Best Practices for Energy Procurement
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In cooperation with Mazzetti, Hospital Energy has authored best practices for energy procurement specific to healthcare. This market-leading approach can help organizations lower costs and lower market risk, gain control over energy spend, and develop a multi-year strategy that is customized to the organization's needs.
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Triple Bottom Line Benefits of Best Practices
Cost benefits
Effective procurement of electricity, natural gas, district energy, renewable energy, on-site or off-site power generation, and energy storage is fundamentally a risk avoidance and cost-saving opportunity. Employing energy purchasing best practices can prevent unwelcome surprises and result in potential budget savings for health care facilities.
Environmental benefits
Market procurement of energy allows hospitals to obtain access to renewable or cleaner fossil fuel-generated sources of electricity.
Social benefits
Resources saved through effective management of energy costs can be redirected toward patient services and encourages the continued deployment of viable sustainability strategies that benefit our communities, nation, and the world.
Executive Summary
In the past, with energy costs largely regulated and therefore fixed, hospital engineers simply purchased energy directly from local utilities. Today, market deregulation coupled with a host of new financial intermediaries and energy products, advances in energy technology, and a new emphasis on sustainability requires energy buyers to make complex procurement decisions.
These fundamental changes require that hospitals adopt new methods for sourcing energy supply (at least in deregulated markets). The most important of these methods is to align facility, finance, and supply chain professionals around a financial approach to energy procurement. This text sets forth energy procurement best practices adopted by leading health systems around the United States.
Key concepts in this document are:
- Energy is a financial commodity traded using financial tools
- Financial methods should drive hospital energy decision making.
Emphasis on financial management contributes to an organization’s ability to respond to the value-based procurement efficiency standards of the Affordable Care Act. In light of these changes to both the energy market and the health care field, hospitals today should approach energy procurement using three best practice principles (Aggregation, Alignment, Analytics).