How do you find energy prices that are in line with the market?
The turbulence on the energy market has probably not escaped anyone’s attention in recent months. The following guidebook article shows which challenges have to be considered when purchasing energy.
Benedikt Benz, responsible Lead Consultant Energy at the Kloepfel Group, and other energy experts from the Kloepfel network explain in an interview which special features and challenges are currently encountered in the procurement of energy.
General features of energy procurement
Energy is an exchange-traded product. Due to the constant trading on the stock exchange, natural price fluctuations take place, which in principle can be followed live on the power exchange.
Comparing historical prices with current pricing is therefore of little help and only provides an indication of the extent to which the overall cost of energy has developed in companies. It is more important to look ahead and make forecasts, and to identify and implement possible targets/strategies for one’s own company.
For the final energy price conditions, the individual customer is also very much relevant in addition to the exchange-related topic. Here it is a question of the respective procurement structure. This is different, for example, for a hotel than for an aluminum refiner. For example, there are different acceptance times and different peak frequencies. The various purchase structures (load profiles) of the companies have an enormous impact on the offer price of the individual energy suppliers.
Current situation – strong volatility
Now the question arises: How does the market currently work?
Looking at current aspects, the strong volatility in the energy market currently leads to major challenges.
From experience, two major differences can be identified between the previous (2010-2021) and the current (2021-present) energy market:
Previously, over the last ten to twelve years, one could count on one hand the number of times market fluctuations from one day to the next were EUR 3 / megawatt hour or greater.
More dramatic, however, are the market events of the last 1.5 – 2 years. With very few exceptions, one could see the stock market fluctuating by more than 3 EUR / megawatt hour or greater virtually every day. This created volatility leads to uncertainty in the market.
As a result, suppliers are withdrawing from market areas and the remaining suppliers are only granting very short commitment periods on their offers. All in all, the competitiveness of the market has been temporarily disrupted. It is true that in recent weeks we have again been in a declining market. Historically, however, we have always been in a high-price energy phase.
Risk minimization
Dealing with this development is not easy. Of course, it is basically good to try to fix prices early on, purely for calculation reasons. It therefore remains important to hedge one’s prices and energy supply in the long term.
This raises the question of how risk can be minimized. There are various approaches here. For example, above a certain consumption level, it can be worthwhile to carry out tranche procurement – in other words, to split up the energy procurement of partial quantities at several points in time. This can go as far as so-called rolling index procurement.
This approach brings the advantage and security of not only fixing one’s energy prices on days with high prices, but also of approaching the average market mean values, depending on the scope of the tranche model. In this way, risks can be minimized.
In this transformation period from an absolute high-price market to a market that is gradually becoming more “tolerable” again, we recommend putting one’s energy requirements out to tender on a large scale on the market. This will allow proper comparisons to be made and significant price differences to be identified. Unnecessary and inexplicable risk premiums of individual suppliers can be eliminated.
Kloepfel Group – Support through expert network
In the context of the reorganization on the energy market, which has now particularly resulted in the last one and a half years, it must always be examined, which procurement model, inclusive which conditions with again which offerer brings the largest use for the enterprise under chance and risk consideration.
The Kloepfel Group can help in the search for the right energy supplier and the best market prices.
The special know-how of the Kloepfel consultants is strengthened by the combination with energy experts from our network.
This allows us to constantly access the latest market information and thus offer the customer the best possible and necessary added value on the subject of energy. This gives the customer the possibility and certainty of procuring his energy at a price in line with the market, even in turbulent times.
Do you also need support for the purchase of energy? Please feel free to contact us!
Contact:
Kloepfel Group
Christopher Willson
Pempelforter Str. 50 | 40211 Duesseldorf
Tel.: 0211 941 984 33 | Mail: rendite@kloepfel-consulting.com