Procurement in the energy sector plays a key role in the energy industry. It not only influences the cost structure of companies, but also their carbon footprint and sustainability goals. Unlike in many industries, procurement here is closely linked to volatile energy markets, regulatory frameworks and geopolitical influences. In this article, we provide an overview of the special features of energy procurement, address current challenges, particularly in the context of the climate crisis, and discuss strategic future prospects.

1. What does purchasing mean in the energy sector?

1.1 Direct purchasing in the energy sector

Direct energy purchasing comprises the strategic and operational procurement of electricity and gas. The central tasks include

• Market observation
• Analysis of price developments
• Participation in tenders
• Selection of energy markets
• Contract negotiations
• Risk management.

The energy market is highly volatile, which makes purchasing particularly challenging both in terms of time and price.

Energy trading basically takes place in two ways: via regulated energy exchanges as central trading centers or via over-the-counter OTC trading.

In Germany, around 75% over the counterof electricity is still traded . However, prices are still strongly oriented towards exchange prices.

The timing and duration of procurement contracts have a considerable influence on energy prices. Spot market prices can fluctuate greatly depending on the day, while long-term futures prices offer more planning security. Strategic procurement planning therefore takes into account market trends, political influences and seasonal factors.

1.2 Indirect purchasing in the energy sector

Indirect purchasing in the energy sector includes all procurement activities for goods and services that are not sold directly as tradable energy products but are essential for the business operations of energy companies. These include

Production facilities as long-term capital goods:

• Wind farms
• photovoltaic systems
• power plants
• energy storage facilities

Grid infrastructure:

• Transmission lines
• transformers
• Smart grid technologies.

There are also the following categories:

• IT systems
• Software for trading platforms
• SCADA systems for grid control
• Cybersecurity solutions
• Specialized services such as maintenance and repair
• Consulting for regulation and compliance
• Engineering services and facility management

The procurement of critical infrastructure technologies is particularly complex, as they have to meet the highest safety and availability standards. Modern energy companies are increasingly relying on digital procurement platforms to optimize indirect purchasing, meet compliance requirements and achieve cost savings through strategic supplier partnerships.

The integration of ESG criteria is also becoming increasingly important, as energy companies need to make their entire value chain more sustainable.

1.3 Differences between energy procurement and other sectors

In contrast to other sectors, energy procurement is more strongly influenced by political decisions, government regulation (e.g. EEG, CO₂ pricing) and market dynamics. Purchasing also has a direct influence on the carbon footprint of companies. This is a distinguishing feature of growing strategic importance.

2. Current challenges in energy procurement

2.1 Market volatility & price uncertainty

The energy market has been increasingly characterized by price volatility in recent years. There are many reasons for this.

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Influencing factors such as geopolitical conflicts, regulatory interventions and the scarcity of fossil resources intertwine and create a dynamic that makes long-term planning difficult. This volatility affects both direct purchasing (tradable energy products such as electricity, gas, oil and emissions certificates) and indirect purchasing (production facilities, infrastructure and services), with the latter being particularly vulnerable due to longer-term investment cycles and more complex supply chains.

The price shock during the Ukraine war was particularly striking: before the war began, around 55% of German natural gas came from Russia (as at 2020). The loss of these supply volumes and the destruction of critical infrastructure, such as the Nord Stream pipelines, caused prices to multiply within a very short space of time. The price of natural gas at the European TTF trading point reached a record high of 320.4 in March 2022 (see figure), compared to an index value of around 100 before the crisis. Electricity and light heating oil were also massively affected.

2.2 Negative impact of volatility on indirect purchasing

Indirect purchasing was hit even harder by secondary effects: Wind farm components became more expensive due to higher steel prices. Solar panel supply chains from Asia were interrupted by energy shortages and logistics problems. In addition, the IT infrastructure for energy trading platforms delayed by semiconductor bottleneckswas  . Maintenance and repair costs rose disproportionately as specialized service providers adjusted their prices to the increased energy costs. Engineering services and consulting services became significantly more expensive due to the increased demand for energy efficiency projects and compliance consulting.

This trend was exacerbated by the increased demand for alternative sources and higher CO₂ prices. The increase in CO₂ certificates as part of EU emissions trading made fossil energy generation significantly more expensive. In 2021, still €25 per tonne; today, the price has more than doubled and stands at €55 per tonnethe CO₂ price was . This was compounded by the expiry of temporary relief measures such as the VAT reduction on gas and emergency aid in December 2022, which had previously had a price-dampening effect. With the discontinuation of these measures, the consumer price index rose again, particularly in spring 2023.

This extreme volatility makes it difficult for companies to realistically calculate their energy expenditure. Long-term contracts are becoming riskier because future developments are almost impossible to predict. Indirect purchasing in particular faces special challenges: Investment decisions for wind farms or power plants with a 20-30 year term must be made under extreme uncertainty, while at the same time supplier contracts for critical infrastructure services must be made more flexible. Energy-intensive sectors must therefore fundamentally rethink their purchasing strategies and focus more on risk hedging and diversified procurement portfolios.

