As the world transitions towards renewable energy, more and more large companies are turning to long-term energy contracts. These contracts, which can range from 10 to 25 years in length, provide stability and predictability in energy prices, making it easier for companies to plan and budget for their energy needs. In this blog, we will explore why large companies prefer long-term energy contracts over short-term energy contracts.
5 Reasons Large Companies Prefer Long-Term Energy Contracts
Larger companies have many things to manage, so when they are able to predict future costs and attain budget certainty, it can be quite advantageous. As one of the nation’s leading energy brokers, we have found that our large business clients prefer long-term energy contracts. Let’s explore some of the reasons below…
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Price Stability:
One of the biggest reasons why large companies prefer long-term energy contracts is because they offer price stability. Energy prices can fluctuate wildly over short periods of time, making it difficult for companies to budget for their energy needs. Long-term contracts lock in prices for an extended period, often at a fixed rate, providing companies with predictable energy costs over the contract term.
2. Hedging against price volatility:
Large companies that consume a significant amount of energy often prefer long-term energy contracts to hedge against price volatility. Energy markets are notoriously volatile, with prices fluctuating based on supply and demand, geopolitical tensions, and weather conditions. By locking in prices for an extended period, companies can hedge against these market fluctuations and ensure that they have a stable source of energy at a predictable price.
3. Reduced administrative burden:
Long-term energy contracts also reduce the administrative burden on companies. Negotiating and signing multiple short-term contracts can be time-consuming and resource intensive. By entering into a long-term contract, companies can streamline their procurement process and reduce the administrative burden associated with managing multiple contracts.
4. Attracting investment:
Investors are increasingly interested in companies that demonstrate a commitment to sustainability and reducing their carbon footprint. Long-term energy contracts demonstrate this commitment and can help attract investment from socially responsible investors. By locking in prices for an extended period, companies can demonstrate that they are committed to reducing their environmental impact and have a stable source of energy that aligns with their sustainability goals.
5. Meeting sustainability targets:
Many large companies have set sustainability targets that include reducing their carbon footprint and increasing their use of renewable energy. Long-term energy contracts provide companies with a stable and predictable source of renewable energy that can help them meet these targets. By entering into long-term contracts with renewable energy providers, companies can demonstrate their commitment to sustainability and reduce their reliance on fossil fuels.
In conclusion, long-term energy contracts offer large companies price stability, hedging against price volatility, reducing administrative burden, attracting investment, and helping them meet their sustainability targets. As the world continues to transition towards renewable energy, we can expect to see more and more large companies turning to long-term energy contracts as a way to ensure a stable and predictable source of renewable energy. Inertia Resources, Inc. would be happy to help get your company set up with a long-term or short-term energy contract today to provide you with price stability, hedging against price volatility, reduced administrative burden, attracting investment, and meeting sustainability targets. Contact Us today to get started!
