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Free power market: how to close prices & volumes?

Rafael Herzberg's picture
Consultant energy affairs, Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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  • Feb 25, 2021

Free power market: how to close prices & volumes?

A subject that deserves careful analysis is contracted prices and volumes.

The standard is closing a fixed price (adjusted by an inflation index) and a fixed volume consistent with the expected business plan.

But in real life the volume consumed in each given month is never the contracted one on the dot! There is a surplus or a "left over". In these two cases the risk involved is having to sell at a loss or buy at a much higher price than the contracted one.

There are ways to mitigate these risks. Contracting (a) a range of volumes and not a fixed amount, and (b) a "collar" price to enable transactions on the "spot" but with "palatable" limits.

I call the attention of this matter because in Texas (USA) the spot skyrocketed (price of the order of dozens of times the normal one) due to a blackout of great proportions.

 If you want to explore these risk mitigation possibilities, get in touch!


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Rafael Herzberg's picture
Thank Rafael for the Post!
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