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In short: For European energy leaders, procurement has quietly shifted from an administrative function into a core risk management tool. Four pressures drive this: reducing import dependency without losing cost competitiveness, meeting CSRD and Scope 3 obligations that now reach several supplier levels deep, managing a market where zero or negative electricity prices have become a structural feature rather than an anomaly, and maintaining visibility into supply chains where a single unknown sub-supplier can halt a project. This article looks at each, at the contractual and compliance exposure that comes with 20-30 year PPAs, and at what shifting from reactive crisis management to proactive control actually requires.
Being a decision-maker in the European energy sector today presents serious challenges: ensuring supply security, complying with increasingly strict ESG regulations, all while operating profitably. All this in a market where drastic price fluctuations rewrite previous business models on a daily basis.
The stakes: Across the CEE region, a significant share of energy companies question whether their current manual, spreadsheet-based operating model can be sustained through the coming decade. In Hungary, the situation is particularly critical: import dependency and EU green transition goals create pressure to establish transparency and efficiency, where CSRD regulations place serious sanctions on non-compliance. According to Hungarian law, from 2026, the SZTFH can impose fines up to 1% of net revenue, with a maximum of 50 million forints.
The procurement function of a modern energy company is no longer an administrative support area, but a strategic risk management center. This role comes to the forefront in four critical areas.
Reducing import dependency is not just a strategic goal, but a business necessity. Alternative suppliers frequently come at a substantial price premium over incumbent sources, while existing long-term take-or-pay contracts are legally binding. This situation creates a decision-making environment where the complexity of procurement decisions far exceeds the capacity of traditional methods.
AI-based multi-sourcing platforms can model procurement scenarios that handle this complexity and support informed decision-making between dependency reduction and cost-effectiveness. The real challenge: what tools and what timeline can achieve diversification while keeping the organization competitive.
Compliance increasingly means that a company is responsible not only for direct suppliers, but for their suppliers too – several levels deeper in the supply chain. This requirement represents a paradigm shift in procurement processes. Validated ESG data must be collected, documented, and made auditable from hundreds or even thousands of suppliers. With manual methods, this task is simply not a realistic undertaking.
Distributed ledger and other tamper-evident record-keeping approaches are being explored as tools for ESG data collection and auditing, which is particularly relevant in an environment where documentation errors directly lead to financial and reputational consequences, and where regulatory oversight is increasingly strict and investor expectations are increasingly high.
In the first eight months of 2025, zero or negative electricity prices occurred in Hungary 309 times — already exceeding the full-year figure for 2024 (306 hours), and far above 2023's 93 hours. This is evidenced by HUPX market data and Portfolio.hu reporting.
The more useful reading of these numbers isn't that volatility is exploding — the rate of growth actually slowed in 2025 compared with the tripling seen between 2023 and 2024, and HUPX data indicates the amplitude of price swings narrowed as well. The point is that zero and negative pricing has become a structural, recurring feature of the market rather than an occasional anomaly. At the same time, gas prices can multiply from one day to the next. A market with this profile — routine price collapses during high solar output, sharp spikes when supply tightens — requires a different risk management approach than one built around gradual, predictable movement.
Excel-based hedging strategies leave material unhedged exposure on a large annual procurement volume, and at the scale typical of a mid-sized energy company that exposure translates into substantial potential losses. Real-time integration of market data and predictive modeling are now fundamental conditions for financial stability. The era of post-analysis is over – decisions must be made simultaneously with market movements.
A significant portion of critical components comes from Asian manufacturers, often through several supplier levels. A single unknown sub-supplier's bankruptcy or a trade restriction can immediately halt major projects. The Colonial Pipeline 2021 case demonstrated this vulnerability well: the DarkSide ransomware group's attack shut down the pipeline for 5 days, causing panic buying and fuel shortages on the US East Coast.
The energy sector is critical infrastructure, where every supply disruption becomes a national security issue. The purpose of modern supply chain monitoring systems is early forecasting, although warning time varies significantly depending on the type of supply disruption and the quality of available data. The point: the organization should be notified of the problem when there is still time to seek alternative solutions.
