Energy costs can make or break your bottom line.
Most manufacturing businesses struggle with unpredictable energy bills. But what if you could take control?
Why Energy Procurement Matters Now More Than Ever
The energy landscape is shifting rapidly. In January 2025, gas prices averaged 122.86p/th, an 11.07% increase from December, while electricity prices rose by 19.72% to 124.35/MWh.
For high energy users, these fluctuations aren’t just numbers—they’re potential threats to your profitability.
But here’s the good news: with the right procurement strategy, you can transform this challenge into an opportunity.
Understanding Your Energy Consumption Profile
Before diving into procurement options, you need to know your patterns.
Do you use more energy during specific seasons? Are there peak hours when your machinery runs at full capacity?
Monitoring your usage isn’t just good practice—it’s essential for finding the right contract. Without this data, you’re essentially flying blind.
Many manufacturing businesses make the mistake of signing contracts without understanding their consumption patterns. This leads to paying for energy they don’t need or facing penalties for exceeding agreed volumes.
The Three Contract Types Every Manufacturer Should Know
Fixed Contracts: Stability at a Premium
Fixed contracts lock in both commodity and third-party charges under one unit rate for the entire term.
They’re perfect if you want simplicity and budget certainty. However, you’ll pay a premium for this security, and you might miss out on market dips.
Plus, with fixed contracts, you may be unable to access government support for third-party charges that are hidden within the single unit rate.
Pass-through Contracts: Flexibility with Transparency
These contracts split your bill between fixed commodity costs and variable non-commodity charges.
If non-commodity rates change, these will appear on later bills. This model is ideal when applying for government support, as it separates components and makes it easier to receive targeted reliefs.
Flexible Contracts: Strategic Control
With flexible procurement, you can purchase energy in smaller chunks and even leave volume unhedged to take advantage of favourable market conditions.
This approach allows for more strategic risk management but requires active oversight. For manufacturers with multi-site operations, flexible energy baskets can increase buying power by aggregating demand with other businesses.
Market Trends Shaping 2025 Energy Procurement
Several key factors are influencing the UK energy market in 2025:
Infrastructure Challenges: Ageing grid infrastructure presents significant risks to energy reliability, potentially causing production downtime.
Geopolitical Pressures: Ongoing tensions in Eastern Europe and the Middle East continue to disrupt energy supply chains.
Policy Developments: The Targeted Charging Review has increased fixed daily charges by up to 2,000%, with refreshed charges due in December 2025 and taking effect from April 2026.
Renewable Energy Growth: In Q3 2024, renewable electricity generation was 6.5% higher than the same period in 2023, totalling 50.5% of all electricity generation.
Practical Strategies for Cost Reduction
1. Time Your Procurement Decisions
Market timing can significantly impact your energy costs. Consider:
- Securing contracts when seasonal demand is low
- Monitoring wholesale market trends before renewal
- Using forecast-led insights to lock in rates up to a year in advance
2. Leverage Data Analytics
Use energy management software to:
- Track consumption patterns across sites
- Identify inefficiencies and peak usage periods
- Create accurate forecasts for better contract negotiations
3. Explore On-site Generation Options
Installing rooftop solar panels can reduce grid dependency and lower long-term costs, with typical payback periods of 5-10 years.
Combined Heat and Power (CHP) systems can offer up to 20% reduction in energy costs and 30% reduction in carbon emissions.
4. Consider Power Purchase Agreements (PPAs)
A PPA with an energy generator can help meet sustainability targets while locking in specific long-term rates, providing both environmental and financial benefits.
Risk Management: The Missing Piece
Many manufacturers focus solely on price, overlooking the importance of risk management in their energy strategy.
Effective risk management includes:
Implementing Contingency Plans: Preparing for potential supply disruptions with backup options
Hedging Against Market Movements: Using trading strategies to secure energy when prices are favourable
Diversifying Energy Sources: Reducing dependency on a single supplier or energy type
How Link Utility Consultants Can Help
At Link Utility Consultants, we specialise in securing the most competitive energy contracts for high energy users, with complete transparency and no hidden fees.
Our approach includes:
- Working with over 50 energy suppliers to find the best fit for your needs
- Providing forecast-led insights for informed decisions
- Offering capped broker commissions for transparent pricing
- Guaranteeing to beat any renewal quote direct from energy suppliers
Next Steps for Manufacturing Businesses
- Audit Your Current Energy Usage: Understand your consumption patterns before making any procurement decisions.
- Review Your Contract Options: Consider whether fixed, pass-through, or flexible contracts best suit your business needs.
- Stay Informed: Keep up with policy updates and market trends that could impact your energy costs.
- Consult with Experts: Speak with energy procurement specialists who understand the unique challenges facing manufacturing businesses.
Energy procurement doesn’t have to be complicated. With the right strategy and partner, you can achieve cost stability while supporting your sustainability goals.
Ready to take control of your energy costs? Contact Link Utility Consultants today for a personalised energy procurement assessment.
