Telnergy’s Wholesale Market Framework: How We Time Contract Renewals

We Don’t Use a Single Fixed Method to Time Contract Renewals. We Use a Framework That Combines Forward Market Data, Storage Signals, and Geopolitical Risk Assessment. Here’s How It Works.

The most common question we receive from clients approaching renewal is some version of: “Is now a good time to fix?” It’s a reasonable question and the honest answer is always the same: it depends on four things that we assess simultaneously, and the weight we give to each changes depending on the current market environment.

This article sets out the framework we use — the specific data sources we watch, how we interpret them, and how they feed into the timing recommendation we give clients. It is not a proprietary system; it is disciplined market literacy applied to a decision that most businesses make once a year without a framework at all.

The Four Inputs

1. The forward curve structure

The starting point is always the shape of the forward curve — the set of prices at which energy is traded for delivery at various future points. We look at the NBP/TTF gas forward curve and the electricity baseload forward curve for the periods relevant to the client’s contract (typically the 12, 18, and 24-month forward points).

Two curve shapes matter most:

Backwardation: Near-term prices higher than forward prices. The curve slopes downward. This means the market expects prices to fall. If true, a business that delays fixing will benefit from lower future rates. But if the near-term premium persists because of a genuine short-term supply stress, waiting may not materialise into lower rates. Backwardation typically indicates a strong case for considering a longer contract — locking in before the near-term premium expires.

Contango: Near-term prices lower than forward prices. The curve slopes upward. The market expects prices to rise. If true, fixing now is advantageous. But contango is the normal carry structure for commodities, and markets are not reliably right about future prices. Mild contango doesn’t automatically mean “fix now” — it means the cost of delay is quantifiable.

In practice, the curve is rarely cleanly backwardated or contango across all tenors. It often has a hump — higher in the near term (winter risk premium), lower in the middle (storage injection expectation), and rising again further forward. Reading the curve across its full shape, not just comparing today’s spot to tomorrow’s 12-month, is what produces useful insight.

2. European gas storage levels

GIE (Gas Infrastructure Europe) publishes daily storage fill data across all major European storage sites. We check this weekly. Storage is the most reliable leading indicator of near-term gas price direction — for the reasons set out in our European storage article — and it has a specific, quantifiable relationship with forward pricing.

The reference points we use:

• Storage significantly below the 5-year average heading into the October injection season end: elevated winter risk premium likely to persist. Bias toward fixing sooner rather than waiting.
• Storage at or above the 5-year average: winter risk premium is lower. There is less urgency in the forward pricing; a delayed fix is less costly.
• Storage draw-down rate in winter significantly above seasonal average: spot prices will spike. Clients with upcoming renewals should fix before this translates into forward pricing uplift.

3. Geopolitical risk signals

We don’t attempt to forecast geopolitical events. What we do is assess the current risk premium embedded in forward prices relative to historical norms, and qualitatively assess whether visible risk factors (Hormuz tension, shipping disruptions, Russian gas developments, Norwegian outage risks) are adequately priced or under-priced by the market.

When risk is clearly under-priced — when forward prices don’t reflect a risk that is visibly elevated — the case for fixing now is strengthened. An event that materialises after you’ve fixed doesn’t affect your contracted rate. An event that materialises while you’re waiting to fix, or just before you renew, does.

The practical application: in early 2022, the geopolitical risk was severe and increasingly visible, but forward prices in late 2021 had not fully priced the scenario of Russian supply disruption. Clients who fixed in November 2021 avoided the worst of the March 2022 price spike. Not because we predicted the invasion, but because the risk was visibly elevated and the cost of waiting exceeded the potential benefit.

4. Client-specific context

The same market conditions can support different recommendations for different clients. The context we factor in:

• Remaining contract term: A client with 6 months remaining has less flexibility than one with 12 months. Time pressure changes the risk profile.
• Business risk tolerance: A margin-thin hospitality operator has different price volatility tolerance from a manufacturer who can pass energy cost increases through to customers.
• Cash flow position: A business in a strong cash position can tolerate being wrong about timing better than one where energy costs are a critical variable.
• Prior contract rate: A client currently on a low legacy rate that expires soon has more to lose from a bad renewal timing than one currently on an above-market rate who has been overpaying.

How the Framework Produces a Recommendation

The four inputs don’t produce a mathematical formula — they produce a weighted judgement. In practice, our recommendation falls into one of three positions:

“Fix now”: Forward curve favourable (backwardation or near-term spike visible), storage below average, geopolitical risk elevated, client context supports acting. We recommend executing the contract immediately.

“Fix within 4–8 weeks, watch for a better window”: The market is broadly acceptable but not at a particularly good point. Storage and curve don’t indicate urgency, but the client’s timeline makes extended delay inadvisable. We agree a “trigger point” — a price level at which we recommend executing — and monitor the market against it.

“You have time — let’s re-assess in 6–8 weeks”: Storage is building well, the forward curve is in modest contango without alarming signals, and the client’s timeline allows a wait. We continue monitoring and schedule a review.

We have been wrong about timing. Any adviser who claims otherwise is misrepresenting the limits of forward market analysis. What the framework provides is a defensible, evidence-based process that produces better average outcomes than no framework at all — which is the benchmark against which energy market timing decisions should be measured.

What the Framework Does Not Do

It does not predict the market. No framework does. Energy markets are influenced by events — weather, conflict, equipment failures — that are genuinely unpredictable. The framework manages the knowable variables (curve structure, storage, visible risk) and acknowledges that the unknowable variables exist.

It does not generate recommendations that serve our commission interests. A longer contract generates proportionally more commission for the adviser who places it. If the framework points to a short contract, we recommend a short contract.

It does not produce the same recommendation every time. Our position in 2019, 2022, and 2026 has been different — because the market has been different. A framework that always produces the same answer isn’t responding to the market; it’s a default.

Applying the Framework to Your Renewal

When you work with Telnergy, the market assessment above is part of every renewal conversation. You receive our current view on the forward curve, the storage picture, and the geopolitical context — and a specific recommendation with a rationale you can interrogate. If you disagree with the recommendation, we discuss it. The decision is always yours; the framework is the basis for an informed decision.

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