Energy procurement is no longer just about securing the best price. It’s about striking the right balance between cost, carbon and complexity, especially as sustainability initiatives like on-site generation and Power Purchase Agreements (PPAs) reshape how much energy businesses need, and when they need it.
When procurement isn’t planned in step with a business’s net zero strategy, it can lead to over-commitment, poor return on renewables and unintended financial risk. Below are key considerations and practical steps procurement managers can take to keep commercial outcomes aligned with carbon ambitions.
1. Consider how new generation affects your demand profile
Any renewable project, solar, wind or otherwise, changes your demand from the grid. But this shift is rarely linear. For example, solar PPAs can be sleeved into supply contracts as produced. This means you receive energy based on when it’s generated, not when it’s needed.
A typical solar profile delivers nothing overnight, builds steadily in the morning and peaks early afternoon. If your business demand doesn’t follow that same curve, you could end up:
Selling back this excess power during peak hours, when prices can be very low or even negative, often returns less than the cost you paid to hedge it. While this challenge is most obvious with solar due to its predictable generation profile, wind PPAs can present similar risks. Although wind generation is less consistent, mismatches between supply and demand can still lead to oversupply and lost value.
Practical approach:
A PPA changes the shape of your demand. Your procurement strategy needs to reflect that to avoid paying to offload surplus power.
2. Make PPAs part of your wider strategy
Power Purchase Agreements (PPAs) are a common feature in net zero strategies, offering cost stability, green credentials and long-term carbon reductions. But they need to be integrated into a broader procurement framework if they’re going to deliver full value.
Because PPA energy is delivered according to the generator’s output, there’s often a mismatch with actual business demand. If this isn’t accounted for, businesses can end up selling excess power at low-value times and still relying on grid supply during high-cost periods.
This isn’t just a solar problem. Wind PPAs, while less predictable, can still result in similar exposure if they’re not backed by an energy procurement strategy that reflects the shape and variability of generation.
Practical approach:
True helps organisations evaluate the financial risks associated with different technologies and project types. By understanding these risks in advance, businesses can adjust their procurement strategy accordingly and avoid making decisions that look good on paper but cost more in practice.
3. Recalibrate your hedging volumes
Onsite generation and PPAs reduce the amount of energy a business needs to purchase through traditional supply contracts. But unless this reduction is accounted for in the hedging strategy, it can lead to overcommitment, buying more than is needed and being forced to sell back the surplus.
This typically means selling excess volume at a lower price than where it was hedged. Equally, if too little is hedged and additional energy needs to be bought at short notice, it can come at a premium.
What matters is not just how much you hedge, but how actively you manage your position. Without that awareness, businesses risk being caught out on both sides, losing money whether they’re over or under supplied.
Practical approach:
Energy hedging should reflect a forecast of future demand, not just past consumption. Detailed planning helps mitigate the risk of exposure in either direction.
4. Understand the limitations of REGO-backed contracts
REGO (Renewable Energy Guarantees of Origin) certificates are commonly used to support green energy claims, but they vary in credibility and impact. Some are directly tied to a specific renewable generation source, while others are purchased separately with no direct connection to the supplied electricity.
There’s also a wide range of REGO products available, each with different source quality, price points and commercial implications. Selecting the right option requires assessing whether the solution is tailored to your business needs, budget and timeframe.
Similar thinking applies to carbon offsetting and RGGO (Renewable Gas Guarantees of Origin) for gas contracts. While RGGO remains expensive, it can be relevant in certain contexts, such as sites with gas-fired generation, where electricity produced can be considered ‘green’ if backed by credible RGGO certificates.
Practical approach:
Not all green energy contracts are created equal. It’s important to evaluate REGO or RGGO-backed offers in context and ensure that solutions are financially sustainable as well as environmentally credible.
5. Co-ordinate across departments
Energy procurement, finance and sustainability teams often operate with different objectives and timelines. This can lead to disjointed planning. For example, the sustainability team might agree to a PPA with long-term carbon benefits, while procurement is locked into a supply contract based on old usage patterns.
Alignment across departments isn’t a ‘nice to have’. It’s essential for accurate budgeting, effective risk management and delivering net zero outcomes without hidden costs.
Practical approach:
Use a centralised platform like True that enables cross-functional visibility. When procurement managers, sustainability leads and finance teams all work from the same data set and forecast models, businesses can avoid duplication, underperformance and missed opportunities.
6. Integrate scenario planning into your decision making
Net zero strategies are dynamic. As your business adds EV fleets, decarbonises heat, or scales renewable generation, your energy profile will keep changing. Procurement needs to anticipate these shifts, not just react to them.
Scenario planning allows you to stress-test procurement strategies under different future states. For example:
Practical approach:
Use tools that let you model these scenarios and calculate the impact on cost, carbon and contract structures. This enables more agile, informed decision making as your business evolves.
The best procurement decisions aren’t just cost-efficient. They’re carbon-aligned, risk-adjusted and tailored to the energy shape of your future business.
Net zero strategies bring complexity, but they also offer an opportunity to drive smarter procurement. With better modelling, aligned teams and data-led platforms, procurement managers can take the lead in shaping a commercial path to sustainability.
Want your energy procurement to drive net zero progress, not hold it back?
With True, you can cut through the noise, see the numbers clearly and make decisions that balance cost, risk and carbon.
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