By Jenna Richardson, Director of Sales, North American Insurance Services
The Grangemouth industrial dispute which came to a head in October 2013 was symptomatic of the highly competitive, truly global nature of today’s energy and utilities market.
As explained by Ineos’ boss Jim Ratcliffe, this dispute could only be resolved – and the future of the Grangemouth plant secured – when the company felt confident enough to make a £300 million (more than $493 million), three-year investment to bring competitively priced shale gas across from America to generate energy more cost-effectively in the UK.
As the fourth largest chemical company in the world with operations in 11 countries and a massive requirement for energy, I would suggest that Ineos is a fairly accurate barometer for the priorities and concerns affecting the use of energy and utilities by enterprise organizations today.
Businesses must buy their energy as cheaply as they can. At the same time, energy companies are finding that the world they know is undergoing a process of transformation.
Take the energy source mentioned above: shale gas.
It has turned the economics of the global energy market on its head, representing a potential boost to America’s GDP of $380 billion to $690 billion (approximately 3.7 percent) by 20201.
Small wonder, then, that while shale represented just 1 percent of American natural gas supplies in 2000, today it is 30 percent and rising2.
Nor is this the only “new” source of energy that is changing the rules of the game.
According to The Economist3 the growing market share of energy from renewable sources poses an “existential” threat to Europe’s electricity providers as wholesale process are driven down and new technologies become more affordable.
Given that energy and utility companies spend a significant amount of their revenues on operating costs, coping with change on this scale must mean optimizing operational efficiency.
Outsourcing on a global scale can help significantly in achieving this goal.
A case in point was the three-year global contract recently signed in America between Xchanging and Severn Trent Services (STS), part of the Severn Trent Plc group of companies and a provider of water and waste water treatment products and operating services to utilities and municipalities in key markets around the world.
Xchanging will be providing procurement services covering strategic sourcing, category and contract management services, and analytics across all STS indirect procurement spend, delivering maximum value for spend, introducing standard global processes and enabling scalable growth for the customer.
How is your organization performing in these areas? Could you be making savings that would help you compete more effectively in the global energy and utilities market?
Now more than ever before, I’m convinced that outsourcing can deliver value for companies in this sector - and I’d like to hear your thoughts and experiences too.
1 “Game Changers: Five Opportunities for U.S. Growth and Renewal”, McKinsey, 2013
2 An Interview with George Mitchell, The Economist, 1st August 2013
3 European Utilities: How to lose Half a Trillion Euros, The Economist, 12th October 2013