The Energy Basket Strategy and why it might be worth considering

If your business is looking to manage energy costs more strategically, it’s worth understanding how group energy purchasing, often known as an ‘energy basket’ works.

While it’s not the right fit for everyone, it can offer a more considered way of buying energy, particularly for medium to large businesses with consistent usage.

This guide will walk you through what an energy basket is, how it works, and why some businesses are choosing to explore it as an alternative to the traditional fixed-rate contract.

Read on and we’ll answer these key questions:

• What is an energy basket?

• Why use an energy basket instead of a standard contract?

• Who does this work best for?

• What to consider before joining

• Is it right for every business?

What is an energy basket?

An energy basket is a procurement model where several businesses join a shared framework to purchase their energy together. While each business keeps its own individual contract and billing, their combined energy demand is used to improve buying power and access the wholesale market.

This allows energy to be bought in phases throughout the year, rather than locking in a full contract price based on the market rate at a single time.

Why use an energy basket instead of a standard contract?

The traditional approach to energy contracts, choosing a supplier and fixing a rate for a set term, works well in a stable market. But in times of price volatility, it carries risk. Locking in at the wrong time can result in being lumbered with long-term costs that are hard to shift.

Group purchasing through an energy basket spreads that risk. Because energy is bought in tranches over time, there’s more flexibility to respond to market movement, with decisions made by experienced energy traders.

Who does this work best for?

Energy baskets are often well-suited to:

• Medium to large businesses with predictable energy use

• Organisations looking for more control over energy spend without building in-house expertise

• Businesses in sectors like manufacturing, logistics, food production, and education, where energy is a notable overhead

What to Consider Before Joining

It’s important to understand that while you’re joining a group in terms of purchasing volume, your contract remains separate. That means your pricing, terms and risk profile will still be treated individually.

Before joining an energy basket, consider:

• Your risk appetite: while a fixed contract could have a higher unit rate. It provides a level of certainty in spend, It should be emphasised that though that there are potential savings to be made they can’t be guaranteed.

• Your internal capacity: is your team equipped to manage energy contracts or would a managed approach help?

• Your energy profile: do you use enough to benefit from wholesale access?

Is it right for every business? - No… and that’s worth being honest about. 

If your energy usage is highly variable, or if you need the predictability of a fully fixed price, a different model might suit you better.

But for many businesses looking to reduce exposure to market swings and bring more strategy into energy procurement, an energy basket is an option worth exploring and can be commercially savvy in the long run.

BFFF’s energy buying club

We’ve recently launched our energy buying club, an opportunity for our clients and contacts to join our own energy basket.

By partnering with us you gain access to trusted industry specialists who will grant your business access to strategic energy purchasing and  wholesale energy rates.

If a strategic approach to energy interests you, fill in your details below and a team member will discuss this with you.