2.3 Regulatory complexity

Energy buyers have to navigate a dense network of national and European regulations:

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These regulations and many other provisions influence purchasing decisions. Contractual risks, reporting obligations and ESG compliance are important topics.

2.4 Supply chain risks & infrastructure dependency

Global supply chains and critical infrastructure such as electricity grids, gas pipelines and LNG terminals are susceptible to disruptions caused by cyber attacks, acts of sabotage or construction delays. These risks have a direct impact on security of supply and therefore also on purchasing strategies.

Cyberattacks on energy grids

Thousands of cyberattacks on electricity and gas grids have been reported in Europe since 2022; the German Federal Office for Information (BSI) warns of serious consequences for security of supplySecurity .

Sabotage of grid infrastructure

In September 2022, explosions occurred on the Nord Stream pipelines, causing extensive gas outages and geopolitical upheaval.

In Germany, a fiber optic cable for the railroad destroyed in 2022was . Also a symbol of possible sabotage against critical infrastructure.

Delays in the construction of LNG terminals

The Stade LNG terminal in northern Germany has been delayed for months because the "FSRU" ship was withdrawn.

Impact on indirect energy procurement

• Supply uncertainty & price volatility: Disruptions lead to short-term supply bottlenecks and price increases.
• Risk profile adjustment: Buyers must take crisis scenarios (e.g. cyberattack, sabotage, construction delay) into account and safeguard them in the purchasing process.
• Update procurement strategies: By diversifying (e.g. LNG vs. pipeline gas), setting up safety nets or emergency supply contracts.

2.5 Digitalization & data management

Real-time data is also becoming increasingly important in indirect energy procurement. Energy prices, CO₂ intensity and regulatory requirements have a major impact on the selection and evaluation of suppliers and products.

This requires:

• Transparent data on energy and CO₂ key figures along the supply chain
• Access to up-to-date market information to assess price trends and security of supply
• Digital tools that link purchasing, sustainability and risk data with each other

However, many companies face challenges:

• Outdated IT systems that are unable to record or evaluate energy-related information
• Lack of interfaces between procurement, sustainability and ESG reporting
• Unclear responsibilities with regard to data quality and reporting obligations (e.g. CSRD, EU taxonomy)

Even those who do not procure energy directly are affected by its price and emissions trends. Indirect energy procurement must be integrated into digital management and evaluation to ensure informed decisions, regulatory certainty and climate-conscious supply chains.

2.6 Climate crisis & current developments

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With around 40% of global CO₂ emissions, the energy supply is the single biggest contributor to the climate crisis. It is therefore at the center of climate policy measures.

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Initiatives such as the Paris Climate Agreement, the EU Green Deal, the EU Taxonomy or national measures such as the Climate Protection Act in Germany are calling on companies to systematically decarbonize their indirect energy consumption as well.

For indirect energy purchasing, this means

• Purchased products and services are increasingly being assessed according to their energy and emissions profile.
• Buyers need to understand and compare the carbon footprints of materials, production processes and transportation routes.
• Those who select CO₂-intensive primary products or suppliers risk higher costs, loss of reputation or sustainability problems in the supply chain.

The decarbonization of procurement thus becomes a strategic obligation and a central task in climate-related risk management.

3. Sustainable procurement as crisis prevention

3.1 Definition & objectives

Sustainable energy procurement means paying attention not only to price, but also to environmental, social and economic impacts. In terms of indirect energy purchasing, this means that companies check the energy and emissions profiles of their primary products, suppliers and services.

The focus here is on

• Renewable energies along the supply chain (e.g. through guarantees of origin or PPAs)
• Low-emission suppliers that actively reduce CO₂ or produce in a climate-friendly way
• Supply chain transparency for energy sources, transport routes and ESG risks

Sustainable procurement thus contributes directly to the reduction of Scope 2 and Scope 3 emissions and at the same time meets the growing demands of politicians, investors and the public. It is no longer an add-on, but a prerequisite for a sustainable procurement strategy.

3.2 Advantages

Sustainable procurement not only protects the climate, but also provides companies with clear economic and strategic advantages. Those who already consistently rely on low-emission and energy-efficient products and suppliers benefit on several levels:

• Greater planning security: energy prices are subject to strong fluctuations - sustainable supply chains, e.g. through PPAs or climate-friendly logistics, enable more stable cost calculations.
• Regulatory compliance: EU taxonomy, CSRD and LkSG are increasing the pressure on companies to demonstrate ESG-compliant procurement. Those who focus on sustainable energy sources and transparent supply chains at an early stage proactively meet legal requirements.
• Competitive advantage through ESG ranking: Customers, investors and partners are increasingly paying attention to the sustainability of the entire value chain. Credibly documented, climate-friendly purchasing has a positive impact on ESG ratings and company perception.
• Reputation gain: Sustainability is a relevant image factor today - both for stakeholders and in employer branding. Those who act credibly strengthen trust and differentiation in the market.

