Block contracts are electricity trading agreements covering a defined power or energy block for specified delivery periods. They help make procurement or sales more predictable and can provide advance price hedging. The term is not used consistently across all markets: the agreed delivery profile, pricing terms and physical or financial settlement determine how the contract works.
Block contracts at a glance
- Baseload blocks cover constant power throughout every hour of a delivery period; peakload blocks cover specified daytime hours.
- Depending on the contract, physical delivery obligations can be fulfilled through own generation, battery storage or purchased electricity.
- Whether a block requires physical delivery or financial settlement depends on the agreed product.
How do block contracts work?
The contracting parties agree on the market area, delivery period, power profile, price or pricing formula, and settlement method. Baseload products cover constant power throughout the period. Peakload products cover defined daytime hours; the applicable hours and weekdays depend on the product. Individually agreed delivery windows are also possible.
Simplified example: A physical contract for a constant 1 MW from 18:00 to 22:00 on one day covers 4 MWh. At a fixed price of €100/MWh, the contract value is €400 before additional costs. This amount is the agreed payment for the electricity, not the profit. Procurement or generation costs and other expenses have not yet been deducted; using battery storage also introduces storage losses.
Delivery must meet the agreed time profile. Providing the correct total energy volume is insufficient if it is delivered during the wrong intervals. Where an asset portfolio fulfils the obligation, operational planning translates the delivery commitment into corresponding asset schedules.
Not every block product requires physical delivery. Financially settled electricity futures settle price differences against a reference price. They do not, by themselves, create an asset dispatch schedule.
Distinction from block orders
A block order links several delivery intervals within a single exchange order. Classic block orders are accepted or rejected in full; other variants allow partial acceptance. These execution conditions apply to the particular order type and are not a general characteristic of all block contracts.
Where are delivery blocks used?
- Electricity procurement: Commercial and industrial companies can cover predictable portions of their consumption through suitable delivery blocks. Any shortfall or surplus must be purchased or sold separately.
- Generation sales: Generators and trading companies can sell volumes in advance to hedge part of their revenue.
- Battery storage operation: Battery energy storage systems (BESS) can supply an evening block, for example, provided sufficient energy has been charged beforehand and the required power is available.
What risks and technical requirements should be considered?
A fixed price improves predictability for the agreed block but does not guarantee lower overall costs or profitable battery operation. Subsequent volume adjustments can incur additional costs. With a variable pricing formula, the extent of price protection depends on its design.
If the example block is to be supplied entirely from battery storage, the system must deliver a constant 1 MW over four hours and a total of 4 MWh at the agreed delivery point. State of charge, usable energy, discharge power and available grid connection capacity must therefore be assessed together. A nominal capacity of 4 MWh is not automatically sufficient: discharge losses, auxiliary consumption and operational reserves must also be considered.
Operational planning must ensure sufficient charging time and charging power before delivery starts. When combining applications in a multi-market approach, energy and power already committed to delivery are not freely available for other uses. Additional intraday trading must not jeopardise outstanding delivery obligations.
Local implementation requires schedules with unambiguous timestamps, suitable measurements at the relevant metering point and controllable assets. Operating limits and behaviour during communication failures must also be defined.
How does EcoPhi support schedule execution?
With suitable integration, EcoPhi can execute physical delivery schedules locally and monitor power, energy volumes and the state of charge of connected battery storage systems. The energy management system (EMS) handles the technical execution of the specified control task.
Schedule integration and control logic depend on the interfaces and project requirements. They require compatible interfaces, an agreed metering concept and defined control functions. Additional engineering services may be necessary. Contract execution, procurement of missing volumes and trade settlement remain the responsibility of the relevant market participant.
Block contracts in summary
Block contracts structure electricity volumes and prices for defined periods. For battery storage, the key questions are which physical obligations arise and whether they can be met throughout the delivery window. EcoPhi can provide technical support for local schedule execution and monitoring.
Frequently asked questions about block contracts
Do block contracts always have a fixed price?
No. Contracts can use fixed prices or agreed pricing formulas. The scope and effectiveness of price hedging depend on the specific terms.
Must a delivery block come from a single asset?
Not necessarily. Where the contract permits, several generators, battery storage systems and purchased volumes can jointly fulfil the obligation.
Are block contracts the same as balancing energy?
No. Balancing energy addresses short-term imbalances between electricity generation and consumption. A delivery block primarily specifies an agreed electricity volume and time profile; it does not, by itself, establish participation in a balancing market.