German energy consultant ISPEX has launched a European energy consultancy and procurement network that will allow pan-European organisations to access the best local buying and regulatory knowledge, claims CEO Dr Stefan Arnold.
The annoucedment of the ISPEX Network is laudable and will be of use to multinational operators. But what are the implications for buying and managing energy for pan-European organisations in light of a possible Brexit?
Firstly tell us about ISPEX?
We primary work for companies in Germany, Austria and Switzerland who spend more than €250,000 per annum on energy. Our focus is on reducing costs but also on regulatory compliance. In recent years we have also become technology focused in order to provide detection and monitoring services, expense and billing information.
What is the aim of the ISPEX Network?
It was natural to grow into neighbouring markets like Austria and Switzerland but it was not as easy to branch out into areas like Benelux, Eastern Europe and the UK. This was not only due to geography but also to the very different markets and regulatory frameworks in those regions.
Building satellite offices never seemed an attractive solution as we simply could not provide the resources and standard of services that we would deliver in our own territories. While claiming an ‘office’ in another region looks attractive on company letterheads or websites it is more often just window dressing.
So we decided that a better and more transparent solution was to find regional partners who have the local resources and technical skills as well as a similar business model.
In terms of management, clients will often want the contracts managed where the European headquarters are located. Regional partners will report to the local partner who will then centrally manage the account and report to the client.
Additionally, clients will get tailored proposals from all the regional partners to ensure that they are getting the best possible services and results from the network as whole.
Our search for a partner in the UK led us to find Pulse Business Energy. It was clear to us it had the technical skills and that it managed large energy budgets but also had a high level of local regulatory knowledge as well. I was pleased to see that it won the Energy Buyer of the Year Award 2015 in the UK, which only reaffirmed our view of it.
Like ourselves Pulse has also been technology-led and can provide software solutions in the UK to the level we do in our home territories. After talking to similar partners all over Europe we decided that a network of partners would provide the best possible solution for pan-European clients.
How does the German energy sector differ from the UK?
On meeting with UK energy consultancies we have learned that there are many differences which can be overlooked. In Germany we have more than 1,000 electricity suppliers and more than 800 gas suppliers and many of them operate regionally.
Customers have a great deal of choice but it is impossible to speak to all these suppliers when a tender arises. So early on, we developed software that allows us to manage tenders through an online auction process so that all the interested suppliers can all bid at once and see how they rank.
In the UK this type of process currently would not work because there is not the same volume of suppliers and subsequently not as much online supplier engagement.
In Germany, the non-energy charges are often 70-75% of the overall electricity bill due to our earlier investment in renewables, which now dominates the overall cost. In the UK, the split between non-energy and energy can still be around 50/50. In Germany, the non-energy charges are fixed and all suppliers are aware of what these costs will be in advance of setting the supply contract.
I was surprised to learn that in the UK many of the non-charges are calculated retrospectively. As a result, these costs need to be speculated on by suppliers, which lends to a non-energy cost bidding process in the tender that we see companies like Pulse provide for in the UK. Both in Germany and the UK this type of technical knowledge and the methods for taking advantage of it can only be provided by local expertise, resources and contacts.
In addition, types of flexible buying contracts available in the UK are also a feature of the UK retail market and we are keen to watch this trend in Germany.
So what regions does the Network operate in?
Late in 2015 we formed the ISPEX Network together with Pulse Business Energy and Powergia as our partners in the UK and Switzerland. Since the Austrian energy market is very similar to the German one, we can provide our services by our German consultants.
Now we are talking to prospective partners in Italy, Benelux and Eastern Europe. Within the next year, we want to have partners in every important European deregulated market.
What impact do you think a Brexit might have on your Network?
A Brexit would bring uncertainty across the energy market: less the European one but more the British market.
The media currently spreads news which even predicts a rising number of blackouts in the UK as a result. Firstly, I do not think that leaving the EU will deeply affect British power supply or energy trading in the UK. Current contracts can and will last even without UK being part of the EU.
Of course, nobody knows how British energy frameworks would develop outside the EU. European regulation has been responsible for some important issues such as the Esos scheme and the upcoming rollout of smart meters. This uncertainty actually will not have any trigging impact on our Network, but will strengthen it.
Growing differences between markets will be responsible for a growing need for a local UK partner and regional partners for British companies working in the EU. te