In short: sustainability in indirect energy procurement is not a cost driver, but a strategic lever to ensure resilience, efficiency and future viability.

4. Strategies & requirements for purchasing in the energy sector

4.1 Risk hedging

Energy prices are subject to strong fluctuations due to geopolitical developments, CO₂ pricing, weather extremes or shifts in demand. For indirectly purchasing companies, this means that even if they do not procure energy themselves, their suppliers, materials or services are heavily affected by these fluctuations. In order to ensure long-term cost stability, targeted hedging strategies are required in purchasing.

Important instruments here are

• Hedging strategies: Companies can hedge indirectly against rising energy prices, for example through long-term supply contracts with fixed energy or material prices or through contractual hedging with upstream suppliers.
• Price escalation clauses: These clauses make it possible to flexibly adjust prices to market changes (e.g. electricity price index, CO₂ certificates). Designed correctly, they create transparency and reliability for both contracting parties.
• Spot and futures market mix: When selecting suppliers, the purchasing strategy can also differentiate between short-term (spot market-based) and long-term (futures-based) contract models - depending on the risk and demand situation.
• Scenario-based planning: The simulation of various energy price scenarios helps to identify and cushion the financial impact on production costs, supply prices or margins at an early stage.

Sophisticated risk hedging in energy procurement is also crucial for companies that are indirectly affected. It not only protects against short-term price peaks, but also ensures long-term competitiveness - especially in energy-intensive sectors.

4.2 Supplier management & sustainability criteria

Companies are under increasing pressure to demonstrate the sustainability and responsibility of their supply chain.

1. environmental performance & carbon footprint

Suppliers who know, document and reduce their carbon footprint have an advantage. Particularly important:

• Product and company-specific emissions data
• Measures for energy efficiency or decarbonization

2. certifications & proofs

Certificates show that sustainability is structurally anchored. Particularly in demand:

• ISO 14001 (environmental management)
• ISO 50001 (energy management)
• ISO 26000 (social responsibility)

3. transparency & traceability

Where does a product come from? How energy-intensive is its production? Who are the upstream suppliers?

• Traceability back to the source
• Documentation on origin and energy use
• Compliance with supply chain due diligence (LkSG)

4. audits & external ratings

Independent assessments make sustainability comparable:

• Platforms such as EcoVadis, CDP or BSCI
• Results flow directly into the supplier evaluation
  

Tip for procurement managers Use a standardized ESG scoring model or integrate sustainability into your SRM tool. This way, ESG does not become an additional task, but part of your routine processes - and creates real added value in the long term.

4.3 Digitalization & tools

Modern procurement solutions enable the analysis of large amounts of data, automated tenders and transparent reports. AI-supported forecasts help to evaluate future developments.

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5. Outlook: The future of procurement in the energy sector

Indirect energy procurement is at a turning point: what was once considered an operational support area is now becoming a strategic driver for decarbonization, digitalization and resilience. At a time when energy costs are fluctuating, ESG requirements are increasing and digital technologies are changing entire supply chains, the role of procurement is being redefined.

Companies that align their procurement with foresight can

• Proactively manage risks instead of just reacting to crises,
• Embed sustainability in the supply chain instead of looking at it in isolation,
• and use digital opportunities to improve processes, transparency and performance.

Future developments such as CO₂ tariffs, automated trading platforms, blockchain-based supply chains and AI-supported risk analyses will continue to change procurement. At the same time, the requirements for compliance, ESG scoring and data integration are increasing.

Indirect energy procurement will therefore not only become a key factor for efficiency and compliance, but also an active contributor to the energy transition. Now is the right time to strategically develop your own understanding of procurement.

6. Conclusion & recommendations for action

Indirect energy procurement has evolved from a sideshow to a strategic management tool. Between energy price crises, climate targets and digitalization, it is becoming clear that those who purchase passively today not only risk higher costs tomorrow, but also regulatory conflicts and loss of reputation. The requirements are increasing - but so are the opportunities to create real added value through data-based, sustainable and risk-oriented strategies.

Recommended measures for procurement managers:

1. Create transparency
   Collect and analyze energy and emissions data along the entire supply chain - from the plant to IT to the service provider.
2. Embed sustainability
   Integrate ESG criteria into your supplier evaluations, use carbon footprints, audits and certifications as a basis for decision-making.
3. Use digitalization consistently
   Rely on modern procurement platforms, AI-supported forecasts and automated tenders for efficiency, transparency and scalability.
4. Hedge risks
   Develop flexible procurement strategies with price escalation clauses, hedging instruments and scenario planning - including for indirect services and goods.
5. Position strategically
   Make procurement an active part of your climate strategy. This not only strengthens resilience and efficiency, but also helps shape the energy transition.

Those who strategically align indirect procurement in the energy sector today are not only shaping efficiency and resilience in the company, but also making an active contribution to the climate-neutral future of the energy sector.

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