity costs as a buying opportunity that needs to be capitalized on now! The reason? While these lower capacity costs cover the entire 2022/2023 Delivery Year, the market dynamics driving energy commodity prices up, i.e., the price of natural gas and electricity (the largest part of your monthly energy bill), are continuing full steam ahead.

Translation: The dip in PJM capacity costs is a buying opportunity, especially as energy macrotrends continue to drive commodity prices up. Therefore, the longer you wait, the less you stand to save, so ACT NOW!

Tips for All Energy Buyers in a Rising Market

Regardless of whether your buildings are in PJM or not, let me leave you with three tips that will help you get the most bang for your energy buck in this rising market:

1. Don’t look back: Look forward. So you didn’t capitalize on 2020’s historic low prices. And I didn’t buy Tesla at $50. We can’t change that, but we can read the writing on the wall and act in our best future interests. To that end, all signs (rising LNG exports, a booming U.S. economy, low rig counts) are pointing to higher energy prices in the future. That means the longer you wait to get into the market, the higher your prices will be. Start working now with an energy advisor that can explain the current market, review the trends with you, and develop a buying strategy matched to your risk profile and business needs. This is a market that favors the prepared!
2. Energy is getting more complicated, not less. With “once in a hundred year” weather events now seemingly happening at least once a year (witness, for example, Texas’ February deep freeze and spring heat wave), energy users who simply buy the cheapest product without reviewing the contract details – and responsibilities during times of stress on the grid – are exposing themselves to potentially devastating, unexpected energy costs. Add to this the complexity of going green at scale to meet sweeping sustainability and decarbonization mandates, and energy is suddenly more strategic to a business’ survival, reputation, and success than ever. Do you really want to leave your energy buying decisions up to local, decentralized plant and facilities managers, or would you rather execute against a scalable, repeatable, and centralized plan, and gain the visibility and accountability that comes with it?
3. Procure energy via an online auction. Whether you engage with a strategic energy advisor or work solely with your own internal team, you must use the best tool in the market to extract the best prices and terms from suppliers. The best resource for this is an online auction platform combined with an air tight process run by Transparent. There is no other way to attract suppliers en masse, test multiple contract terms, gain expanded price discovery, and maximize competition for your energy load than through this battle-tested approach that perfectly harnesses and optimizes the power of people, process and technology.

For help understanding and executing your energy-buying opportunities in today’s market and preparing for tomorrow’s, contact Jonathan Le, Transparent Energy, at jle@transparentedge.com.

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