Anya Kussé
As a leading player in the energy market, we unburden companies in their energy policy and develop future-proof energy strategies. Our team of experts negotiates, manages and optimizes our customers' energy contracts in a continuous and transparent manner. Supported by AI-driven software, we provide insight into the current and future cost of each MWh. We integrate sustainability into our overall approach and work pragmatically and solution-oriented to support you in the energy transition. Together, we create the most ideal energy landscape for your business.
With winter approaching, we advise companies to quickly sharpen their energy contracts. "The phasing out of several nuclear power plants in 2025 will have an impact on supply and consequently prices. Add to that the fact that we will see an ongoing yo-yo effect with large price fluctuations, even on a daily basis. The companies that do not start looking at their energy contract now risk feeling it in their budgets in the years to come," warns Chris Elbers, CEO of Odot. In this article, we offer five tips to avoid the pitfalls in the energy market.
Businesses can expect significant price fluctuations in the energy market next winter. Higher demand, less power from solar panels and more power from wind, will cause volatile prices. We are already seeing power prices immediately rise above 100 euros per MWh at times with little sun, or even peak towards 170 euros per MWh. On top of that, starting in 2025, part of our nuclear capacity will be gone, so natural gas plants will play a larger role in generating electricity. While our natural gas reserves are quite well stocked, an early winter peak or geopolitical troubles could quickly send natural gas prices (and thus electricity prices) soaring.
To hedge against these major price fluctuations, companies should negotiate their new energy contracts before the first winter strikes and prices skyrocket. But for many, this is easier said than done and there are plenty of snags. Odot, which guides 1,700 Belgian companies in their energy strategy, gives a series of tips to take into account when determining a new contract:
1. Start from a thorough analysis of the (current and) future energy situation.
Major changes in volume, the installation of solar panels, charging stations or batteries are best mapped out in advance so that this can be taken into account when including contractual volumes. Chris Elbers: "Such an analysis is really crucial in an energy strategy. Last summer, for example, we saw companies lose a lot of money because they had to pay heavily to put their surplus green power back on the grid. The fact is that injection contracts today contain a lot of formulas where the imbalance costs are charged per KVA/kWp/MWh."
2. In addition to price formulas, examine price-click methods.
Make a broad comparison and include as many aspects as possible. Be sure to look beyond just the price formulas, but also take a close look at the price click methods. There is a subtle but crucial difference between 'profile clicks' and 'block clicks'. While profile clicks are based on usage profiles, block clicks set equal volumes for each hour.
Chris Elbers: "For example, if a company locks in 70 percent of its consumption with a profile click, 70 percent of the consumption for each hour is charged at this fixed price and the variable price formula is charged for the other part. With a block click, the supplier sets the price for an equal volume for each hour. The result is often that companies have bought too much volume in off-peak hours and too little in peak hours. When prices are lower, it means that companies are selling the volume they are buying too much at much lower prices."
Furthermore, it is also important to include all non-consumption related costs (e.g. on capital, annual fees,...) in the comparison.
3. Choose flexibility.
Odot also always advises its clients to consider a mixed strategy and to choose contracts with enough flexibility to price certain portions of volume. Those contracts reduce the risks of price increases and more expensive rates, but at the same time leave enough room to respond to price decreases.
Chris Elbers: "If, for example, 50% of the volume can already be fixed in price for future periods at an acceptable price, the risk of extreme price increases remains limited. But on the other hand, if the variable price of that moment would still be lower, you still have an average good price as a company."
4. Pay attention to prerequisites and fine print.
Pay close attention to the boundary conditions (volume flexibility, duration, termination terms, etc.) and go through all elements of a contract carefully before signing, including the fine print.
Chris Elbers: "We see energy suppliers today putting the risk more on the customer side. And those risks are not always easy to spot in an energy contract proposal. Often a few letters in the small print are enough for a considerable risk of additional costs. So it's important to thoroughly scrutinize those as well."
5. Follow up continuously.
Continue to manage your energy contract in a continuous way (clicking, monitoring volumes,...) and decide at the right moments to click or leave a part of the volumes variable. At Odot, we opt for a mixed strategy: on the one hand, fix small parts of the volume at acceptable prices to protect yourself against possible price increases. On the other hand, betting fully on opportunities: if prices are very favorable, it's better to lock in as much of your volume in price as possible. Constantly monitoring the market and price trends is necessary to properly execute this strategy.