Anyone can buy power. They can search on the internet, or they can call a supplier to get a rate. By contrast, power procurement is a service-led approach that goes much deeper into the process and uses different methodologies to respond to an operator’s needs.
For an operator that has not started its fleet electrification journey yet, its biggest costs will be staff and diesel.
While diesel outgoings will virtually disappear when the operator transitions to electric, it will then have electricity costs to add into the mix.
By the end of 2025, the annual electricity usage of some of the UK’s largest bus fleet operators is expected to rise to 49 million kWh.
That will lift even further by 2035, when entire fleets will be decarbonised, and electricity will quickly become the number one cost for operators.
With this in mind, power purchasing will need to be thought about more strategically than ever before.
In this edition of Switched On, Alasdair Wilson, our Power Procurement and Renewable Solutions Director at Zenobē, shares his insight into the world of power procurement and why, as bus fleet electrification continues to grow, it is fast becoming a hot topic for finance directors in depots across the country.
As always, if you have any questions, please get in touch.
Steven Meersman, Co-Founder and Director, Zenobē.
Why should operators consider a power procurement plan?
Before electrification, a small- to medium-sized bus depot may have typically used 250,000kWh per year – meaning that electricity bills would have been a relatively low figure on its cost centre.
However, with decarbonisation and the introduction of fully electric buses, the same depot may now use up to seven million kWh per year. That will have a significant impact on electricity costs.
Suddenly, finance teams need to take a much bigger interest in how best to optimise those as electricity replaces diesel as one of the top three cost centres within the business.
In many respects, before electrification, a depot’s electricity contract would have been similar to a domestic contract in the type you have for your home. But now, higher usage brings with it the opportunity to enter a whole world of different contract types – contracts that are more suitable for a depot’s needs now it is powering fully-electric vehicles.
Brokers versus power procurement specialists
The vast majority of the UK commercial market uses third parties to help with power procurement, so it is by no means an alien function to most business owners and coach and bus operators.
However, many of these third parties are brokers that simply acquire a range of price options for energy that are then presented to the customer. A power broker may sign up an organisation or a depot to one of these tariffs over the phone without further correspondence or interaction until the next renewal date.
Additionally, it is highly unlikely that a typical power broker will have specialist knowledge of the transport sector and its related energy usage.
A specialist power procurement consultant will look at the granularity of when electricity usage occurs. That is especially pertinent in the transport sector, where vehicles may need to be charged at different times depending on the demands of the route and the number of vehicles available to the operator.
The consultant and operator need to be in constant engagement to review and optimise these costs. At Zenobē, we are working directly with suppliers to develop transport-specific products with a focus on making electric the most viable power resource for the transport industry.
What does a power procurement partnership look like?
Often, a power procurement contract will be arranged following the delivery and commissioning of a depot.
In a power procurement partnership, it is beneficial to ensure that you are working with someone who has knowledge around how the site was commissioned. That helps with knowing what the expected energy output will be and with the continuity when transitioning from construction and commissioning into operations.
It is a benefit that Zenobē – as an end-to-end electrification provider – is already offering to some of our customers. But we also run power procurement contracts in depots where we don’t have charging assets in operation.
The important thing is having transport-specific knowledge and an understanding of how an electric bus depot operates, which allows us to respond much more directly to our customers’ requirements compared to energy brokers.
On a day-to-day basis, we operate as energy consultants and as an extension of the in-house energy management or sustainability team. We are in touch every week, managing any queries that the operator has around its energy usage including contractual, billing and technical issues, and advocating on its behalf directly with the energy supplier.
How is a procurement contract agreed?
In an electricity contract, there are about 20 different elements that go into the electricity rate set out in the invoice received from the supplier, including government green levies, network costs, and other taxes.
Typically, coach and bus operators will have a fixed contract where a rate is secured on day one and charged for the next 12 or 24 months. You could say you have a one-in-365 chance of hitting the best rate.
With increased electricity demand due to decarbonisation, there are many procurement opportunities open to operators that have varying degrees of flexibility and can provide the opportunity to secure a better price.
Moving forward with a power procurement contract requires operators to take on a new perspective. In Zenobē’s power procurement process, we will set up a workshop and meet with all relevant stakeholders to understand how they prepare their budgets, explain the pros and cons, and above all, understand their attitude to risk and introducing elements of exposure to their power procurement contract.
Following this workshop, we will make a recommendation for a fixed or flexible approach, and we will provide support throughout the lifetime of the contract.
A power procurement contract can also include a forensic audit of invoicing to date to identify where additional cost savings can be achieved. Further savings could be gained by integrating financing of solar panels into the power procurement contract to facilitate on-site energy generation.
With access to live market data and a network of vetted suppliers, a power procurement contract provides operators with a holistic approach to their energy management – one that can, when approached in the right way, reflect the needs of a modern electric bus operator.
Conclusions
The shift to fully electric bus depots presents a pivotal moment for operators and their finance directors as they balance the move from diesel to electric.
While their spending on diesel will fall, electricity outgoings will inevitably rise to become a significant cost centre for their operations. By approaching this challenge with the right power procurement partner, reliable and cost-effective electricity can be secured to keep the overall total cost of operation down.
Alasdair Wilson is a power procurement and renewable solutions professional with over 24 years’ experience. He currently heads Zenobē’s dedicated power procurement team, working with bus operators to manage energy pricing and funded solar solutions for standalone depots to large-scale fleet portfolios.
