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Grower trades directly for energy and emissions

Was there any trading in gas and electricity last year when prices were so high? Yes, definitely. Greenhouse growers were not sitting still. Brainchild Commodity Intelligence (BCI) has been supporting them in energy trading for over a decade now. The company does that by taking growers directly to the stock exchange, the place where it mostly happens these days.

"There is no better place to trade," says Managing Director Wouter Alblas from his office in The Hague. "They get exactly the price we make for them there," adds analyst and trader Maickel Bonke from the office in Oldenzaal. This is because growers trade there directly, without any intermediate steps. "It started with that proposition and still does," stresses Wouter, who himself was previously an independent energy trader. "It makes our company distinctive." In addition, Brainchild assists growers with a piece of support. Not redundant, especially in a market where developments are rapid, as everyone has noticed.

"OTC market dries up"
Maickel is one of the traders who makes the final deals for growers. He does so for gas on the TTF market, for electricity, and for emission rights. "And on request, we can also offer other products, provided they are available on the ICE," he says. It is the abbreviation for energy and commodity exchange Intercontinental Exchange. Growers trading directly on the exchange is still rare, as Wouter knows. "Traditionally, there has been a lot of trading on the OTC market," he says. It is the 'Over-the-counter market,' where two parties trade off-exchange. "This is where the risks have been increasing in recent times, so volumes are decreasing, and trading is drying up."

Hedging risks financially
Trading is not without risk anyway, even in the stock market. It means Brainchild requires collateral. It makes a greenhouse horticulture company, which incidentally is not the only sector it serves, need to have financial resources. How much also depends on what gas position one wants to take, for instance. A large tomato grower also persuaded a room of colleagues and energy-interested people of this at an energy event last December. With high prices, it became "more capital-intensive" to tie up gas for later winters, the grower said. Those buying in have to put down collateral, but like gas prices themselves, collateral had also risen. With the current falling prices, collateral is also falling again.

Wouter nods and recognizes the picture the grower painted. It involves hundreds of thousands to millions of euros in collateral, depending on the size of the position and the volatility of the contract. "Plus, often a little extra to manage price movements." He does stress that 'smaller trades' are also possible. The fact remains that risks need to be hedged. "Working with collateral makes the system safe and ensures that it does not collapse quickly."

Spark spread trading on the rise
The above means that, so far, mainly the larger greenhouse companies are customers. "However, we do see an increasing demand for spark spread trading," he says. In this, growers play into what they can make and sell in electricity with spark spread. "This is also interesting for companies with lower energy requirements. Assume an installed capacity of about 5 megawatts."

Regulated and transparent
What Wouter, Maickel, and the rest of the team of energy specialists do is actually work with financial instruments. That means the company is supervised by the Financial Markets Authority, and De Nederlandsche Bank is also watching. "We are a fully regulated investment firm. That is special. You don't see that in greenhouse farming," the Managing Director knows.

Energy prices reached great heights last year, and peculiarities occurred this year, too, such as recently with negative electricity prices. BCI follows everything closely. Wouter points out that governments encourage trading on exchanges. "It is transparent and also allows governments to keep a better grip on developments."

Always trading
Maickel and his colleagues trade every day. "We don't stop when there is a lot of movement in the market and stay open," he says. He gives an example. "It happened many times last year that at OTC lots, trading was not possible at all and, if it was, at sharply different prices compared to the market price at the time. With us, buying and selling at the market price is then possible, even when volatility is high."

Just as it is possible to lock in gas for years when there is still a supply contract. "We can offer that because we handle it financially," Wouter points out. This allows a grower to trade for 2026, 2027, or 2028, for example, with Maickel and his colleagues helping the grower close the deal. Trading with basically financial products does not take away from the fact that BCI also has "the physical aspect of delivery" in-house. "Doing that for electricity," stresses the managing director.

BCI's focus is on the Netherlands. Greenhouse horticulture is the largest group with customers, although the company sees that this group is decreasing slightly in proportion to the total number of customers. Not because fewer growers are interested in the services but because other sectors are also knocking on the door.

"If we are going to grow, it will definitely be in greenhouse farming," Wouter expects. "That's because energy plays an important role in the sector. It makes us add a lot of value there. Buying for a factory that needs the same thing every day is different from buying for a grower where it's all about daily optimization of the CHP and differences between summer and winter consumption, for example." Should it come to international growth, neighboring countries will be looked at first, with Germany coming into the picture first. As does France. Belgium is "trickier." "That is a very illiquid market," Maickel points out.

Smart software also comes into play in energy trading. Maickel need not fear that he will eventually be replaced by artificial intelligence, for example. "We are in the process of fully automating trading," Wouter does indicate. "Short-term trading, especially Intraday trading, lends itself well to this. Turning on and off CHP's or lighting, you can program well." BCI is also in talks with tech companies in the sector for this purpose. Making the real deals remains people work, the Managing Director is convinced, just like consulting with growers via app, email, or phone call. Maickel and his colleagues do that every day. And will continue to do so in the coming years. "Trading on and through the exchange, that's the trend," he says.

For more information:
Wouter Alblas
Brainchild Commodity Intelligence
[email protected]  

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