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Energy time periods , so how a company implements them should be consistent with a long-term energy strategy .
Hedging
Buying electricity at market prices can expose companies to unfavorable price changes , which can inflate spending on energy , and to volatility , which makes energy costs unpredictable . The market has slowly adjusted to the volatility introduced into the system by the increased availability of intermittent renewable energy , but recent events have driven volatility even higher ( Exhibit 4 ).
Widely used financial tools such as hedging through futures or forward markets can allow companies to reduce portfolio volatility and ensure cost predictability . Many industrial companies already are active hedgers , but some have remained on the sidelines . In certain cases , companies concluded that hedging was unnecessary because energy did not historically make up a significant share of product costs ; others simply did not have the appropriate in-house capabilities to hedge . In addition , some industrial companies refrained from hedging because their competitors did not do so , thus avoiding being outcompeted or operating at a loss if energy prices fell below hedged prices . Higher energy prices and greater volatility , however , are forcing some companies to rethink their position on hedging .
Switching fuels
Industrial companies could consider switching to less expensive energy inputs if their processes and equipment permit it . For
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