Navigating Electricity Procurement Challenges During the Energy Transition

Electricity procurement challenges require anything but one-size-fits-all solutions. Diverse regions and organizations confront unique hurdles as they work toward meeting energy objectives while maintaining reliability. At the Ascend Summit 2023, Anthony Boukarim, Senior Manager of Resource Planning and Valuation at Ascend Analytics, moderated a panel on power procurement trends and future expectations that featured perspectives from three industry experts: Andrea Torres, Senior Portfolio Manager at San Diego Community Power; Paul Eory, Manager of Strategy and Planning at Lansing Board of Water & Light; and Michael Enger, Director of Energy and Market Operations at Austin Energy.  

Key Takeaways

• As the renewable energy transition gains speed, striking the right balance between affordability and reliability becomes critically important.
• Fluctuating weather conditions, evolving energy demand, and the transition to cleaner energy sources necessitate adaptable solutions to ensure a dependable power supply.
• Collaboration, adaptability, diversification, and a steadfast commitment to sustainability remain guiding principles for success.

Finding Solutions for Energy Procurement Challenges  

In discussing expectations for the future, the Ascend Summit panelists identified six common, high-level challenges for energy procurement, as well as guidance for meeting these challenges.

1. Renewable Energy Goals: Panelists unanimously agreed that there exists, across all regions, a steadfast commitment to transitioning from fossil fuels to cleaner energy sources. This shared vision aligns with the global pursuit of sustainability. Procurement decision makers in all markets must prepare for a rapidly evolving resource mix.
2. Affordability and Reliability: It remains vitally important to strike a balance between keeping energy affordable and maintaining its reliability. This challenge remains consistent, irrespective of the specific energy mix or regulatory framework.
3. Supply Chain Risks: The global disruption in supply chains has emerged as a significant challenge for all markets. Delays and cost increases triggered by supply chain disruptions can impact project timelines and budgets, making adaptability a vital factor.
4. Negotiation Challenges: Negotiating with developers presents complexities marked by price volatility, interest rate uncertainties, and regulatory intricacies. Successful negotiations demand transparency, clear expectations, and meticulous supply cost management.
5. Environmental Considerations: Environmental, Social, and Governance (ESG) criteria will become increasingly influential in procurement decisions. Organizations must shift their focus beyond economic value to consider broader environmental and community impacts.
6. Flexibility and Capacity: Across markets, the demand for flexibility and capacity remains an important consideration. Fluctuating weather conditions, evolving energy demand, and the transition to cleaner energy sources necessitate adaptable solutions to ensure a dependable power supply.

Adapt and Diversify to Navigate the Electricity Procurement Landscape

According to the Ascend Summit panelists, there exists a widespread acceptance of the need to pursue ambitious renewable energy goals while retiring carbon-emitting sources. However, panel participants highlighted the importance of striking a balance between sustainability, affordability, intermittency, and local development.

Despite variations in market designs, characteristics, and demographics, all panelists emphasized concerns about local content, job opportunities, and labor risks. New solutions are needed to ensure the fulfillment of these crucial aspects, all while preserving reliability and affordability. Various strategies, such as Power Purchase Agreements (PPAs), diversified ownership structures, and supply diversification play pivotal roles in achieving these objectives. To prevent unexpected delays and challenges, panelists underscored the value of transparency, realistic assumptions, and adaptability when negotiating projects with developers.

While the electricity procurement landscape shares several common challenges, each market and organization possesses unique perspectives and priorities. The unifying factors of renewable energy adoption, reliability, and cost-effectiveness bind these markets together. However, the approaches and challenges they face highlight the multifaceted nature of the industry. Collaboration, adaptability, and a steadfast commitment to sustainability remain guiding principles for success in this ever-evolving field.

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