In the world of energy purchases for businesses, there is a subtle but crucial distinction between two terms: profile clicks and block clicks. Price fixes or price clicks are done to hedge the risk of price increases. However, in a falling price market, performing clicks in block can lead to very high additional costs for companies purchasing energy in the business market. We find that based on their contract, many companies do not realize whether they are clicking in block or profile.
1. Profile clicks versus block clicks.
With profile clicks, a company, based on its consumption profile, fixes the price of (part of) its consumption. If a company fixes 70% of its consumption with a profile click, then for each hour 70% of its consumption is charged at this fixed price and the other part is charged at the variable price formula. The red part is the 70% of the volume purchased at the fixed price. So there is no hourly billing.
With a block click, one fixes the price for an equal volume every hour for the period one fixes. Thus, the block click does not follow the company's profile. This often results in companies having bought too much volume during off-peak hours and too little during peak hours. With a falling market price, this means that the overbought volume is sold at much lower prices resulting in a loss.
2. Realistic case: Clicks end 2023 for delivery 2024 in a declining price market.
Companies that executed a block click last year for delivery 2024 may have clicked at higher prices than the current market price. Block-click contracts involve hourly billing. For example, one food company wanted to click 95% of its volume at the end of 2023 for delivery 2024 at €128/MWh. Had this click happened in a block-click contract there would have been an additional cost of over €10,000 on a volume of 690 MWh just on the January invoice.
So, what should companies do?
Through profile analysis, negotiate an appropriate energy contract with an associated thoughtful purchasing strategy. Odot negotiates and optimizes energy contracts with knowledge on the subject.
Odot reduces your energy costs through a unique procurement model, supported by AI and innovative software. Our knowledge of the energy market, assures you the most advantageous rates, continuous price tracking and a contract that suits you.
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In the world of energy purchases for businesses, there is a subtle but crucial distinction between two terms: profile clicks and block clicks. Price fixes or price clicks are done to hedge the risk of price increases. However, in a falling price market, performing clicks in block can lead to very high additional costs for companies purchasing energy in the business market. We find that based on their contract, many companies do not realize whether they are clicking in block or profile.
1. Profile clicks versus block clicks.
With profile clicks, a company, based on its consumption profile, fixes the price of (part of) its consumption. If a company fixes 70% of its consumption with a profile click, then for each hour 70% of its consumption is charged at this fixed price and the other part is charged at the variable price formula. The red part is the 70% of the volume purchased at the fixed price. So there is no hourly billing.
With a block click, one fixes the price for an equal volume every hour for the period one fixes. Thus, the block click does not follow the company's profile. This often results in companies having bought too much volume during off-peak hours and too little during peak hours. With a falling market price, this means that the overbought volume is sold at much lower prices resulting in a loss.
2. Realistic case: Clicks end 2023 for delivery 2024 in a declining price market.
Companies that executed a block click last year for delivery 2024 may have clicked at higher prices than the current market price. Block-click contracts involve hourly billing. For example, one food company wanted to click 95% of its volume at the end of 2023 for delivery 2024 at €128/MWh. Had this click happened in a block-click contract there would have been an additional cost of over €10,000 on a volume of 690 MWh just on the January invoice.
So, what should companies do?
Through profile analysis, negotiate an appropriate energy contract with an associated thoughtful purchasing strategy. Odot negotiates and optimizes energy contracts with knowledge on the subject.