September 19, 2014 | By RGR Marketing Blog

When Energy Costs Rise, Collective Energy Purchasing Steps In

Energy costs have risen considerably over the past decade. In fact, recent reports have costs rising at 8 times the rate of earnings, making it much more expensive to power our homes and businesses than it previously had been. Because of this and other factors, many business owners and private individuals are currently (and always!) on the lookout for ways to cut energy costs.

Collective energy purchasing may offer just such a solution. So what is collective energy purchasing, and more importantly, does it actually work?

There’s Power in Numbers

Here’s how collective energy purchasing works: groups of businesses or consumers can pool their purchasing power together, and then use their leverage to negotiate better energy prices from gas and electricity providers.

While individuals can’t exert much control over the prices charged by their utility companies, groups of people or companies are much harder to ignore. The utilities know that if they won’t offer these groups more attractive rates, one of their competitors very well may, resulting in loss of revenue and market share. The larger the group, the more influence it can wield when it comes to negotiating better deals.

Buying in Bulk Has Its Benefits

Energy buying collectives are often able to procure their power in bulk, agreeing to purchase a large amount of energy at an agreed-upon price. This allows them to take advantage of temporary dips in the energy market, saving even more money in the process.

The Lowest Bidder Wins With Collective Energy

Energy purchasing collectives can foster competition among energy providers by accepting bids from companies interested in securing their patronage. Often, getting energy for the lowest price is a high priority, but many collective energy-purchasing groups are also interested in acquiring their energy from sustainable sources. It may not always be possible to have both low prices and green energy, but with the recent proliferation of renewable energy providers, it often is.

Is Collective Energy Purchasing a Game-Changer?

Collective energy purchasing initiatives got a bit of a boost in 2012, when they were endorsed by the Obama administration. Be that as it may, collective energy purchasing hasn’t really caught on with the rank and file of American energy consumers – at least not yet.

Still, some large cities and small towns have been buying energy in bulk for their citizens, using their collective purchasing power to get lower rates from gas and electrical providers, and to exert influence over how that energy is produced.

And as renewable energy sources such as solar and wind become cheaper, more efficient, and more commonplace, it seems to be only a matter of time before consumers and business organizations follow suit.

[Photo Credit: Lester Public Library]

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