16.02.2022

Between success and failure. About good and weak energy and gas purchasing strategies with a bloom of indexed offers in background

Tags

Author

Adam Wlizło

Member of the Board

Electricity and gas purchasing strategies based on futures indexed offers are booming. The dynamic increase in interest is a derivative of last year's price increase. More and more companies are deciding to buy some media for 2023 now, without waiting, as was the case in previous years, for contracting all of them in the second half of the year (so far the contracting peak was in September-November).

To put it simply, it can be said that the market of energy products is like the market of stocks, currencies or other commodities. Probably none of us would invest a lot of money in buying shares of an unknown company. Similarly, if we do not have sufficient knowledge about the mechanisms that create prices on the wholesale energy and gas market (thus we may have difficulty identifying the accompanying market risks), we should be careful when making purchasing decisions regarding energy products.

The main advantage of indexed offers, addressed to large energy and gas consumers, is the possibility of purchasing at current market prices. Entrepreneurs using the services of an intermediary (sellers) have access to the wholesale market and may, in accordance with the terms of the accepted offer, contract energy products at appropriate times. This obvious advantage of the product gives rise to many opportunities but also generates risks. Therefore, purchasing at indexed prices should always be based on a well-thought-out strategy tailored to a given enterprise.

What is a strategy that only answers the question of when to make purchases? Market practitioners will say that this is not a strategy but a casino entry ticket. Unfortunately, it is common on the market to create and publicize price forecasts and the resulting tactics of conduct, prepared on the basis of gut feelings, often fueled by media and politicians reports. A well-prepared strategy defines the scenarios of the company's conduct under certain conditions - price drops or increases. Such a strategy results in specific actions that will be implemented in the event of the emergence of market opportunities, but also the materialization of individual risks.

Below we present examples of questions that are worth asking ourselves, but also other "strategists" who urge us to adopt such and not other ways of proceeding.

Does the energy and gas purchasing strategy directly correlate with the company's financial strategy? Does the purchasing strategy based on specific pricing mechanisms take into account the risk levels acceptable to the company? What are the differences between the offers, and in particular, what are the factors influencing the final price of the price telling us? What are the main price determinants in wholesale markets?


The current market price of a band product for 2023 is PLN 593 / MWh, more than twice as much as the valuation of the same product from a year ago. We recommend our clients to take advantage of one of the indexed offers available on the market and then, based on a prepared strategy, to purchase the first tranches of energy for next year. Various price scenarios may materialize this year. Should the price increase scenario materialize in the coming months, hedging part of the portfolio will turn out to be a valuable move.

You can read more in the article: Energy prices for 2023. What should you know before signing a contract?

See also

More news

18.05.2022

Purchase of energy from renewable sources. How to protect the company against increases?

The purchase of energy from renewable sources has gained in importance over the last year, because the so far leading ecological emphasis has been supported by a very strong partner - the financial aspect. Over the last year, the purchase of "green" energy (often based on long-term cPPA contracts) has become strongly competitive with the purchase of energy from the power exchange, the prices of which have experienced a threefold increase y / y (one of the main culprits of the current increases is the situation on the coal market). The energy prices offered to companies in the last days for 2023 exceeded the level of PLN 1,250-1400 / MWh (rates vary depending on the characteristics of the recipients; let us remind you that in 2021 entrepreneurs were buying energy on average at PLN 300-400 / MWh).

Read more

15.04.2022

About the purchase of natural gas based on offers indexed with the forward market prices

According to the data of the Energy Regulatory Office, since the beginning of the liberalization of the gas market, the gas supplier has been changed by 281 thousand. with approx. 6.5 million of all recipients (as of Q3 2021), of which only 5% were industrial recipients (tariff groups with markings from W5 to W10). The PGNiG Group is the undisputed leader in gas sales in Poland, with a market share of approximately 85% in 2020. We will soon find out how the current situation will affect the new distribution of market shares (according to the ERO data, at the end of 2020 in Poland there were approx. 90 companies actively involved in trading in natural gas, with 185 entities having a license to trade in gaseous fuels. ).

The decision to change the seller is influenced by the level of customer awareness and their motivation to change (nowadays mainly the level of the offered price), as well as the ease of making such a change (no complicated procedures) and the availability of competitive offers on the market.

The prices of gas fuel offered by various sellers often differ by several or even several percent, and a significant increase in price differences has been observed since the outbreak of the war in Ukraine. Most sellers set prices based on the current gas exchange quotations, adding excise tax, the cost of the so-called white certificates, margins but also mark-ups, which play an important role in recent months, allowing to secure the commercial risks of sellers. The current gas prices for 2023 listed on the Polish Power Exchange exceed the level of PLN 465 / MWh (updated on 04/25/2022), which means more than fivefold increase in prices over the last year.

Read more

31.03.2022

The DSR service as an opportunity to increase the cost effectiveness of enterprises

The essence of the DSR (Demand Side Response) service is the reduction of electricity demand by consumers during peak demand hours, at the request of the transmission system operator, which in Poland is Polskie Sieci Elektroenergetyczne. DSR is one of many remedial measures used by the grid operator to maintain the stability of the National Energy System.

Why is it worth using a DSR service? First of all, in order to obtain additional remuneration. Recipients who have reported the possibility of reducing their capacity by 1 MW receive annual remuneration in excess of PLN 100,000. Due to the fact that the remuneration obtained in most cases does not involve any additional costs, its attractiveness is high. It is worth mentioning that entrepreneurs participating in the DSR program, in addition to rationalizing individual electricity costs, contribute to the development of innovative products on the electricity market serving the entire economy.

Read more