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How can commercial and industrial businesses deal with energy market volatility?
5 July 2022
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Inflation, global conflicts, supply interruptions – all of these factors make the energy market one of the most volatile in the world. Unfortunately, business owners aren’t necessarily psychic when it comes to anticipating often chaotic energy price fluctuations. So, what are your options when energy becomes a resource your company desperately needs but can’t afford? Business experts recommend using the following strategies to stay ahead in a mercurial market:
Future-proof energy supply procurement
The energy market is very volatile today, which is a major challenge. Here are tips to help your business deal with the issue, as long-term strategies to maintain production.
First, you should future-proof your energy supply procurement. This means having an eye on the market and having a long-term contract that cushions your energy demands. Maximize opportunities with the current energy procurement tenure, while communicating regularly with suppliers to protect the business against future shocks. Lock in on contracts when prices are still stable.
Also, monitor the energy market trends to capture the lows. To be effective, hire an energy consultant to audit your energy demands and provide recommendations for sustainable sources amid volatility.
If your energy procurement contract ends during the volatile periods, fall back to utilities until the prices stabilize again. In a high-cost market, future pricing is usually lower than the current rates.
Finally, your business might benefit from a volatile energy market by switching to green, or renewable energy sources. Although this investment is costly, it is for the long term and will steer your business to sustainability. The costs will eventually be cut due to saving on power bills, and also enhancing a better environment.
Diversify energy sources, use energy-efficient technologies
The energy market is volatile, and commercial and industrial businesses need to be able to deal with that volatility. There are several ways that businesses can do this, including hedging, diversifying their energy sources, and using energy-efficient technologies.
Hedging is a way of protecting against price fluctuations by entering into contracts to buy or sell energy at a set price. This can help businesses budget for their energy costs and avoid sudden price increases.
Diversifying energy sources can also help businesses to manage price volatility. By using a mix of energy sources, businesses can reduce their reliance on any one source and hedge against price fluctuations.
Finally, using energy-efficient technologies can help businesses to reduce their energy consumption and costs. By using less energy, businesses can reduce their exposure to price swings in the energy market.
Have a back-up plan, keep up with energy news
Commercial and industrial businesses face a unique challenge when it comes to energy market volatility.
The current market conditions are unpredictable, with prices fluctuating quickly. This can be extremely difficult for businesses to deal with – especially if they’re reliant on energy to run their operations.
Fortunately, there are several strategies businesses can use to minimize the impact of energy market volatility.
First and foremost, businesses should always have a backup plan in place. Having a solid plan for coping with market volatility will help businesses to stay afloat in times of uncertainty. A backup plan can include things like signing contracts with multiple energy suppliers or investing in renewable energy sources.
Another important strategy is to be aware of your energy consumption. This will help businesses to identify ways to reduce their energy usage to reduce costs. Energy audits can be an extremely useful tool in this regard.
Businesses should always stay up-to-date with the latest energy market news. This will help them to make informed decisions about their energy use, and ensure that they’re prepared for any changes in the market.
Finally, businesses should always be prepared to switch to alternative energy sources if necessary. This can be a difficult process, but it can be very effective in mitigating the impact of market volatility.
Apply price risk management
Energy market volatility significantly impacts commercial and industrial businesses worldwide and requires an excellent strategy to sustain it. Energy market volatility sometimes leads to business closure, and this needs to be stopped as it will make price prediction difficult and increase price volatility.
This can be followed by reasonable market prices, buying short, and selling at high prices. This methodology is most recommended for small businesses as it will allow them to deal with the volatility of the energy market quickly and will make them expand their business in a short period.
The volatility of the energy market is considered one of the most challenging aspects to destroy the economic way of companies and, when not well planned, will inevitably lead to the dark side of the organization.
To avoid energy market volatility, leaders must apply price risk management to let them know when energy market volatility is about to begin. Not having this strategy kills businesses because they don’t have the correct pricing in their organization. Comprehensive market price risk management is the most recommended strategy for dealing with energy market volatility.
This is a crowdsourced article. Contributors’ statements do not necessarily reflect the opinion of this website, other people, businesses, or other contributors.
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