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Optimize Sales and Energy Procurement by Executing the Right Portfolio Strategy

by Isabel Thomas | SAPinsider

January 1, 2013

To stay competitive within the deregulated energy industry, energy retailers need to create detailed sales and procurement portfolios that are seamlessly integrated. However, portfolios that rely on historical data are not flexible enough to keep users current on market fluctuations. Energy retailers, independent energy producers, and even large energy consumers are turning to SAP Energy Portfolio Management 6.04 to enable the real-time relay of information and make processes more efficient.

Deregulation of the energy industry creates both opportunities and challenges for energy companies arising from the inherent competition that deregulation fosters. Those that are best positioned to capture market share are the energy retailers and companies that can procure their own energy and most efficiently manage the volatile market conditions by either creating more detailed demand models or integrating sales and procurement models.

Historically, energy portfolios were managed with disparate solutions pulling data from various places. For energy retailers that both buy and sell energy, sales and demand data resided in a separate system from procurement and planning data. Attempts to leverage these disconnected pockets of information to create sales forecast models or procurement plans often proved inefficient and inaccurate.

With increased competition, it has become necessary for energy retailers to create detailed sales and procurement portfolios and, just as importantly, to seamlessly integrate them. Only with close integration can a retailer derive the true cost benefits that the detailed plans are designed to deliver.

The Value of Real-Time Energy Data

Energy sales portfolios that rely solely on historical models or data have neither the insight nor the flexibility to keep users current on market fluctuations. To optimize the energy procurement and sales cycle, users need access to real-time data on customer demand patterns, product availability, pricing, and deal management.

SAP has developed SAP Energy Portfolio Management 6.04 to help energy retailers, as well as independent energy producers and even large energy consumers, manage their energy processes. The key benefit of SAP Energy Portfolio Management 6.04 is that it seamlessly manages both the retail and wholesale aspects of a retailer’s energy pipeline, integrating the sales and procurement profiles to minimize misspent processes or resources. The solution compares the energy demand from customers to standard product and market prices to create an energy ledger of sorts.

Deregulation created the incentive for energy retailers to prepare detailed sales profiles of existing and potential customers to develop specific sales plans. For large commercial and industrial consumers, this has led to the creation of sales portfolios at a granular level. How much energy does a business intend to use on a weekly, daily, or hourly basis? Are there expected periods of high usage? Understanding such patterns can help an energy retailer determine the best time to buy energy for that customer and the best time to sell energy to that customer. At the residential level, sales portfolios are aggregated by customer segments, and accompanying procurement strategies are created for each product, region, or customer group.

Energy retailers compile and store data based on a customer’s actual and forecasted demand, factoring in both short-term and long-term usage. SAP Energy Portfolio Management 6.04 aggregates this data to allow the real-time relay of information between an energy retailer’s sales agent and procurement agent, so that the sales planning process, from quotations to contracts, can allocate for variables such as high-usage periods. SAP Energy Portfolio Management 6.04 uses the data from a sales portfolio, including the energy demand from a particular sale, to plan for and create a procurement portfolio that can help a retailer decide which package of specific energy products can be obtained for the lowest price, factoring in market availability, prices, and a customer’s time series (its base energy need and expected usage fluctuations). Because procurement profile information can change daily according to each customer’s sales profile, precise management of the system using SAP Energy Portfolio Management 6.04 enables a retailer to improve profitability.

So for commercial, industrial, and residential customers, the creation of detailed sales portfolios gives procurement agents the transactions for a structured and organized procurement process that optimizes profitability and minimizes risks.

With integration between sales and procurement, users of SAP Energy Portfolio Management 6.04 can realize multiple benefits. For example, one clear benefit is that the ability to build a customer’s time series into procurement strategies helps energy retailers avoid having to absorb unexpected price spikes. Yet even barring unexpected fluctuations, integration affords retailers the ability to maximize the balance between their sales and procurement profiles with centrally stored and easily accessible data. At any point throughout the day, this allows portfolio managers, procurement agents, traders, or other users to pinpoint demand with procurement levels and avoid high-cost procurement deals. A central data system also minimizes inefficiencies caused by lost or missing data, internal communication issues, or time delays caused by disparate systems integration. Trying to synchronize data across different solutions or products lends itself to gaps in energy portfolio management, which SAP Energy Portfolio Management 6.04 is designed to avoid.

Case Study: Portfolio Management in Practice

A large German energy company implemented a custom energy portfolio management solution from SAP as part of a strategic IT project aimed at optimizing its power procurement processes. Specific goals were two-fold: minimize financial risk and secure distribution-oriented revenues.

The company, which buys electricity and natural gas from procurement partners and then sells it to customers, was looking to update a system in which each of its multiple business units had its own IT solution for compiling sales and consumption data. For procurement, this data had to be exchanged manually with the existing SAP solutions, and process flows were interrupted by integration gaps.

The company integrated the energy portfolio management application with existing solutions, including the SAP for Utilities solution portfolio, the SAP Energy Data Management application, SAP NetWeaver Business Warehouse (SAP NetWeaver BW), and third-party applications, to see a 50% reduction in procurement and sales posting time. The custom solution centralized all energy-related business transactions, from procurement through sales to the end customer — bringing the company’s role as a distributor into sharper focus, as automating all processes makes the company more efficient.

Learn More

SAP Energy Portfolio Management 6.04 was released in November 2012, replacing energy portfolio management 2.0, which only covered electricity. Because energy procurement has, for the most part, operated across a myriad of products and solutions, SAP will begin offering SAP Energy Portfolio Management 6.04 customers an implementation service to assist with basic configuration based on best practices for audit-compliant data. The service is expected to be available in early 2013.

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Isabel Thomas ( is the Global Industry Business Development Manager for Utilities at SAP Custom Development. Before assuming that role, she was a Solution Expert in the IBU for Utilities. During her time on that team, Isabel worked on strategic accounts and became a subject matter expert on deregulation and the SAP for Utilities solution. Before joining SAP in 2000, she held various positions in marketing, sales, and consulting at two partner firms in the utilities space.

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