Free power price - "collar" model

Free power price - "collar" model

A very interesting format for contracting prices on the free electricity market is the "collar".

It is about making it possible to contract in the "spot" BUT with a risk exposure limit.

The "collar" is characterised by three conditions:

1st) "Floor" in $/MWh
2nd) "Ceiling" in $/MWh
3rd) Between floor and ceiling the spot

If the spot is below the floor, the trader invoices the floor. If it's above the ceiling, the bill comes with the ceiling. If it is between floor and ceiling, the invoice will come with the spot, plus a % (premium).

The strategy of a "collar" contract can still be closed for a part of the required volume. The other, for example, can be in the traditional format. Thus a "mix" is created.

I have already suggested this type of contracting and it was very successful!

It will be worth considering this possibility!