In previous installments of our series, we described the energy sector as a dynamic financial asset that requires agility and daily optimization. It might seem that all it takes to succeed in the new world of energy is high-quality data and a quick-thinking trader. The reality, however, is significantly more complex. Even the most sophisticated trading plan will reach its limits if it is hindered by technological constraints inherent in the energy source itself. Flexibility cannot be calculated solely through algorithms; it must first and foremost be embedded in the concept itself and in the technical condition of the equipment.
The current geopolitical situation clearly demonstrates how risky it is to rely solely on a single type of resource or fuel. This issue is all the more sensitive for the Czech market because, in terms of natural gas supplies, we are currently heavily dependent on transit routes through Germany due to our infrastructure. Any technical problem, legislative change, or adjustment to transit fees in our neighboring country can have an immediate impact on the cost structure of domestic operations.
This vulnerability became fully apparent in 2022. At that time, entities focused exclusively on natural gas faced a sharp rise in costs that could not be effectively mitigated. Heating plants with cogeneration facilities maintained a relatively more stable position, as they were able to partially offset high input costs for gas by selling electricity, the price of which was rising in parallel. However, facilities with a diversified portfolio of energy sources proved to be significantly more resilient. The ability to quickly shift the focus of production to alternative fuels—such as biomass, solid fuels, waste, or heat generation from electricity—allowed these entities to mitigate the harshest impacts of the crisis and maintain economic stability.
The Local Energy Mix and the Role of the Architect
There is no one-size-fits-all guide to the ideal energy source. Each location is unique in terms of its connection to the distribution grid, the availability of a gas connection, meteorological and spatial conditions, and, for example, local energy sources. Designing an optimal solution therefore involves combining various energy components in a way that yields the best economic results over the long term. This is the realm of expert assessment, where detailed, in-depth analyses of local constraints are used to develop the architecture of the future energy source—one based not on estimates, but on data.
The approach to energy modernization to date has often been fragmented. An operator would commission a study on a biomass boiler, then another on a heat pump, and yet another on battery storage. The result is usually a desk full of conflicting documents, each advocating its own technology as the best. However, this is a path to an inefficient investment. A modern energy system requires a single architect who can see the broader context of all opportunities and the site’s limiting factors. This architect must determine when it is pointless to consider waste as an option at a specific location, or why a geothermal well lacks economic justification without government support. Instead of letting isolated studies pile up in a drawer, it is necessary to create a comprehensive strategy for the next 10 to 15 years that determines the correct balance among individual energy sources. Only when an architect oversees the entire process—from the initial study through to final construction—can we ensure that the original economic objective is not lost in the technical details of implementation.
When designing a system, it is essential to move away from the practice of using the lowest purchase price as the primary selection criterion. Low capital costs (CAPEX)—typical, for example, of standalone gas boilers—are often offset by high operating costs (OPEX) that are difficult to control. The future will likely belong to hybrid systems that combine various sources such as biomass, gas, cogeneration units, electric boilers, and heat pumps, all supplemented by robust heat and electricity storage. While this combination requires a higher initial investment, in the long term it allows the operator, thanks to diversified sources, to switch flexibly between fuels depending on which source is the most economically advantageous at any given moment.
Economic Optimality in Practice: Technological Synergies
The right combination of elements makes it possible to achieve economic optimality, which is unattainable with a single technology on its own. One example is the use of a heat pump in combination with an electric boiler. While a heat pump—which requires a significant initial investment—offers a high heating factor during transitional seasons, its efficiency drops at extremely low temperatures or during temperature inversions. Investing in oversized capacity is inefficient under such conditions. A strategically chosen mix that includes a more affordable electric boiler—which helps cover peak demand or take advantage of hours with extremely cheap electricity—optimizes both the investment and average operating costs.
However, the true economic benefit is only fully realized when these sources are integrated with cogeneration, energy storage, and a centralized control system. We can then generate both heat and electricity via cogeneration during periods of high electricity prices, and conversely, generate heat using an electric boiler and a heat pump during times of excess energy in the grid. If the system is thoroughly thought through, we can also use self-generated photovoltaic power directly to power the heat pumps, thereby minimizing distribution fees. Furthermore, proper planning can significantly reduce peak demand. This chain of interconnected combinations dramatically increases the complexity of optimization. However, if the architecture is designed systematically and with an emphasis on the interdependence of technologies, it can ultimately create a robust economic model that is resilient to fluctuations in individual markets.
