If the last 12 months have taught us anything in the energy market, it’s that having flexibility within your energy contract is crucial.
It is reported over 1 million businesses are trapped in ‘high’ energy cost contracts, as a result of the energy crisis. Today, markets are still very much volatile, with half of the market speculating further decreases and the other half forecasting increases – so, what should your business considering when it comes to fixed or flexible?
Introduction – Energy Markets
In the face of ever-fluctuating energy markets, businesses are constantly seeking strategies to optimise their energy procurement and mitigate risks. One of the most crucial decisions they face is choosing between fixed and flexible energy contracts.
This article delves into the world of energy procurement, highlighting the benefits of a flexible energy procurement strategy in the current business energy market.
The Power of Flexibility
In today’s energy market, flexibility is not just an advantage; it’s a necessity.
With the unpredictability of energy prices, a flexible energy procurement strategy offers a solution to volatile energy markets. It allows businesses to actively manage their position in the market, capitalising on downward trends and avoiding the pitfalls of fixed prices for the contract duration. Equally, when budget or prices suit, you can lock out an open position and fix prices. Putting this simply, it is no different to a fixed price contract.
Flexible energy contracts, unlike their fixed counterparts, allow businesses to purchase their gas or electricity directly from the wholesale commodity market. This often leads to lower rates and the ability to make multiple buying or selling decisions, all within an effective trading plan. For every transaction, there are several different strategies that can be applied, customised to the business’s risk tolerance, and providing the certainty and price opportunity they’ve been searching for.
The Case for Fixed Energy Contracts
Fixed energy contracts have long been a popular choice for businesses seeking stability in their energy costs. These contracts allow businesses to lock in a set price for their energy for the duration of the contract, providing a level of certainty and protection against the volatility of energy markets.
This can be particularly beneficial for budgeting and financial forecasting, as businesses can accurately predict their energy costs well into the future.
However, while fixed energy contracts offer stability, they also come with their own set of challenges. In a rapidly fluctuating energy market, being locked into a fixed rate can mean missing out on potential savings when energy prices drop. Some businesses have found themselves stuck with higher rates than they would prefer, unable to take advantage of lower prices in the market. This has led many to consider the benefits of flexible energy contracts, which offer the potential for cost savings and greater control over energy procurement.
The Role of the Consultant
Energy consultants play a pivotal role in helping businesses navigate the complexities of energy procurement. They have extensive knowledge of trading strategies and supplier products, enabling them to apply the best trading strategy and negotiate the best contract with ideal commercial terms and flexibility on behalf of the business.
We use a range of market intelligence sources, such as commodity markets, supply and demand situations, economic and political factors, as well as long-range weather forecasting, to provide a comprehensive picture of market influences.
These are just some of the things we consider for both Fixed and Flexible contracts.
The Benefits of a Flexible Energy Contract
A flexible energy contract offers multiple buying opportunities, greater transparency, and the possibility of selling back. It allows businesses to take advantage of a falling market and provides the ability to re-forecast volume.
Our flexible procurement offering also has many other key benefits that ensure you secure the most competitive prices available, avoid risk premiums, and have complete transparency over every single charge included within your energy bills.
The Future of Energy Procurement
In the future, businesses will continue to seek ways to maximise contract flexibility while keeping their energy costs to a minimum. With a tailored approach to flexible procurement and risk management, businesses can expect a choice of flexible supply contracts unique to their needs, a risk management strategy customised to their procurement plan, and visibility of trading platforms for total wholesale market transparency.
In conclusion, while both fixed and flexible energy contracts have their merits, the choice between the two should be guided by the specific needs and risk tolerance of the business.
With the right strategy and expert guidance, businesses can navigate the complexities of energy procurement and optimise their energy costs in any market condition.
