Biomass and Bioenergy Procurement: When ETRM isn’t enough

Utility companies and power generators have access to a wide range of software solutions that can help them improve operational efficiency and process data faster, from generation optimisation to logistics scheduling. With many software products offered by a wide range of vendors, and new options emerging regularly, it can be difficult to know which technologies are necessary, which are no longer as effective as they used to be and which would not add value if implemented.

Some of the main technologies used in energy generation and trading include the ERP and the ETRM. Whilst these systems can provide significant benefits to businesses, they do not necessarily support all departments equally.

The role of ERPs

ERP stands for Enterprise Resource Planning, and most large utilities with multiple functions use an ERP to help optimise their operations. An ERP typically supports several areas across the business with different features through one underlying core system and database. The ERP may support invoicing, sales, HR, warehousing, scheduling, resourcing and far more. This wide range of functionality is useful in moving the business towards one single source of truth for information, compiling reports and providing better data for decision making.

However, the size of ERPs can also present some challenges for energy companies. Because these systems cover so many departments, they are often stronger in some areas than others, leaving some teams managing all or part of their role offline and therefore negating some of the efficiency benefits the ERP should provide. For example, an ERP may have functionality that supports procurement through long-term contracts, but they are not designed to work with the volatile markets or financial instruments of energy commodities. ERPs can also be expensive to implement or replace. And replacements are further complicated by the widespread disruption they would cause by virtue of being used across so many teams.

ETRM and CTRM systems in biomass procurement

ETRM, or Energy Trading Risk Management, software supports organisations in trading energy and managing the risks associated with this trading. It does typically involve some commodity management features for the sourcing of generation fuels alongside reporting on derivatives and risk, but does not always create operational efficiencies within procurement and logistics. It may also be weak in respect of risk analytics.

Like ETRM, CTRM (Commodity Trading Risk Management) software helps businesses manage risk and trade the commodities that provide fuel for generators. These trading systems are often discussed interchangeably as C/ETRM and most large organisations will use either an ETRM or CTRM for trading.

C/ETRM systems, like ERPs, are often used by several departments including risk functions, sales and trading as well as procurement, and whilst these systems are designed for organisations operating in commodity markets, they still often do not have the logistics functionality that is needed for fuels coming into a generator. This can leave procurement teams managing contracts using offline systems such as spreadsheets, which leads to calculation and copying errors, multiple copies of working documents and confused processes. And because other departments are using the C/ETRM, procurement teams then need to log the actions they have completed again in the system.

Introducing commodity management apps

Commodity management apps provide the technology that procurement teams need to automate processes and drive operational excellence, with the added benefit of working with your existing systems. This means that procurement can onboard the technology they need without having to generate buy-in for a complete systems overhaul amongst other departments, the technology implementation does not cause widespread disruption to the business and it is possible to show a greater return on investment in the incumbent technologies.

For example, a procurement team may find that even with their ERP, managing the logistics for incoming biomass is diverting the team away from activities that could add more value. Arduous administration from monitoring sustainability requirements and greenhouse gas emissions, not to mention the issues of storage and transportation, can have the effect of reducing profitability by limiting the team’s agility.

When the team decide to implement Gen10’s Contract.Manager app, they automate many of the contract management processes such as approvals and conduct their commodity management online in one system to accelerate processes and reduce the risk of errors. They use the app for burn forecasting with actual and average net calorific values, monitor sustainability and manage sampling at multiple points of the process, using the results to automatically update pricing and invoicing as well as improving planning.

The procurement team gain better visibility and control of their feedstock, more efficient operations and improved risk controls through the automated processes. Equally importantly, their contract management system integrates with the ERP and ETRM, meaning that the information they input to carry out an action is also used for reporting and by other teams, reducing the amount of manual copying and improving the speed and accuracy of information flows within the company. The team therefore gain greater agility in their operations and create more opportunities for the wider business.

Commodity management technology provides many new benefits for biomass and bioenergy procurement teams that can supplement, support and enhance the functionality of larger business-wide ETRM and ERP systems. The apps support efficiency and operational excellence within procurement but also drive results for related functions using enterprise systems.