The adage “strength in numbers” holds true, even in your business’s energy procurement strategy. When multiple companies unite to procure energy collectively, they wield enhanced purchasing power. This collaborative approach, termed energy aggregation, empowers smaller businesses to combine forces, unlocking a wider array of pricing and plan choices that would otherwise be inaccessible to them as individual entities. Let’s address some frequently asked questions regarding energy aggregation.
How does energy aggregation work?
Buyer energy aggregation
As a single consumer, your company’s ability to negotiate prices or energy plans may be constrained. Yet, by consolidating your energy procurement with other companies, your business transforms into a more formidable entity. Collectively, your electricity or natural gas consumption carries greater weight. Consequently, in deregulated markets, utility companies are more inclined to vie for your business due to the heightened value of your contract. This intensified competition may prompt them to extend concessions or incentives to encourage you to choose their services.
Project aggregation
Project aggregation involves compiling a portfolio of energy projects, which are subsequently marketed to utility users as a collective package. Like a mutual fund, which enables investors to own fractional shares of various companies, energy project aggregation amalgamates multiple energy projects, granting buyers access to the entire pool. This strategy is frequently employed for renewable or experimental technologies, combining several projects to foster innovation while ensuring user stability.
Community choice aggregation
Referred to as municipal aggregation, community choice aggregation (CCA) empowers local governments to secure power for businesses and residents. CCA facilitates access to alternative energy sources, prioritizing both renewability and affordability while leveraging the infrastructure of existing utility companies for power delivery. By implementing CCAs, communities gain greater autonomy over their electricity sources, enabling access to more environmentally friendly energy options and reduced rates through demand aggregation.
What are the benefits of energy aggregation?
Lower costs
The greater your account size, the greater your influence, whether you’re purchasing printer paper or electricity. Energy aggregation amplifies purchasing power by merging it with other similarly sized users, collectively presenting an appealing business block. In pursuit of securing this sizable account, utility providers often extend discounts. Additionally, aggregation can reduce transaction costs, as these expenses are distributed among all members of your collective rather than solely borne by your business.
Favorable terms
Similarly, your larger consolidated business block can unlock improved pricing options and provide access to more advantageous contract terms. Providers keen to secure your group’s patronage may be willing to offer terms unavailable to smaller users.
Limited risks
Potential buyers may hesitate to rely solely on one renewable or experimental project for their energy needs, fearing the risks of possible failure or outages. However, by utilizing project aggregation, much of this risk can be mitigated. As part of a larger group of users supporting various projects concurrently, they diversify their risk exposure. Distributing the impact of a single delay, output decrease, or failure across the buyer pool minimizes financial risk. Additionally, this approach helps ensure continuity of service, even if one project encounters difficulties or fails to meet expectations.
source: https://dneresources.com/what-is-energy-aggregation-and-how-does-it-benefit-businesses/
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