03.02.2022

Energy prices for 2023. What should you know before signing a contract?

Tags

Author

Arkadiusz Somnicki

Member of the Board

Entrepreneurs who want to purchase energy for 2023 are currently receiving (early February 2022) offers at the level of PLN 750-800 / MWh. Such prices are offered primarily to larger companies. Smaller entities must take into account prices of up to PLN 1,000 / MWh. Before we sit down at the negotiating table with energy sellers, we should find out what the current level of the electricity price results from. This knowledge will allow us to conduct effective negotiations with sellers and ultimately obtain a lower purchase price

Each of the sellers calculates energy prices based on their own contract pricing models. Due to the fact that the prices offered to companies often differ slightly, it can be assumed that a large number of sellers use valuation models based on current market (stock exchange) indicators.

The main parameter taken into account when valuing electricity is energy itself. The current stock exchange prices of the base contract (BASE) for 2023 are at the level of 645-650 PLN / MWh (this is approx. 85% of the final energy price). A year ago, the same contract was paid around PLN 260-270 / MWh. There are reasons to lower the prices of the baseline contract in the second quarter of 2022, however, it should be borne in mind that the market has surprised participants more than once - and instead of a price thaw, the energy crisis in Europe may deepen. Entrepreneurs should consider whether it is worth accepting an energy purchase proposal based on an indexed offer now and, when purchasing in subsequent tranches, secure the price for next year (statistics suggest that using such offers does not guarantee the purchase of energy at the lowest price that will be available). on the market during the entire contracting period, however, in most cases, it effectively protects companies against purchase at the time of the highest prices).

High volatility of energy prices forced sellers to increase the level of risk calculated in the price of energy. A year ago, the risk of price volatility was calculated at the level of a few PLN / MWh, and in recent months its valuation has increased to several dozen PLN / MWh. Due to the fact that in the second half of 2021, daily changes in energy prices on the exchange reached even several dozen PLN / MWh, in order to limit the negative effect of price volatility during the offer validity period, offers valid for a few or even one hour have become a standard (for such offers , some sellers used zero risk of price volatility). Risks related to the unstable market situation are also included in increased margins of sellers.

Read more: How does rising energy prices increase sellers’ profit?

Due to the fact that the real electricity demand curve in the case of most entities is very different from the profile of a "flat" band contract, sellers make energy valuations, e.g. at peak hours (the current price of the "peak" product for 2023 is approx. PLN 835 / MWh) and add it to the band contract price. At the same time, sellers make a valuation of the recipient's future balance (the actual energy consumption differs from the planned one - companies use more or less energy in particular periods).

The current valuation of the above-mentioned parameters, i.e. the risk of price volatility, seller margin, recipient profile and its balancing, in the case of larger electricity recipients it is at the level of PLN 60 / MWh.

Property rights are also subject to valuation. The current valuation of the entire rights package (PM OZE_A, PM OZE-BIO, PMEF_F) is 55 - 60 PLN / MWh.

The final price of energy also includes the excise tax, currently amounting to PLN 5 / MWh.

In the case of larger entities, a well-prepared energy purchase strategy, taking into account the knowledge of price shaping mechanisms, translates into annual savings ranging from several to several dozen million zlotys. Regardless of the amount of energy consumed, we encourage every entrepreneur to carefully analyze their bill. Many years of experience in the area of ​​electricity and natural gas sales prices gives us the basis to say that there is always room for price optimization.

See also

More news

23.02.2024

Energy of the future – from energy storage to dynamic tariffs

The dynamic development of renewable energy sources (RES) opens new prospects for enterprises. In the face of challenges related to connecting new renewable energy sources to the power grid, storage technologies are becoming an increasingly important element. Hybrid installations combining renewable energy sources with energy storage are developing at a fast pace. This solution not only increases independence from traditional sources and the national system, but also increases the security of energy systems. Thanks to this, the electricity produced from renewable energy installations at the peak of production (e.g. a photovoltaic installation during sunlight hours) can be partially used for current needs, and the rest of the produced energy will go to storage. This will make the owners of such sets more energy independent, regardless of the consumption profile, provided that a sufficiently large generation and storage capacity is built. An additional environmental advantage is the ability to obtain 100% green energy for your company.

Preparing customers' electricity systems to use dynamic tariffs will be an interesting topic in 2024. Although the launch of the Central Energy Market Information System (CSIRE) will not take place in mid-2024, as originally planned, this moment is getting closer. The introduction of a fully functional system will mean that consumers who consume even little energy will have the opportunity to use dynamic tariffs, in which the price will be different for each 15-minute delivery period. The introduction of purchasing automation supported by artificial intelligence to this model will allow for better management of energy flows, prediction of failures and optimization of deliveries. Artificial intelligence will begin to play an increasingly important role in the energy sector, from process automation to advanced analyses. This is not only efficiency, but also the key to understanding market trends. As energy networks digitize, new risks will emerge: cyberattacks. Investments in advanced security systems will become key to protecting critical infrastructure. Reliability of energy supplies will be a priority, and a key aspect in the near future will be the modernization of the network to strengthen its resistance to failures and the diversification of energy sources.

Read more

19.01.2024

Dynamic price declines and global challenges. The electricity and natural gas market at the beginning of 2024

Current situation on the electricity market

In the first weeks of 2024, we observed declines in electricity prices on the Polish market, which is a continuation of the trend from the fourth quarter of 2023. On December 29, 2023 (the last working day of the year preceding the delivery year of 2024), the price of the annual BASE_Y_24 product was set at PLN 490/MWh. It is worth noting that the minimum energy price achieved in December last year was approximately PLN 471/MWh, which is the lowest level since November 24, 2021.
In the case of other products on the futures market (quarterly, monthly and annual with delivery in subsequent years), we also recorded price declines. Futures contracts currently available for purchase for delivery in 2024 include those for the second, third and fourth quarters, as well as all monthly (except January) and seasonal and weekly contracts. The table below presents a comparison of exchange prices on January 17, 2024 to prices quoted on December 29, 2023 on the Polish Power Exchange (TGE) for the main futures products and SPOT prices (Day Ahead Market) in the TGe24 index.

Read more

03.10.2023

What’s going on on the natural gas market? Prices, trends and events in Q3 2023

September 2023 was a month full of events on the Polish gas market. We are approaching the key autumn-winter period of the year. This is statistically the most expensive season due to the increased demand for gas for heating purposes.

One of the main events on the gas market in September was the threat of a strike by employees of the LNG sector in Australia (concerning Chevron), which, if production was completely suspended, could affect approximately 7% of the global LNG gas supply (liquefied natural gas). ). Fortunately for customers, the LNG loading schedule was not disrupted. Ultimately, the strike ended after Chevron and Offshore Alliance accepted new proposals regarding employment conditions. These events, although they did not directly concern the Polish market, significantly contributed to price volatility on the Dutch TTF exchange, which is a reference point for European countries. Prices ranged from EUR 47.65/MWh to EUR 53.10/MWh, which means a volatility of 11%. In summary, the Chevron workers' strike had a potential impact on global LNG supply and gas prices, but ultimately did not significantly impact the market due to the quick resolution of the conflict.

Read more