“ANP Generation of Energy on Maasvlakte in Rotterdam: Choosing Between Fixed or Dynamic Contracts”

• Thom Opheikens

  editor Economics

Since the energy market went crazy more than a year and a half ago, they have not been available: a contract with an energy supplier with a fixed price for several years. But such contracts can be concluded again from the beginning of June, with a single supplier it is already possible.

In contrast to the multi-year contracts, it is becoming a lot more expensive to cancel a contract. Prices are expected to be below the level of the current price ceiling of 1.45 euros per cubic meter of gas, although not very much.

Still not exactly cheap. It does mean that those who are afraid of new extreme price increases can fix the price for a longer period of time. Suppliers and price comparators notice that many households are wondering what to do. “It’s a madhouse,” says Ben Woldring of Gaslicht.com.

What then is sensible? That mainly depends on your situation and how much uncertainty you can tolerate, say experts. “You see two trends emerging,” says energy economist Hans van Cleef of Public Affairs. “You have people who just want more flexibility, so that they can take maximum advantage of the low prices when there is a lot of wind and/or sun. Dynamic contracts with an electricity price per hour and a gas price per day are interesting for them.”

The other group, explains Van Cleef, has become quite nervous about the variable contracts after the past year. Depending on the supplier, the prices are fixed for a month or a quarter. For that larger group, a contract with fixed prices is a solution.

Van Cleef himself recently concluded an annual contract. “So far everything has been going well this year. A mild winter, full storage and the Chinese economy that is slower than expected to return to LNG”, the economist argues. “If you look at the price, the risks are mostly upside.”

After a peak of more than 300 euros per megawatt hour (Mwh) in August, the gas price on the wholesale market fell below 25 euros per Mwh before the weekend. Divide that by a hundred and you have approximately the basic price per cubic meter for a household. So 25 euro cents, without all taxes and margins plus risk surcharge for suppliers.

It is good to know that ‘the gas price’ refers to gas that will be delivered next month. Anyone who buys gas now on the wholesale market and wants it delivered in the winter or later, still pays (without taxes) at 50 euro cents per cubic meter.

It shows that there is still a lot of nervousness on the gas market towards winter.

Before the escalation in the energy markets, most households opted for an annual contract, says Woldring. “The big question now is: will people think differently after June 1.”

The table below shows that energy contracts are still roughly half as expensive as before the energy crisis.

“I expect that perhaps a little more three-year contracts will be concluded than before,” says Woldring. “But on the other hand, there will also be a lot of people who prefer to remain more flexible with an annual contract. You will benefit from that after a year if prices do fall further.”