Buying energy at purchase price can be beneficial, but it can also be risky

• Rob Coster

  Economics journalist

A small percentage of Dutch households are unaffected by the extremely high gas and electricity prices because they have switched to a so-called “dynamic energy contract”. This means they pay the current daily price for gas and the current hourly price for electricity.

As energy prices have fallen sharply in recent months, these current prices are much lower than the rates of a regular floating rate. With such a variable rate, energy companies supply consumers with gas and electricity they have previously purchased at higher prices.

A number of smaller energy companies offer dynamic contracts. In addition to current gas and electricity prices, they charge a fee for administrative costs and the maintenance of the app which provides customers with information on current gas and electricity prices. Last year, according to the Association of Dynamic Energy Suppliers (VvDE), around 200,000 households had a dynamic contract.

“The number of customers has increased significantly in recent months, I think it is now approaching 300,000,” says Auke Ferwerda, president of the VVDE. Companies benefit from the sentiment that many people are paying too much.

Even large energy companies will eventually have to offer such a dynamic contract if the customer requests it. This is confirmed by Minister Jetten’s new energy law, which is currently being examined by the State Council. Dynamic energy contracting can also help reduce grid problems.

In many places it is too busy on the electricity grid. Stimulating use when there is a surplus and low prices and slowing use when there is a shortage can reduce problems. The big energy companies are still not very enthusiastic, they assume that people now mainly seek certainty about their energy costs.

People with a fixed or variable rate pay an average amount for gas and electricity, but the prices on the international gas and electricity exchanges in Amsterdam fluctuate every day. Electricity in particular is very expensive at one time of the day, while at another time the price is almost zero or even negative.

In the event of a thunderstorm on Sunday afternoon, there is a surplus of electricity from offshore wind and almost zero consumption by industry. So the buyer gets paid instead of the producer. At 6pm in the winter, when everyone goes home and starts cooking, but there’s no energy from the sun and wind, the prices really go up.

A dynamic contract is particularly interesting for electricity. Especially for people who are able to influence the timing of their electricity consumption. Households with washing machines, dryers, dishwashers or even better: heat pumps and electric cars, tied to timers that turn them on or charge them when the price of electricity is low.

Gas is mainly used for heating homes or for cooking. You do this as needed, the moment you use the gas is often harder to influence. It is also possible to conclude a dynamic contract for electricity only and conclude a fixed or variable contract for gas with another supplier.

See the story of Marc and Bram, who switched to a dynamic energy contract last year:

At the moment, it is beneficial for both gas and electricity to have a dynamic contract, says Martien Visser, energy expert at Hanze University of Applied Sciences in Groningen: “The price of gas has dropped enormously in recent months, and with it the price of the People on a variable contract are still dealing with the prices of the past year, so with a dynamic energy contract you are now really much cheaper.

However, there is no guarantee that it will pay for the switch. “We don’t know and that’s exciting. If it turns into a cold winter, not only will the price be higher, but you’ll need a lot more gas and you’ll be twice as sick.” It is currently profitable, but Visser is cautious with recommendations. “You can enter into a dynamic energy contract, but you need to have a financial buffer. There are benefits, but you definitely have risks as well.”