UPM.COM
Article | Jan 10, 2018

Market agility in electricity consumption provides a competitive edge

UPM Energy offers a brand-new service by selling expertise to industrial scale electricity consumers.

With the electricity market facing the biggest change in its history, buying electricity can be the most difficult part of sourcing raw materials for industrial consumers. Even though the market’s focus is now shifting from producers to consumers, there are still many challenges. The market is increasingly handled in real-time, and it is becoming more complex and harder to predict. Prices fluctuate significantly depending on the time of day and season, and the market is evolving more rapidly than ever. Recent years have also seen an increase in market regulation.

Industrial consumers can be the winners of the ongoing market change, and the potential benefits are great, but very difficult to realise. If a large industrial company wants to buy its electricity directly from the market, the process is time-consuming, and might even require a whole day’s work from several people. If the company cannot devote enough time to buying smart, it could end up purchasing expensive electricity, and thus lose a valuable advantage.

UPM Energy extends its helping hand to tackle this problem. UPM has been operating in the Nordic electricity market both as a producer and a consumer since the birth of the market. Now the company is sharing its unique expertise to help customers.

“We have extensive experience in the processes of an industrial scale electricity consumer, and we know how these processes are seamlessly incorporated with the electricity market,” says Anne Särkilahti, Director, Business Services, UPM Energy.

“We have been ambitious in developing our expertise and bringing it to the next level. We have focused knowledge in trading, IT systems and hydropower production models, as well as in developing market analyses. Now this knowledge is also available to external customers,” says Särkilahti.

From passive consumer to value creator

The new service is about market agile electricity consumption and operating within the market on behalf of the customer. The business model is brand-new within the industry, and it has been formulated in such a way that both the customer and the service provider benefit. The fee is based on the added value created for the customer. “In practice, we help industrial electricity consumers to operate as smartly as possible within the energy market. The passive consumer, who was previously expecting the worst, can now evolve into a trader who understands the complex electricity market, and can even benefit from it economically. This gives our customers a clear advantage over the competitors, who haven’t organised their affairs as systematically,” says Särkilahti.

“If the sourcing hasn’t been carried out thoroughly, the price could be very high in some cases. However, if the company utilises the opportunities available, it could benefit from the expertise and gain an edge on the competition,” she adds.

If electricity consumers follow the price of electricity, understand the inherent flexibility of their processes and can predict their consumption well enough, they can keep the price risk under control and derive major benefit. When business processes are under control, electricity bills don’t come as a major surprise, and companies can even make additional profits.

Looking for cost cappers

By utilizing the expertise of UPM Energy, customers can optimize their operations and harness the cheapest available electricity.

“We won’t begin any market measures before a common procedure is created together with the customer. This agreed procedure guides our actions,” explains Särkilahti.

The first step is identifying potential ways of harnessing cheaper electricity.

“We begin from the customer’s current state, and analysing the opportunities for more market agile operations. After that, we design an operating model and test it in a pilot phase. It is essential that the customer’s entire organisation understands what we are doing. Ultimately, the success of the process depends on how much the customer’s entire personnel is invested in it. It’s all about building trust,” says Särkilahti.

 

Saara Pakarinen