Flexible Energy Contracts

Consumers of energy cannot avoid exposure to European energy markets, and the risks associated with these highly volatile commodity markets. Blizzard believes that this volatility will continue for the foreseeable future.

We believe all large energy consumers should consider using a flexible energy strategy to reduce the risk of entering into fixed price contracts at the top of the market, and take advantage of movements in the underlying energy markets to minimise both energy cost and risk.

Energy prices vary much more than in most other markets and a single mistake can have dramatic financial consequences. Entering into fixed price contracts at the top of the market can be hugely expensive - as can be failing to take advantage of falling prices during a contract period. Timing is everything.

In order to analyse movement in energy prices to get the timing right, detailed research is required in relation to input factors that influence supply and demand. Technical production issues, global temperatures, precipitation, patterns of consumption, and the price of input factors as well as competing energy types are examples of these factors, the significance of which can also vary over time.

In addition, although electric power, gas, oil and coal are in principle independent commodities that are bought and sold in different markets, all these commodities are also interconnected through substitution. In particular, UK gas and electricity prices are highly correlated to international oil and coal prices – which themselves tend to move in tandem.

Managing risk in the energy markets is therefore not only about dealing with price developments in the local arena, but also requires an international perspective. It is complex picture and the amount of information is vast. Having access to relevant information and systems for analysing it is therefore of great importance in order for Blizzard to develop a successful flexible energy program for our clients.

The benefits of accessing flexible energy can be substantial – even in a rising market. More information on these services is available on request, together with case studies to demonstrate the benefits.