A typical PPA (Power Purchase Agreement) runs to well over a hundred pages, with milestones, efficiency guarantees, force majeure clauses, and pricing formulas – all for 20-30 years ahead. A missed contractual deadline can trigger penalties calculated as a percentage of project value, which on a large-scale investment translates into material sums. Most organizations still track these contracts in a fragmented manner, without a central repository. Modern contract management provides a comprehensive solution to this complexity:
Transparency in this area is both an efficiency issue and a tool for managing personal leadership responsibility. In Hungary, a significant portion of public procurement is single-bid, which is a particularly exposed area from a compliance perspective. A digitally documented, auditable procurement process protects the decision-maker and the organization during subsequent audits. This is both legal protection and documentation of professional integrity.
While international competitors use AI-based predictive analytics and automated processes, a significant portion of domestic energy companies still plan and document with manual methods. This difference is measurable and accumulates year by year. Digitized organizations typically have more efficient operations, faster decision-making, and lower cost bases.
The 10-15 year ERP contracts, closed systems, and limited integration capabilities not only represent direct costs but also create structural innovation constraints. Vendor lock-in situations prevent the adaptation of new technologies, slow organizational transformation, and increase operating costs in the long term. The accumulation of technical debt becomes so severe at some point that catching up with competitors is no longer a cost issue but a time issue.
The classic trilemma of the energy sector – supply security, affordability, sustainability – remains unresolved today. According to the World Energy Council's Energy Trilemma concept, simultaneous optimization of the three goals requires complex trade-off decisions.
The risk of stranded assets illustrates this complexity well. Fossil fuel power plants may lose their economic value considerably earlier than their planned operating life due to the green transition, while overly rapid renewable investments cannibalize each other in the market. Portfolio optimization cannot be managed professionally without integrated data and predictive analytics – and this is precisely the area where traditional methods show the greatest weakness.
The implementation of modern procurement and process management systems is a strategic shift from reactive crisis management to proactive risk management. The real value lies in the organization's ability to be prepared for unexpected events:
Digitized organizations make decisions faster, operate with lower operating costs and higher security levels. The essence of the Software with Service model is that the organization doesn't have to struggle with changes alone. Expert support during and after implementation ensures the agility needed for technology to be an engine of growth.
Companies that digitize their processes now, diversify their supplier bases, and proactively manage risks will not only survive the transition period but emerge stronger from it. The question to consider is whether we continue on the familiar but increasingly risky path, or take control of our own processes.
1. Why has procurement become a risk management function in the energy sector?
Because the decisions procurement makes now carry consequences well beyond cost. Supplier selection determines import dependency exposure; supplier documentation determines CSRD and Scope 3 compliance; contract terms lock in 20-30 year commitments; and supply chain visibility determines whether a sub-supplier failure is caught weeks early or discovered when a project halts. Each of these is a risk decision that happens to run through procurement.
2. What does the rise in negative electricity prices actually mean for procurement?
Zero and negative pricing has moved from anomaly to structural feature. In Hungary, 309 such hours occurred in the first eight months of 2025, exceeding the whole of 2024. The growth rate has slowed and swing amplitudes narrowed, but the pattern itself is now permanent — meaning hedging and procurement strategies have to assume routine price collapses during high solar output alongside sharp spikes when supply tightens.
3. How deep into the supply chain does CSRD responsibility reach?
Beyond direct suppliers into their suppliers as well — several levels deep. In practice this means collecting validated, auditable ESG data from hundreds or thousands of entities, which is not realistically achievable with manual, spreadsheet-based methods. In Hungary, non-compliance carries fines of up to 1% of net revenue, capped at 50 million forints, enforced by the SZTFH from 2026.
4. Why are long-term PPAs a particular compliance risk?
Because a PPA is a document of well over a hundred pages covering milestones, efficiency guarantees, force majeure provisions, and pricing formulas across 20-30 years — and a single missed deadline can trigger penalties calculated as a share of project value. When these contracts are tracked in scattered files rather than a central repository, obligations get missed simply because nobody could see them.
5. What is the first practical step toward proactive procurement control?
Consolidating supplier and contract data into a single, auditable source is usually the highest-impact starting point, because most of the exposure — missed deadlines, undocumented ESG data, invisible sub-supplier risk — traces back to fragmentation. Real-time market data integration and automated early warning build on top of that foundation.
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