Negative energy prices: the paradox of transformation and the challenge for businesses
In many companies, purchasing energy still resembles a lottery: the market changes dynamically, prices fluctuate, and the same question returns like a boomerang within the organization: should we buy now or wait a little longer? The discussion begins too late, meaning that instead of discussing strategy, the company talks about a single price, trying to "time the market perfectly" at the lowest point. This is a straight path to budget uncertainty and reactive decision-making. How can you break free from this pattern and build an operational model that defends itself before the board – regardless of what the market does?
Why does the board block energy procurement decisions?
The most common reason why the board or CFO rejects or delays purchasing decisions is not a lack of market understanding. The problem lies in how the recommendation is presented.
From the perspective of a Chief Financial Officer, the situation looks highly risky:
A message like: "the market looks interesting, maybe we should buy" is too weak for the board. The conversation changes completely only when the organization presents a ready-made model, a risk assessment, a defined hedging level, and a clear budget impact. At this point, energy procurement stops being an operational headache and becomes a strategic management tool.
From the perspective of a Chief Financial Officer, the situation looks highly risky:
- the market is volatile,
- there is no certainty if it is the right moment,
- it is difficult to compare scenarios,
- the budget impact remains unknown,
- and the responsibility for a wrong decision is very real.
A message like: "the market looks interesting, maybe we should buy" is too weak for the board. The conversation changes completely only when the organization presents a ready-made model, a risk assessment, a defined hedging level, and a clear budget impact. At this point, energy procurement stops being an operational headache and becomes a strategic management tool.
What actually is an energy procurement strategy?
An energy procurement strategy is not a dusty document or a mere description of a contracting model (such as stating that we buy in tranches or on the spot market). Strategy is a repeatable process for making decisions.
It begins where the company can precisely answer the following questions:
Only after organizing this framework can you move on to market monitoring and effective decision implementation.
Below, we present a systemic approach to managing your purchasing position within Enerace.online.
It begins where the company can precisely answer the following questions:
- What is our primary goal: price minimization or budget stabilization?
- What level of cost volatility are we willing to accept?
- When do we take action, and when do we deliberately wait?
- Who is responsible for the recommendation, and who has the final approval?
- What do we do when prices skyrocket, and what if they crash?
Only after organizing this framework can you move on to market monitoring and effective decision implementation.
Below, we present a systemic approach to managing your purchasing position within Enerace.online.
7 key arguments for the Board and CFO
1. No decision is a real business cost
Halting decisions and waiting for "better times" is often mistakenly treated by boards as a neutral and safe option. In practice, it is not. The lack of agreed action thresholds and postponing decisions drastically increases exposure to market volatility and leaves the budget entirely unprotected. The status quo also carries a cost – often invisible at first glance, but highly real.
2. Approving the operational logic, not a market forecast
The board is not required to predict prices or approve a "market forecast." The board's role is to approve the rules, the acceptable risk level, and the decision-making process itself. Such a shift in perspective removes a massive emotional burden from the discussion. Instead of asking: "is this definitely the perfect price?", the CFO asks: "are we acting in line with the adopted model and our risk logic?".
3. Energy cost as a pillar of margin predictability
An unstable energy price is not just a line item in costs. It is a factor that directly hits budget planning, margin stability, pricing policy, and the overall competitiveness of the company. Energy costs are the result of many complex phenomena (EUA prices, CBAM, energy mix, negative prices, or RES). Therefore, a good strategy does not just serve to "buy cheaper," but primarily allows the company to plan stably instead of improvising.
4. Assessing the process, not a single point on a chart
A purchasing decision should not be evaluated solely through the lens of a single day's price. The key is whether the decision complied with the strategy, limited risk, and improved cost predictability at the moment it was made. A company with a well-structured process might not buy at the absolute lowest point, but it still purchases soundly on a systemic level. A company without a process might occasionally get lucky and buy cheap, but structurally it operates poorly.
Are you looking for a tool that translates market data into ready-to-use scenarios for Your CFO?
See how the Enerace.online platform automates the monitoring of your procurement position and simplifies budget impact reporting.
