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Why being “100% hedged” doesn’t protect you from the spot price
“I’m 100% hedged, so flexibility doesn’t concern me”: industrial energy managers say it often. It confuses the average price of a contract with the price of each MWh actually consumed. The director of a French paper mill learned this the hard way this year: “That’s two million euros of extra cost for the site, despite the hedges.”
Market conditions make the question urgent. In the third quarter of 2026, the French spot price averaged €120.20/MWh, compared with €49.23/MWh a year earlier, according to SMARD, the German regulator’s data platform. Intraday gaps have widened too: on 3 October 2026, a MWh cost €63.94 at 1:30 pm and €243.06 at 6:45 pm.
What does an electricity hedge actually cover?
A hedge buys a volume of electricity in advance at a fixed price: usually a block of constant power, baseload or peakload, over a given period. “100% hedged” means this volume equals your expected consumption over the year, on average.
The spot price, on the other hand, is the market price of electricity. It is set every day on the European EPEX SPOT exchange, for each quarter-hour of the following day.
But your plant doesn’t consume on average. It consumes more when every line is running, and less during a shutdown, maintenance or a weekend. The block, meanwhile, stays flat.
The difference between your actual load curve and your block is settled at the spot price, every hour (or every quarter-hour, depending on your contract):
- when you consume above the block (under-hedging), you buy the extra at spot;
- when you consume below it (over-hedging), you sell the surplus back at spot.
Your hedge therefore protects your budget on the average volume. It says nothing about the price of each MWh you add or remove at a given hour.
Does being 100% hedged reduce the value of flexibility?
No. The gain from shifting consumption is identical whether the site is 100% hedged or fully exposed to spot. A two-hour example is enough to show it.
Take a site consuming 10 MW on average, over just two hours for simplicity (illustrative example):
- a peak hour, spot at €250/MWh, when the site runs at 12 MW;
- an off-peak hour, spot at €30/MWh, when it runs at 8 MW.
The site is 100% hedged with a 10 MW block bought at €75/MWh. At peak, it buys 2 MWh at spot; off-peak, it sells 2 MWh back at spot. Let’s compare it with an identical site that is fully on spot, then see what happens if each shifts 2 MW from peak to off-peak.
The hedge changes the level of the bill: €1,300 less here, because the block was bought for less than the peak price. It does not change the value of flexibility: €440 in both cases.
The reason is simple. The block price is paid no matter what. What changes with your consumption is only what you buy or sell back at spot. The gain from a shift is therefore always calculated the same way:
Your hedge level appears nowhere in this calculation.
What are under-hedging and over-hedging?
What matters is not your annual hedge ratio, but your open position at each time step: the gap between what you consume and what you have hedged.
A “100% hedged” site is only hedged on an annual average. Hour by hour, it switches from one position to the other, often the wrong way round: under-hedged when running at full capacity, during expensive hours; over-hedged at night and at weekends, when prices are low. It buys high and sells low: this is the profile cost.
The risk of over-hedging grows with negative prices. France recorded around 510 hours of negative prices from January to August 2026, as many as in the whole of 2025 (513 hours), according to the CRE and RTE. Selling back a MWh at those hours means paying to get rid of it; consuming more at those hours, by contrast, reduces over-hedging.
In our example, the site is under-hedged by 2 MW at peak and pays €175/MWh more than its block (250 − 75), i.e. €350. Off-peak, it is over-hedged by 2 MW and sells back at €45/MWh below the block price (75 − 30), i.e. €90. Its profile cost comes to €440: exactly what flexibility recovers.
The same reasoning applies over a full year. A site whose activity drops ends up over-hedged and has to sell back at spot volumes it bought at a higher price. A site that deliberately leaves part of its volume unhedged accepts being under-hedged to keep some leeway. In both cases, flexibility reduces the cost of the open position.
When does spot exposure reappear despite a hedge?
In our discussions with manufacturers, spot exposure almost always reappears in one of these situations.
The hedge only covers the baseload. A steelmaker hedged around 12 MW, its minimum consumption level, while its production goes up to 30 or 35 MW. Everything above the baseload, which is most of the production, goes to spot.
Production varies over the week. Monday start-ups, product changeovers, weekend shutdowns: every variation creates a gap with the block, bought or sold back at the price of the hour.
The plant shuts down. A foundry that stops on a public holiday doesn’t consume its block: it sells it back at spot. The amount recovered depends entirely on the price that day, and therefore on when the shutdown is scheduled.
The contract is settled every 15 minutes. The finer the time step, the more gaps there are between your load curve and your block, and the larger the share settled at spot.
Hedging or flexibility: what’s the difference?
Hedging and flexibility answer two different questions, and they complement each other.
For every production decision, the right reflex is therefore to reason in terms of the spot price of the hour, not the average price of your contract. Bringing a cleaning forward, delaying a start-up, scheduling maintenance: each of these decisions is valued at spot, whether you are hedged or not.
Managing your consumption doesn’t call your contract into question either. You keep your hedge and only act on the gaps, which are settled at spot anyway.
Frequently asked questions
Does a 100% hedge protect against rising spot prices?
Only partly. It fixes the price of an average volume, but every MWh consumed above the block is bought at spot, and every MWh below it is sold back at spot.
Is flexibility compatible with a block + spot contract?
Yes. Managing your consumption doesn’t affect the block you bought: it only acts on the gaps, which are settled at spot whatever your hedge level.
How do you calculate the gain from shifting consumption?
Multiply the MW shifted by the spot price gap between the two hours, then by the duration of the shift. For example, shifting 2 MW for one hour, from an hour at €250/MWh to an hour at €30/MWh, earns €440.
What is profile cost?
It is the extra cost borne by a site that consumes more than its block during expensive hours and less during cheap hours. It buys high at spot and sells low, even if it is 100% hedged on annual volume.
Summary
“100% hedged” doesn’t mean “0% exposed”. As long as your consumption varies, part of your electricity is settled at spot, and every MWh shifted is worth the price gap between two hours, whatever your contract.
With today’s volatility, that gap can approach €180/MWh within a single day, as on 3 October 2026 between 1:30 pm and 6:45 pm. That is precisely what flexibility makes it possible to capture.
Highcast forecasts spot prices up to 14 days ahead and, based on your load curve, values every possible shift at your site. Want to know what your flexibility is worth, hedge included? Contact us for an initial estimate.
Sources
- L’EnerGeek, “Électricité : les prix de gros ont bondi de 144 % en France au troisième trimestre 2026”, 25 October 2026 (in French), based on the SMARD (Bundesnetzagentur) report of 21 October 2026.
- Comparons l’énergie, “Prix spot de l’électricité en France” (in French), based on SMARD, the CRE and RTE, accessed 2 November 2026.
- Worked example: illustrative case built by Highcast. Testimonials: Highcast discussions with manufacturers, anonymised.
