When a company in the industrial sector purchases the raw materials it needs for its processes, it knows exactly their price. This allows it to calculate production costs and the profit margin it can apply to its products before selling them to its customers.

But let’s imagine that wasn’t the case. Let’s suppose that the company had to predict in advance the cost of raw materials and that they suffered enormous price fluctuations. Furthermore, let’s imagine that there were few suppliers of these materials on the market and that switching from one to another was, at the very least, difficult. And finally, let’s suppose that the purchase contracts for these raw materials were complex and the invoices almost indecipherable.

Well, that’s exactly what happens with energy. And to limits that are hard to imagine.

An example of price fluctuations: according to MIBGAS’s 2021 Annual Report, on May 21, 2020, a record low price of €4.32/MWh was recorded for next-day gas. However, on December 21, 2021, the price reached a record high of €183.00/MWh. This variation represents an increase of 4,137% in just 19 months.

In the case of electricity, the increase during this period was “more moderate.” On May 21, 2020, the average wholesale electricity price was €21.12 per megawatt hour (€/MWh). On December 21, 2021, the price reached a record high of €360/MWh. This difference represents an increase of 1,604%.

Highly complex contracts and rates

Prices are incredibly volatile, but the types of contracts that energy suppliers offer their customers don’t help either. Beyond options based on fixed prices, prices indexed to the wholesale market, or hybrid models, many contracts lack transparent information that facilitates the possibility of renegotiating clauses or effectively comparing offers. This, coupled with a very complex tariff structure, makes it virtually impossible to accurately calculate the energy costs that a company will incur when choosing one energy supplier over another.

Added to all this is the element of regulatory changes. The energy sector in Spain is subject to numerous legal changes each year, which can significantly impact businesses. Although the exact number of changes varies, it’s common for various regulatory updates to occur each year related to tariffs, taxes, renewable energy incentives, and sustainability requirements. These constant changes can create uncertainty and difficulties in business planning, as companies must continually adapt to new regulations, which can entail additional costs and adjustments to their operations. Furthermore, the complexity of the regulatory framework can make it difficult to understand and comply with legal obligations, especially for small and medium-sized businesses.

And once you have a supplier… what next?

Many companies struggle to access key data about their energy consumption and associated costs. The lack of transparency in billing and the absence of clear information systems prevent companies from making informed decisions about their energy strategy. This is compounded by frequently updated regulations and tariffs, which are often not communicated clearly or accessibly. In many cases, suppliers only provide partial information, making it difficult to compare different market options.

Furthermore, the bureaucracy associated with accessing detailed energy consumption data poses an additional barrier for many industries. Consumption and billing review platforms are often unintuitive or inaccessible. This forces companies to either dedicate time and resources to interpreting the data to optimize their energy costs or to resign themselves and accept payments, assuming that in most cases they include a significant overcharge.

Conclusion

Price volatility, the opacity of the sector, and constant legal changes make purchasing energy at a fair price very complicated. That’s why we recommend that companies that exceed the threshold of €100,000 in annual expenditure on energy supplies leave it to us. Because it’s our specialty, because it’s what we do best.

Is your company in this situation? Would you like us to help you?