Smart Energy Buying – How to Save and Protect the Environment

Why has electricity become so expensive recently? And will it continue to do so?

There are several factors at play here. The COVID-19 pandemic has caused a decline in economic activity. Uncertainty and restrictions have reduced the scale of operations of many companies. When the economy began to recover quickly in 2021, a supply gap emerged, which contributed to rising energy prices and inflation in most countries of the world. Geopolitical factors also affect energy prices.

In the second half of 2021, there was a significant increase in the prices of energy raw materials – mainly natural gas due to the reduction in Russian supplies to Europe. The beginning of 2022, when Russia attacked Ukraine, brought further destabilization of raw material markets, which directly translated into an increase in electricity prices throughout Europe.

In addition, it is worth mentioning the structural problems of the Polish power system, which is based on coal-based energy production and is exposed to high price volatility due to high CO2 emissions. The prices of emission allowances (EUA ETS) have been rising rapidly since 2018, reaching around EUR 77 per tonne in 2022. In 2023, the average price of allowances was EUR 83.85.

As a result, in 2023 and 2024, Poland introduced protective programs to protect consumers from energy price increases. The total cost of these solutions in the second half of 2024 alone is expected to exceed PLN 6 billion. Of this amount, approximately PLN 3 billion was allocated to compensation for maximum electricity prices, and PLN 1.6 billion to energy vouchers. Despite these programs, it should be expected that the liberalization of prices on the electricity market may occur in 2025, which may result in an increase in energy prices for companies.

What might electricity prices look like in the next few or a dozen years?

According to KOBIZE analyses, an increasingly rapid growth rate of CO2 emission allowance prices should be expected after 2025. Forecasts indicate that in 2025 allowance prices may range from EUR 80 to 132, and in 2030 from EUR 91 to 188. The year 2025 may be a critical point, after which the price growth rate will significantly accelerate. This is due to fundamental factors, such as the exhaustion of additional allowance volumes financing the REPowerEU program and an increase in the allowance reduction threshold. Polish energy, based largely on coal, will generate increasingly expensive electricity, which will be related to emission costs.

To stop the increase in energy prices, an energy transformation is necessary, which includes the construction of nuclear power plants, the development of renewable energy sources and investments in transmission and distribution networks. This is not only a matter of ecology, but also of strategic security for Polish companies, which will allow maintaining the competitiveness of the economy. Rational management of electricity is crucial for individual customers, companies and the entire society. Companies must take these changes into account in their business strategy, e.g. by adapting to RES generation or freezing electricity prices for a longer period.

An important element of stabilizing the energy market will be the development of energy storage systems, such as batteries, which can store surplus energy generated by renewable energy sources and use it during periods of increased demand. Automation and the use of intelligent energy management systems that use advanced algorithms and artificial intelligence can significantly improve the operational efficiency and flexibility of the national power system.

The rise in electricity prices means that its users, both businesses and households, must look for ways to save and buy it intelligently. One way may be to consciously choose a tariff – fixed or dynamic. What are the pros and cons of both solutions?

The fixed tariff offers cost predictability. Users are certain that for a specified period, usually a year or more, they will pay a fixed price per megawatt-hour. This makes budget planning easier, because electricity costs will not change depending on market fluctuations. This solution is particularly beneficial for companies that have signed long-term contracts. I will add here that Ekovoltis is able to guarantee customers up to 5 years of security for the electricity purchase rate (Ekovoltis Shield).

The second option is dynamic tariffs, where energy prices can change depending on the time of day, week and current market conditions. Users who are able to adapt their technological processes to fluctuations in energy prices can significantly reduce costs. Businesses often shift energy consumption to night hours or weekends, when prices are lower. However, dynamic tariffs also involve certain challenges. Price volatility means less predictability of costs, which makes financial planning difficult. Users must be aware, ready to monitor energy prices and adjust their consumption accordingly.

What types of dynamic tariffs does Ekovoltis currently offer?

Currently, Ekovoltis offers three main tariffs that have been prepared with the diverse needs of our customers in mind.

The Flex tariff is a variable price settled on an hourly basis based on actual consumption and energy rates from the Day Ahead Market with an optional possibility of setting maximum and minimum price limits for each subsequent year of the contract. As a result, settling electricity sales at hourly rates has a real impact on the increase in the competitiveness of a given company when introducing even minor operational changes. The FIT tariff (tranches) is a solution based on the use of the variable price of the Day Ahead Market with the possibility of securing any percentage of the energy volume with a fixed price determined based on the valuation of long-term exchange contracts. This means that the electricity consumed will be settled, for example, in 30% at hourly prices from the Day Ahead Market (SPOT) and 70% of the fixed price based on the futures market.

The size of the ordered tranche of the exchange product (monthly, quarterly, annual) and the time of placing the order depend entirely on the current needs and strategy of the company. This solution is dedicated to larger companies with annual consumption of 2,000 MWh or more. This product can also be an interesting option for companies whose energy demand is seasonal or highly variable (e.g. very high in one month, while disproportionately low in another). Purchasing electricity in tranches not only optimizes costs, but also allows for the adjustment of energy purchases to changing production requirements or service provision.

Third tariff,FLIX is a solution based on the use of a variable price with hourly settlement on the Day Ahead Market, with the possibility of using a fixed price in any quarter. For example, the electricity consumed will be settled in the summer period at prices from the Day Ahead Market, and in the winter period at a fixed price. The moment of switching to a fixed price also depends on the current needs and strategies of the companies. It is possible to use only a fixed rate, which will change on a quarterly basis. Freezing the price for a quarter is optional and if the benefits of settlement only at a variable price are identified, such a model can function throughout the period. Another example may be companies with their own installations, which cover a significant part of their demand for electricity in the summer. Here, the optimal solution may be to use a fixed price in the fourth and first quarter, and settlement at a variable price in the second and third quarter. This results from the seasonal formation of prices on the Day Ahead Market.

By offering these three tariffs, Ekovoltis enables companies to better manage their energy costs and tailor their purchases to their specific operational requirements, which is crucial in the face of rising electricity prices.

Choosing a tariff is not the only way to save money. Electricity users are becoming more resourceful and innovative.

Buying energy during periods of low demand and storing it and using or reselling it during periods of higher prices is quite a good business. Especially since purchase prices are increasingly often negative. That is why more and more ideas are emerging for storing electricity. Flywheels, compressed air tanks, hydrogen or ammonia are used for this purpose. Energy can be stored in the form of heat or various chemicals.

There are also much simpler ways to optimize energy purchases. For example, companies using freezers can lower the freezer temperature when energy is cheaper, so that the freezers are switched off during periods of increased energy demand. Households can use electric cars as energy stores. This allows them to buy more energy when prices are lower or even negative, and use it when prices are higher.

All this means that both businesses and households should buy energy consciously. This approach allows for significant savings, increased use of energy from renewable sources, and improved comfort and quality of life by reducing CO2 emissions and pollutants.