February 2022 Volume 4

OPERATIONS & MANAGEMENT

Forging Industry Finds Energy-Cost Savings, Budget Certainty with Online Auctions By Jane Seagraves

What if you could suddenly increase the pool of suppliers competing for your energy contract – be it electricity, natural gas, or renewables – and put those suppliers through a process where you could see their bids in real-time, providing you total transparency, and they could also see the bids in real-time so that they could bidmore aggressively, i.e., driving down their prices, to win your business? In late 2018, Race Winning Brands, the leading manufacturer of racing and high-performance parts for the automotive and powersports market, found itself in that very position, engaging with Transparent Energy to procure 7.9 million kWh of power annually for one of its plants via online auction. Typically, when large energy users such as forging operations procure energy, either via a broker or an internal procurement team, they solicit bids from a few suppliers, evaluate the terms, and do a little phone or email jockeying to arrive at a final price. Race Winning Brands got something completely different – and better – when they went the auction route: Ten suppliers participated in the event, logging over 100 bids in under 1 hour across different terms lengths (24, 36, 48 months) and products (fixed all-inclusive, variable rates), resulting in a 48-month fixed, all-inclusive rate that savedmore than $110,000 over the term. Then, two-and-a-half years into the resulting contract, Race Winning Brands got even more pricing relief. Transparent Energy’s proactive renewal process brought Race Winning Brands back into the market to capitalize on historic lows, taking advantage of a

market dip to execute a two-year renewal that secured the company an additional 7% savings through November 2024. Reflecting on these successful procurements, a Managing Director at Race Winning Brands commented: “Transparent Energy gave us a competitive advantage by leveraging market timing and a proactive approach to our procurement strategy. By staying well- informed and providing an intuitive solution, we were able to save thousands to our bottom line while creating a massive amount of budget certainty, which only helps our operations.” Welcome to the high-impact world of energy procurement via online auctions. Guarding Against Energy Price Volatility with Online Auctions After enjoying years of historically low and stable energy prices, the forging industry, like other energy-intensive industries, felt the extreme energy-price volatility of 2021, witnessing a triple-digit rise in natural gas costs, which in turn impacted electricity prices. As we enter 2022, those prices have come down a bit, but the drivers behind high energy prices – the growing use of natural gas as a “bridge fuel” for the world to become more sustainable, increasing exports of natural gas from the U.S. to the rest of the world, and relatively flat supply – are threatening to make price volatility the new normal. One way the forging industry can protect itself is by using

FIA MAGAZINE | FEBRUARY 2022 47