Dynamic energy contract explained for businesses
Direct answer
A dynamic energy contract is a supply contract in which the delivery rate follows the spot market prices: the electricity price changes per hour or per quarter-hour, the gas price per day, and both are known one day ahead. On top of that bare rate come fixed surcharges, energy tax and VAT. You settle afterwards on your actual hourly consumption, measured by the smart meter.
- Clear definition
- Data-driven assessment
- Risks and opportunities visible
- Practical next steps
Dynamic energy contract explained: scattered information versus Energy Intelligence
Most businesses know a fixed rate per kilowatt-hour that stays the same for a year. A dynamic energy contract works differently: the price moves with the market and can differ from hour to hour. That raises questions about the terms. How is the bill built up, what do you lock in and what not, and what exactly are you signing for? This explainer is about the contract itself, not about how the market price is formed.
- The rate follows the day-ahead spot market: electricity per hour or quarter-hour, gas per day, each known one day in advance, with fixed surcharges, energy tax and VAT added on top.
- A dynamic contract has no end date and no cancellation fee, unlike a fixed contract, which has an end date and usually a cancellation fee.
- You need a smart meter that records consumption per quarter-hour, because billing is based on your actual hourly usage.
Insight
Traditional approach
Information is scattered across portals, documents, invoices or separate spreadsheets.
Modern approach
Data, context and interpretation are brought together into a clear decision picture.
Decision-making
Traditional approach
Choices are made based on averages, assumptions or occasional analyses.
Modern approach
Scenarios, KPIs and current measurement data make the trade-off more concrete and repeatable.
Follow-up
Traditional approach
Actions often stay non-committal or disappear into separate reports.
Modern approach
Follow-up actions, monitoring and reporting are linked to the same energy data.
How is a dynamic contract built up?
A dynamic contract links your delivery rate directly to the spot market, the so-called day-ahead market. The electricity price can differ per hour or per quarter-hour, depending on your contract; the gas price is set per day. Those rates are always known one day ahead. What you see, however, is not your final price. On top of the bare market price come the supplier's fixed surcharges, the energy tax and VAT. Those parts are stated in your contract terms and do not change per hour. A dynamic contract has no fixed term and no end date, so in principle you can switch on a monthly basis.
- The bare rate follows the day-ahead spot market and is known one day in advance.
- Electricity varies per hour or quarter-hour, gas per day.
- Fixed surcharges, energy tax and VAT are added on top of the market part.
- No end date, so usually cancellable monthly without a cancellation fee.
How does billing work?
With a dynamic contract you settle on your actual consumption per hour, at the rate that applied at that moment. If you consume a lot during an expensive hour, you pay more; if you consume during a cheap hour, you pay less. This requires a smart meter that records your consumption per quarter-hour. An ordinary meter, or a smart meter that only reports monthly readings, is not enough, because the settlement cannot then be linked to the hourly prices. As with other contracts, you usually pay a monthly advance, with an annual settlement afterwards. Bear in mind that your bill is higher in winter than in summer, because you consume more and prices are often higher then.
- Settlement on actual hourly consumption times that moment's hourly rate.
- A smart meter with consumption data per quarter-hour is a condition.
- Usually a monthly advance with an annual settlement afterwards.
- The bill is higher in winter than in summer.
Who is it suitable for and what are the risks?
A dynamic contract suits those who can steer on price best. If you can shift consumption to cheap hours, for example by running an electric vehicle or heat pump during quiet moments, you make use of the low rates. Those with a flat, non-shiftable consumption profit less. The main risk is price peaks: during some hours the price can rise sharply, and unlike a fixed contract your rate is not locked in. You trade certainty for the chance of a lower average price. To make comparison possible, suppliers, under agreements with the regulator ACM and Energie-Nederland, calculate an expected purchase price for the coming twelve months each month according to a fixed method.
- Suitable for those who can shift consumption to cheap hours.
- Less attractive with a flat, non-steerable consumption profile.
- Price peaks are the main risk; the rate is not locked in.
- Suppliers publish an expected purchase price for 12 months each month, so you can compare providers.
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