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Procurement in energy and utilities

How procurement practices and technology drive success and help tackle multifaceted challenges today and in the future.

Energy and utilities worker looks at tablet while maintaining a wind power plant

The multifaceted challenges currently facing the energy and utilities sector demand strategic foresight and innovative solutions. From decarbonisation to decentralisation to the rise of AI and digitalisation – all with the backdrop of rising demand and cost pressures – procurement professionals are at the forefront of supporting organisations to overcome disruption, embrace evolution, and improve resilience. 

In this blog, we’ll go into more detail about those challenges and how procurement solutions can be integral in helping the energy and utilities sector to overcome them. 

What challenges are the energy and utilities sector facing?

While all industries are facing global pressures to ensure sustainability, manage supply chain risk, meet customer demand and handle economic instability, here are some of the ways these factors are having an impact on the energy and utilities sector in particular.

Two energy and utility workers are installing solar panels

The impacts of the climate crisis and working towards decarbonisation

Tackling carbon emissions remains a pivotal focus. Despite a temporary decline in 2020, emissions rebounded in 2021, approaching pre-pandemic levels. To meet 1.5° pathway requirements, mature economies must accelerate emissions decline by transitioning to renewables like wind, solar, and biofuels – as well as developing clean energy alternatives like green hydrogen and magma power. The shift away from coal, oil and gas will take time as capacity is currently limited, meaning some European countries have been forced to rely on other regions to meet demand – something which became starkly apparent when the war in Ukraine began.

High voltage transmission line in a field

The global rising demand for energy

With electrification growing in transport and building industries, and the rise of data-centre-reliant computing technologies, the energy sector is preparing for a threefold increase in electricity demand by 2050 (a fivefold increase in hydrogen and a 10 percent increase in gas over the next decade). And to reach net zero emissions by 2050, annual clean energy investment worldwide will need to more than triple by 2030 too. The need for adequate infrastructure, accurate forecasts and cost estimations is vital if companies are able to expand the grid and meet those demands.

Energy grid system next to a wind power plant

Moving towards a decentralised approach to energy grid systems

The shift away from fossil fuels empowers consumers to generate their own electricity (for example, with rooftop solar panels), promoting sustainability and autonomy. Procurement experts must navigate this landscape by engaging with emerging models such as decentralised energy schemes that foster shared energy resources and scalability. In Glasgow, for example, local energy generation is on the rise, with housing developers encouraged to both generate their own energy and establish shared neighbourhood energy resources.

A customer is tracking energy use on a tablet PC

The digitalisation of energy production and infrastructure, and acceleration of AI

Digitalisation forms the backbone of the energy industry’s future. Intelligent solutions, such as AI-driven predictive analytics, Internet of Things (IoT) devices, blockchain for transparent energy tracing and digital twins for virtual replicas of power plants, are already supporting our increasingly complex energy networks. Generative AI tools could help to address many of the challenges raised here, including network reliability, affordability, sustainability and fluctuating demands.

A procurement professional sits at a desk and calculates prices

Economic uncertainty, inflation and the rise in energy prices

In a volatile economic climate, procurement professionals must adeptly navigate how to achieve savings amid inflation, cost pressures and escalating energy prices. Energy and utility companies need to find cost-effective solutions, embrace innovation, and optimise operational efficiency to ensure financial resilience. Balancing sustainability initiatives with the imperative of cost savings is key too, requiring a nuanced approach.

How can procurement play a strategic role in tackling these challenges? 

The procurement function has a central role to play in helping businesses to face these challenges head on and even drive innovation for the whole organisation – from protecting supply chains to supporting digital transformation and the clean energy transition. As a key part of the country’s critical infrastructure, the energy and utilities sector can leverage procurement strategies to tackle these challenges.  

Selecting reliable suppliers

Procurement teams can set the tone, ensuring sustainable, reliable and innovative suppliers are at the core of their strategy. This is key for an industry that’s rapidly changing, with new technical requirements and developments happening all the time. Energy companies can struggle to define their demand far in advance and for a long period. That’s why they need procurement solutions that make it easier to partner with a wide variety of suppliers.

The nature of this sector also requires reliability and stability – trusted, vetted suppliers that can meet the needs of their customers. Digital platforms that include sustainability filters or allow businesses to purchase from their preferred regional suppliers are just two ways procurement solutions help support this goal. This sits alongside a high degree of technical expertise to deliver specialised products and components.

Supporting compliant decentralised procurement

With robust procurement policies in place that align with regulatory frameworks, organisations can better support decentralised procurement initiatives. This starts by promoting transparency, ethical sourcing, and adherence to environmental standards. Decentralised teams should be encouraged to foster collaborative relationships with local suppliers and community-driven initiatives to accelerate their efforts.

The Unite Platform is built on this foundational principle, allowing businesses the opportunity to invite their own local suppliers to join and add their catalogue. This means decentralised teams can continue to shop from their preferred suppliers, while procurement teams can keep an eye on spend.

For this approach to thrive, teams need centralised digital procurement tools and training on the benefits of decentralised procurement, including local economic development and sustainable practices. Leading German energy provider EnBW was faced with the multi-pronged challenge of maverick buying, pricing control and supporting its sustainability strategy.

In Unite, it found a central solution to take care of its indirect purchasing needs – enabling it to manage all its suppliers in one place. All employees are able to place orders using a digitalised and standardised procurement process, which saves costs and keeps maverick buying at bay.

Wind power plant by energy provider EnBW

Smart procurement features for a leading energy company

Discover how energy provider EnBW enhances sustainability and efficiency by centralising procurement with Unite.

Gaining greater insight into your value chain

In the past, having a handle on Scope 3 emissions has been hard to achieve. With a large number of suppliers, accurate and comprehensive data collection can be arduous, and limited internal knowledge about data assessment methods has made it really tricky for organisations to report on their supply chain’s impact. Until now…

Pioneering sustainability software company Yook offers CO2 emissions insights as an integral part of digital procurement solutions. Yook’s cutting-edge technology automates and handles data collection, cleansing and assessments so businesses don’t have to worry about manual data gathering but still have the insights they need to make more sustainable procurement decisions.

At Unite, we’re currently working with Yook on a pilot project with a number of our customers to create an automated CO2 reporting function of their tail spend’s emissions to further enhance businesses’ sustainability efforts. Beyond regulation, being able to understand the impact of your supply chain and effectively report on it helps foster trust among stakeholders and build a roadmap for climate action.

Feel the power of procurement 

To address the complex challenges currently facing the energy and utilities sector, procurement needs to be a central part of the solution and could be pivotal in driving change. From navigating a path towards sustainability and embracing digitalisation to adapting to decentralisation trends, a resilient procurement strategy that incorporates innovative technologies, process improvements and a commitment to sustainable practices is imperative. 

Unite for Energy and Utilities

Read here how Unite helps energy companies to optimise their procurement processes and supports strong supply chains and digital transformation.