Decarbonization and Long-Term Electricity Price Security Consumers are increasingly inclined to invest in production assets (cogeneration and renewable capacities) or to sign PPAs with producers, driven by decarbonization and the desire to secure electricity prices in the long term. For many, this production will represent a significant portion of their electricity supply. Conversely, producers are increasingly managing consumption: developing a supplier business, setting up a network of charging stations, etc.

Actors who used to only buy or sell energy now find themselves managing a portfolio of assets exposed to electricity markets. For now, many adopt an "asset-by-asset" management approach. They contract with a supplier for their consumption and with an aggregator for their production.

​

This relatively simple strategy was not very optimal in 2022. Risk premiums and bid-ask spreads (the difference between the best buy and sell offer in the futures markets) exploded, leading some actors to sell their production well below market price and buy their supply well above.

How to avoid this situation? That’s what we’ll explore in this article.

​

Netting Production and Consumption

​

Buying only your "net" consumption offers several advantages. Indeed, it allows you to control your purchase price in terms of level and duration for the part covered by production and avoid excessive transaction costs. It also helps avoid potential guarantees or prepayments requested by suppliers/aggregators.

​

In illiquid markets, transaction costs on the market can quickly become very significant. Crossing the bid-ask spread can cost up to tens of euros per MWh for certain maturities and during volatile periods. Acting as a "mini" integrated actor by netting production and consumption can thus result in significant savings.

​

Being able to manage all your sites as a single portfolio also allows you to sign intra-group contracts between the different subsidiaries that produce or consume energy. These contracts can be long-term and easily form PPAs, securing both the investment in production capacities and the purchase price for consumption sites. Smaller sites, for which it would have been difficult to establish "external" PPAs, can thus benefit from "internal" PPAs.

​

From Supplier Relations to Managing Multiple Counterparties

​

With market price volatility, depending on a single supplier or aggregator for buying/selling operations becomes increasingly costly and risky.

For the same transaction, significant price differences can appear between suppliers depending on the liquidity they have access to and the risk parameters applied. These price differences are even harder to spot and negotiate as real-time price data flows become less and less representative of the actual cost of executing a market transaction. Signing an exclusive master agreement with a single actor without reserving the right to buy/sell volumes from third parties can thus be a mistake.

​

However, managing the physical delivery of volumes from multiple counterparties can be complex, as the supplier/balance responsible must integrate each counterparty’s transactions, sometimes submit balancing responsibility plans (PEB), and account for them in the invoice. Many suppliers therefore prefer not to allow their customers to use other counterparties or only do so for very large portfolios.

 

Portfolio Management with Augmented Energy

​

To net production and consumption and manage multiple counterparties, producers/consumers need to set up a specific contractual and technological structure. Augmented Energy offers a unique integrated solution in France to help producers/consumers optimize their portfolio simply and transparently. This solution can be deployed for small portfolios starting from a few tens of GWh/year, with potential gains reaching millions of euros.