By Michael Tickle on Jan 07, 2021
Like many other sectors and industries, energy retailers are considering how to adapt and react to the effects of COVID-19. The pandemic has caused atypical energy use patterns across all sectors.1 As a result, energy retailers must come up with new approaches to remain cost competitive and provide value.
B2B energy retailers can be particularly challenged. Retailers’ obligations haven’t changed, but customer usage has. Retailers serving residential customers have responded to higher-than-normal usage, but some retailers focused on commercial and industrial customers have had to liquidate unused supply.2
After months of intermittent lockdowns and partial openings, some commercial and industrial facilities continue to face uncertain energy use outlooks. It has quickly become important for retailers to learn how load profiles shift in order to rebalance and pivot strategies. While this effort may not change immediate impacts, it can help retailers make smarter decisions moving forward.
Beyond those volumetric challenges of being a successful retailer, potential credit risks are likely the greater uncertainty. While the U.S. government has passed relief measures to improve business’ ability to keep up with rent and utility payments during shutdowns, many of these measures are near expiration, increasing the possibility of energy bills going unpaid, leaving retailers to absorb this debt.
Nevertheless, energy retailers do have options for increasing resilience and growing their business despite changing demands and markets. Here are some observations about the possibilities.
1. Leveraging Tailored Wholesale Energy Products & 24/7 Trading
Retailers can work with an energy marketer to source standard and non-standard wholesale energy procurement options. These tailored products may be designed to shift the degree and nature of physical or financial risk to better accommodate new internal goals and fluctuating usage predictions.
Relevant, timely usage data is instrumental in helping retailers respond to changing load profiles.4 Reacting to this data requires access to a 24/7 trading desk, which can improve the ability to buy and sell wholesale energy on a timely and responsive basis.5 Prompt market access can help when responding to shutdowns, weather, or any other unexpected event.
2. Reassessing Liquidity & Debt
As Boston Consulting Group reports, “Many retailers face losses that, in just months, could wipe out their aggregate profits from B2B sales over the last decade.” Globally, many retailers have found themselves with too much supply, forced to sell at significant losses, with negative repercussions on their cash flow.
Optimizing debt management is an important consideration for tackling these liquidity issues.6 Additional financing can enhance cash flow and allow retailers to seek competitive advantages when they’re needed the most.
3. Strengthening Retail Market Positioning
Learning how pandemic-related market forces affect loads has driven some retailers to re-assess the viability of their current business models and contingency plans.7 For example, previously vetted contingency plans may not work for health-related issues and pandemics, which disrupt energy and industry in new ways. Some retailers may plan to differentiate themselves through efforts like adjacent services, such as demand management or distributed energy resources (DERs), or expanding their geographical service area. Energy wholesalers may assist in this effort in various ways, such as competitive rates, deep expertise, tailored products, and scalable supply.
More Solutions to Help Energy Retailers Adapt
For further reading, see Energy Retailer Solutions At A Glance, a brief fact sheet outlining Shell Energy products and services that can help foster resiliency and growth within your business.
Consistently ranked a top-3 energy marketer and trader in North America, Shell Energy offers standard and non-standard wholesale energy products, including power, natural gas, and renewable energy supply.
We have the scale and trading power to provide continuity, expertise, and flexibility to energy retailers during changing times. Contact Shell Energy to connect with an expert team that understands the complexity of your decisions.
Michael Tickle, Mid Marketing Manager at Shell Energy North America, has over 15 years of energy retail experience. Having held various roles in finance, sales, and origination, he applies his expertise developing products and structured solutions to energy retailers throughout the U.S. and Canada.