What is the difference between electricity and gas procurement

 Electricity procurement revolves around demand patterns, wholesale spot exposure, network charges, and contract timing. Gas procurement is shaped by physical supply constraints, storage access, pipeline capacity, and seasonal price swings. Both share the same label, yet they behave like two entirely different species.

A simple way to think about it is this. Electricity is a flow that cannot be stored easily at scale, so prices react almost instantly to demand shifts. Gas is a commodity that can be stored, traded, and physically moved, which creates its own set of behavioural drivers and market quirks.

How does electricity procurement actually work?

Electricity procurement hinges on understanding demand flexibility and contract structure. Many Australian businesses default to fixed rate contracts because they feel safer. That is a classic example of loss aversion at play.

In practice, electricity buyers look at:

  • Peak and off-peak consumption

  • Wholesale market volatility

  • Network charges

  • Retailer hedging strategies

  • Environmental schemes

One facilities manager once told me that choosing an electricity contract felt like “trying to predict Melbourne weather with a blindfold on”. There is truth in that. The market moves fast, and decisions often rely on a mix of data, instinct, and a healthy respect for risk.

Why is gas procurement more seasonal and supply driven?

Gas procurement is shaped less by instant demand and more by physical realities. Pipelines, production schedules, LNG export commitments, and winter heating loads all influence price and availability.

Anyone who has managed a gas portfolio through July knows how quickly retailers shift from relaxed to cautious. Scarcity does a lot of psychological heavy lifting here. Buyers often commit early just to avoid being caught short later.

In gas procurement, businesses typically consider:

  • Contracted delivery volumes

  • Take or pay structures

  • Transmission and pipeline fees

  • Storage access

  • Seasonal price shifts

This is where behavioural science creeps in again. Consistency bias nudges buyers to stick with familiar retailers, even when alternatives might offer better terms.

Are the risks the same in both markets?

Not even close. Electricity risk is mostly price volatility and demand unpredictability. Gas risk is about availability, logistics, and contractual flexibility.

An Australian food manufacturer once learned this the hard way. Their electricity bill spiked because they chose a contract with heavy spot exposure, yet their gas costs stayed stable because they had long term volume commitments. Same business, completely different dynamics.

What does an effective procurement strategy look like?

A sharp strategy treats electricity and gas as separate streams rather than one catch-all energy task. Behaviourally, this encourages better decisions because teams view each market on its own terms. It also creates clearer brand positioning for procurement advisors who support both areas, which strengthens authority and trust.

A strong approach usually includes:

  • Market monitoring

  • Load analysis

  • Contract timing

  • Retailer negotiation

  • Scenario modelling

  • Clear internal decision rules

Social proof matters here too. Businesses are far more confident adopting structured procurement methods when they see competitors or industry peers doing the same.

FAQ

Is electricity usually more volatile than gas?
Yes. Electricity reacts quickly to weather and demand spikes, while gas prices shift more around supply constraints and seasonal patterns.

Can a business buy electricity and gas from the same retailer?
Sometimes, but it depends on location, retailer products, and network access. Bundling may simplify admin but does not always give the best commercial outcome.

Why do gas contracts use take or pay clauses?
These clauses protect producers and pipeline operators. They ensure minimum revenue while giving buyers price certainty for agreed volumes.

Final reflection

Electricity and gas procurement feel similar on the surface, yet they operate in different psychological, commercial, and physical environments. Once you see those differences clearly, the markets get a lot easier to navigate. For a broader look at how these markets fit into the wider sector, you can explore this discussion of energy procurement,or dive deeper into this detailed overview of energy procurement.

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