With new technologies, evolving regulations, and a growing number of players in the market, it’s essential to choose the right partner for your energy needs.
If you’re considering purchasing renewable energy through an energy trader, here’s a guide to help you find the perfect match.
- Evaluating Energy Trader Capabilities
- Overall Strategy: A good energy trader should have a clear and well-defined strategy. Do they focus on short-term market fluctuations or long-term stability? Do they prioritise specific sources or geographies? Understanding their approach will help you assess if it aligns with your business goals.
- Portfolio Diversification: Does the trader offer a diversified portfolio of renewable energy sources, or do they rely on a single project or source? A diversified portfolio spreads risk and ensures a more reliable energy supply, especially in a country like South Africa with grid challenges and varying weather patterns across the country – decoupling localised resource availability on the end users.
- Risk Management: A reliable energy trader should have a robust risk management strategy. This includes assessing and mitigating risks related to IPP (Independent Power Producer) performance, system-related events, geographical concentration, and single project failure.
- Track Record: A proven track record is a strong indicator of a trader’s reliability and expertise. Look for traders with a history of successfully trading nationally over a continuous period of time, satisfied customers, and a strong reputation in the industry.
- Shareholders and Backing: The financial stability and backing of a trader’s shareholders are crucial. Strong shareholders provide the resources and support needed for long-term success and resilience in a dynamic market. In addition, a trader’s ‘bankability’ is good to consider. Are they able to raise guarantees from shareholders or 3rd party guarantee providers?
- Analysing an Energy Trader’s Value Proposition
- Flexibility and Customisation: Does the trader offer flexible and customisable energy solutions? Do they offer flexible tenor options? Can they tailor their offerings to your specific consumption profile and business requirements? Look for traders who prioritise your needs and offer bespoke solutions.
- Pricing: Transparent and competitive pricing is essential. Understand the trader’s pricing structure, including any escalation clauses and potential for cost savings. Find out what their customer guarantee requirements are. Do they have onerous prerequisites, such as large deposits? Compare prices and requirements with other traders and alternative energy procurement options.
- Supply Timeliness and Availability: Ensure the trader has a reliable track record of delivering energy on time and in the required quantities. Inquire about their contingency plans for potential supply disruptions. Be cautious of projects that are scheduled to come online in the future (2026 onwards) and where traders haven’t yet received bankable quotes or issued guarantees. These projects, also known as pre-financial close (pre-FC) projects, carry a higher risk of delays or cancellation.
- Beyond the Transaction: The Value of Partnership
- Attentiveness: Choose a trader who is attentive to your needs and acts as a true partner in your energy transition. They should be responsive to your inquiries, provide clear communication, and offer ongoing support.
- Industry Relationships: Look for a trader that has solid relationships with the market. Evaluate their ability to hold strong stakeholder engagements and relationships across the value chain – from IPPs, to utilities, regulators and customers. These connections set a trader up for success across all the complicated aspects of being a trader in a liberalising market.
- Considering the Alternatives
- IPP vs. Trader: Finally, consider the alternatives. Purchasing directly from a single IPP can offer certain advantages, but it often comes with complexities and risks. Weigh the pros and cons of each approach to determine the best fit for your business.
- ‘Behind-the-meter’ Solutions: Can the energy trader integrate with and optimise your existing behind-the-meter assets? These assets, which include solar panels, battery storage, and building energy management systems (BEMS), can significantly reduce your reliance on grid power and lower your energy costs. A good energy trader should be able to supplement and complement these assets, ensuring you only pay for what you consume.
Choosing the right energy trader is a crucial step in your journey towards a sustainable energy future. Make an informed decision and partner with a trader who will empower your operations, reduce your environmental impact, and contribute to your long-term success.
Let’s talk about getting you started on your journey to green energy today.