Advantages and risks of the two main contract types in the energy market: which one to choose for your business.
The choice between a fixed and variable price contract is one of the most important decisions in managing business energy costs. Both options have specific advantages and risks.
Fixed price
With a fixed price contract, the energy cost per kWh (or Smc) remains constant throughout the contract duration, typically 12-24 months. The supplier assumes market risk and includes a premium in the price to cover it.
- Pro: predictable budget, protection from market increases, simple management
- Con: generally higher average price, no benefit if the market drops, early exit costs
Variable price (indexed)
The price follows a reference index: PUN for electricity, PSV or TTF for gas. A fixed spread (supplier margin) is added to the wholesale price.
- Pro: reflects real market cost, potential savings in low-price periods, transparent spread
- Con: cost volatility, budgeting difficulties, risk of price spikes
Hybrid strategies
Many companies adopt mixed strategies: fixing a portion of volumes while leaving the rest at variable prices. This technique, called layered hedging, allows balancing protection and flexibility. An energy consultant can help define the optimal mix based on the company's consumption profile and risk appetite.
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