Energy procurement in an age of constraint

Spend enough time talking to large industrial energy users and one thing becomes clear very quickly: energy procurement is no longer just about buying power.

That may sound obvious. But the implications are far-reaching.

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At a recent private dinner bringing together senior energy, sustainability and procurement leaders from across manufacturing, logistics, infrastructure, property and healthcare, the conversation quickly moved beyond tariffs and contracts. Instead, the discussion circled around a more fundamental shift taking place across the energy system.

The challenge is no longer simply securing affordable energy. It is learning how to operate inside a system that is becoming increasingly constrained, decentralised and volatile. And for many organisations, that means energy procurement is evolving into something much closer to energy strategy.

Grid capacity: the new bottleneck

For decades, access to electricity has been taken for granted by large organisations. Power was available when needed, and the key task for procurement teams was negotiating the best possible price.

That assumption is starting to break down.

Across sectors, the most pressing issue raised around the table was not energy price volatility but grid capacity. Organisations seeking to electrify operations, expand facilities or roll out electric vehicle fleets are increasingly discovering that obtaining new or upgraded connections can take years.

In some cases, the timeline is measured in decades.

The implications of this shift are significant. In a world of constrained grid infrastructure, energy users are no longer passive consumers. Instead, they are increasingly expected to contribute to system flexibility.

Some markets are already experimenting with new connection models. Rather than granting unconditional access to the grid, operators are offering conditional connections, where organisations must demonstrate an ability to adjust demand or provide on-site generation during peak periods.

The logic is simple: if the grid cannot expand fast enough, demand must become more flexible.

For large energy users, this represents a profound change in how energy is managed. As one participant observed, the electricity system has quietly undergone a conceptual inversion.

Historically, the grid dispatched generation to meet demand. Now, increasingly, demand is being dispatched to match generation.

Procurement teams are playing the wrong game

Another recurring theme throughout the evening was the tension between traditional procurement practices and the realities of modern energy markets.

Procurement functions are trained to compare prices, evaluate suppliers andsecure the best deal for a given product. But electricity is not a product in the conventional sense. It is a dynamic market influenced by weather, infrastructure, policy and geopolitics.

The result is a growing mismatch between how energy is purchased and where the real value lies.

Several participants pointed out that procurement exercises still tend to focus heavily on small differences in unit price. Yet in many cases, these marginal gains are dwarfed by the opportunities available elsewhere in the energy system.

Flexibility services, portfolio optimisation and demand management can deliver savings far greater than shaving a few pence off a megawatt-hour.

That shift requires a different mindset. Instead of asking which supplier offers the lowest tariff, organisations are increasingly asking a more strategic question:
How can our energy consumption be structured to create value?

The flexibility economy is emerging

The rise of renewable generation is accelerating this transformation.

Wind and solar power now account for a growing share of electricity generation, but their variability introduces new challenges for grid stability.
When the wind drops or cloud cover increases, other resources must respond quickly to maintain supply.

This is where flexibility becomes valuable.

Businesses that can adjust their demand – by shifting production schedules, charging batteries or temporarily reducing consumption – can help balance the system. In return, they may receive financial rewards through emerging flexibility markets.

For organisations with predictable consumption patterns, this can open up entirely new revenue streams.

Participants described scenarios where stored electricity could be discharged back into the grid during periods of high demand, or where energy-intensive processes could be scheduled during times of low wholesale prices.

In this emerging landscape, energy users are no longer simply customers. They are becoming active participants in the electricity system.

The “last 20% problem”

Many companies have already made significant progress in reducing operational emissions. Renewable electricity contracts, energy efficiency measures and electrification programmes have helped drive down Scope 1 and Scope 2 emissions.

But the conversation revealed a growing recognition that the remaining challenge, often described as the “last 20%” of decarbonisation is far harder.

Scope 3 emissions, which include supply chains and logistics, are proving particularly difficult to tackle.

Several organisations around the table described similar experiences. After implementing the most straightforward solutions within their direct control, they now find themselves facing problems that extend far beyond their own operations.

Transport networks, supplier behaviour and infrastructure availability all influence emissions outcomes, yet these factors are often outside the organisation’s immediate authority.

In short, the next phase of decarbonisation cannot be achieved in isolation.

Collaboration as infrastructure

One word mentioned repeatedly during the discussion - Collaboration.

Many of the challenges facing large energy users today are fundamentally systemic. Electrifying freight fleets, deploying charging infrastructure or integrating distributed energy resources often requires coordination between multiple organisations.

Consider the example of heavy goods vehicles.

Electrifying HGV fleets is technically feasible in many cases, but doing so requires extensive charging infrastructure. If a charging hub is only used for short periods during the day, the economics quickly become challenging.

However, if multiple users share the same facility – freight operators, public transport fleets and local services, utilisation improves and the investment becomes viable.

The same principle applies to other forms of infrastructure.

Shared energy hubs, district heat networks and industrial clusters can enable solutions that would be impossible for individual organisations acting alone.

But building these systems requires new forms of cooperation between businesses that may historically have operated independently.

The limits of voluntary action

Despite widespread corporate commitments to net zero targets, the discussion also exposed the limits of voluntary action.

Within most organisations, investment decisions still depend on financial viability. Projects that deliver a clear return on investment move forward relatively easily. Those that do not face a far steeper path to approval.

Several participants suggested that regulatory signals may ultimately be necessary to accelerate certain transitions.

Policies that introduce economic incentives – or penalties – can shift internal conversations within companies. A regulatory framework that assigns a clear cost to emissions or mandates specific changes can bring long-term considerations into immediate financial planning.

Without such signals, organisations may struggle to justify investments whose benefits lie many years in the future.

The overlooked opportunity: operational efficiency

Amid discussions of infrastructure, electrification and global supply chains, another point surfaced repeatedly: many organisations are still overlooking relatively simple operational improvements.

Energy waste remains widespread across the built environment. Buildings are frequently heated or cooled inefficiently, equipment runs unnecessarily and energy monitoring is often inadequate.

Given that the built environment accounts for a significant share of global emissions, these inefficiencies represent a substantial opportunity.

While solving the larger systemic challenges will require new technologies and infrastructure, addressing these everyday inefficiencies can still deliver meaningful emissions reductions.

A strategic capability

Taken together, the discussion revealed a sector undergoing rapid evolution. Energy procurement is no longer confined to negotiating supply contracts. It now touches infrastructure planning, operational strategy, technology deployment and financial risk management.

Organisations that treat energy as a strategic capability – rather than a transactional purchase – will likely be better positioned to navigate this transition.

Because in the emerging energy system, the question is no longer simply how much power a business consumes.

It is how intelligently that power is used, managed and integrated into the wider system.

And that, increasingly, is where the real value lies.