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5. Eliminating chaos and costly ad hoc action
Without a permanent strategy, every energy purchase becomes a separate, exhausting project. You have to gather data from scratch, involve the board at the last minute under time pressure, and explain why today's recommendation differs from the one a month ago. This wastes the organization's time, hinders the assessment of the right timing, and drastically increases the risk of a costly mistake.
6. Managing risk instead of empty promises
It is not worth promising the board that a strategy will completely shield the company from market fluctuations – the market will always remain volatile, reacting to geopolitics, weather, or CO2 regulations. A good strategy, however, gives you something more important: it allows you to see the full picture, separate decisions from emotions, and give market price movements a clear budget context.
Below is an energy price trend chart from the Enerace.online system integrated with alerts and market news – illustrating a decision framework based on hard data, not intuition.
Below is an energy price trend chart from the Enerace.online system integrated with alerts and market news – illustrating a decision framework based on hard data, not intuition.
7. A process is easier to approve than intuition
Ultimately, business comes down to a simple fact: the board is much more willing to accept decisions that are quantifiable, comparable, and embedded in a process that can be justified over time. The strategy should be presented as a robust decision-making framework containing clear objectives, volume hedging rules, scenarios for price increases/decreases, and precisely defined roles.
How to prepare material for a purchasing committee or the board?
For a purchasing recommendation to win the approval of the board and CFO, the prepared material should concisely answer 5 key questions:
Below is an analysis of volume hedging levels and energy prices broken down by years and months in the Enerace.online application
- What is our current procurement situation? How much volume is already hedged, how much remains open, and what are the final decision deadlines?
- What does the market look like and what does it mean for us? Avoid generic macroeconomic essays – focus exclusively on the facts that directly impact your decision.
- What are our options? Present the alternatives: do we buy now, hedge a portion, or wait for a specific market condition?
- What is the impact of each option on the budget and risk? This is absolutely the most critical point from the CFO’s perspective.
- What is the recommendation and why now? Provide a short, clear justification, without an evasive "it depends."
Below is an analysis of volume hedging levels and energy prices broken down by years and months in the Enerace.online application
The most common mistakes in communicating with the CFO and the Board
What most frequently causes an otherwise textually and factually sound recommendation to land in the trash?
Structuring your operational model and introducing a common language for purchasing decisions permanently eliminates these mistakes.
- Over-focusing on the price itself instead of the process and operational logic.
- Failing to present alternative scenarios and their direct impact on the budget.
- Mixing general market commentary with the specific recommendation.
- Involving the board too late in the decision-making process (presenting a fait accompli).
- Attempting to justify actions with emotions or gut feelings, e.g., "because the market might rebound any minute."
Structuring your operational model and introducing a common language for purchasing decisions permanently eliminates these mistakes.
Are you looking for a tool that translates market data into ready-to-use scenarios for Your CFO?
See how the Enerace.online platform automates the monitoring of your procurement position and simplifies budget impact reporting.
Test Enerace.online for Free
FAQ: Key questions about energy procurement strategy
1. How to defend an energy procurement strategy to the board?
It is best to base the conversation not on price forecasting attempts, but on operational logic: the purchasing goal, acceptable risk level, budget impact, decision scenarios, and a clear division of roles within the organization.
2. What should the board know about corporate energy procurement?
The board must receive the full picture in a format that allows for safe decision-making: the current purchasing position (how much volume is secured, how much is open), the risk level, the market's impact on the budget, and a clear recommendation.
3. Why is a non-decision in energy procurement also a decision?
Postponing action is not neutral. Leaving volume unhedged means consciously accepting continued exposure to market volatility, a lack of budget protection, and shifting the risk to a moment when time pressure will be significantly greater.
4. Does an energy procurement strategy have to mean tranche-based purchasing?
No. A strategy is not identical to a single specific contracting model. Strategy is the overarching framework that defines the rules for making decisions, while the model (tranches, fixed price, indexed to spot) is merely one of its operational tools.
5. What arguments convince a CFO to implement an energy procurement strategy?
For financial directors, business predictability is paramount. A strategy guarantees budget stabilization, a reduction in chaos and ad hoc actions, better control over market risk, and the ability to directly compare cost scenarios.
Author: Bartosz Palusiński, Enerace Consultant