Why Trading Can’t Save a Poorly Designed System
We are often asked whether a technologically rigid or poorly designed system can be salvaged through professional trading. Experience shows that if the technology lacks the ability to respond flexibly and its control is the result of ad hoc or improvised adjustments, even high-quality trading management cannot fix the system’s operational economics. Close communication among staff and extraordinary efforts by operators may help at certain moments, but they are not a systemic solution. The only true solution is investment in systematic digitization and precise technology management, upon which one can then safely build. Otherwise, everything depends on the quality and perseverance of the staff, which poses a significant risk from the perspective of long-term operation.
The scope of errors in technological design is often enormous in practice; nevertheless, whenever cogeneration or significant energy consumption is present in an operation, there is always considerable room for optimization. However, the decisive factor is the precision of control. If an operator cannot guarantee compliance with specified production and consumption parameters, it ultimately harms its own financial performance above all else. Without a digital infrastructure that enables automated responses to market signals, it is very difficult to maintain effective operational control over the long term in the complex environment of the energy sector.
Emissions Allowances as an Accelerator of Change
The topic of subsidies often comes up in debates about modernization. From a strategic planning perspective, however, it is important to view subsidy programs primarily as a tool to accelerate investment, rather than as the sole purpose of such investment. Even without subsidy support, new technologies are beginning to make increasingly strong economic sense, partly due to the pressure to decarbonize. If we factor in the gradual introduction of ETS2 emission allowances, we’ll find that for facilities powered exclusively by natural gas, this could mean a very significant increase in fuel costs. All this at a time when these facilities are once again grappling with the impacts of previous gas price hikes.
In this context, it is no longer just a matter of environmental stance, but of simple mathematics. Every increase in the price of an emissions permit only confirms that diversifying energy sources enhances a company’s price stability. Our task is to combine these elements in such a way that their disadvantages cancel each other out, while their advantages reinforce one another.
Strategic Adaptability: A Market in Flux
The current market situation, characterized by significant fluctuations in energy prices throughout the day, will not last forever. The incentive to buy low and sell high naturally attracts new players, particularly in the areas of battery storage and flexible generation sources. As we can see from the example of California, massive investments in energy storage are already leading to a gradual convergence of price curves and a narrowing of market spreads. The current trend of significant intraday price drops is unlikely to persist in the long term. With the massive expansion of energy storage, we can expect these price differences to gradually narrow.
Similarly, such investments are having an increasingly intense impact on the ancillary services market. Individual projects are beginning to compete with one another more and more, and the volume of activations will continue to decline in the future as the market gradually manages its imbalance with greater precision through intraday trading. This trend is becoming increasingly visible across the EU. However, it is important to recognize that political regulations, geopolitical events, and changes in consumer behavior can very quickly alter current market conditions.
Remaining dependent on a single solution or a single market trend today means voluntarily exposing oneself to future risk. While the need for operational flexibility will not disappear, the way in which assets must be used will change. A well-designed technology mix prepares a company for the fact that the market will continue to evolve. Only a resource with multiple operational and commercial applications can respond to these structural changes in a timely manner and maintain its economic relevance even when today’s market anomalies become a thing of the past.
A Unified Strategy as a Way to Protect Your Investment
Today’s modern energy sector is not just about individual technologies, but above all about the ability to integrate them into a long-term, functional strategy. Various stakeholders come together throughout the entire life cycle of an energy system: technology suppliers, providers of ancillary services, and exchange traders. It is precisely in this fragmented environment, however, that the greatest risk arises—that the original economic objective will be lost over the years. To prevent this from happening, it is essential to maintain unified strategic oversight of the entire process, one that takes into account the broader context from the initial feasibility study through to the final trading phase.
This oversight then makes it possible to chart a course for the next ten to fifteen years. The strategy does not merely determine which boiler or pump to purchase; above all, it defines why a given solution has specific parameters and what role it will play in the future market mix. If the entire process—from design through construction to completion—is coordinated by a partner who understands the technology’s entire life cycle, the risk of operational inefficiency and premature depreciation of expensive technology due to improper use is significantly reduced.
This is precisely where the strength of integration within the ORGREZ Group becomes evident. ORGREZ ECO designs the technological architecture and long-term investment strategy; ORGREZ establishes the framework for operational economics and technology utilization strategy; and the commercial division, ORGREZ TRADE, subsequently ensures the day-to-day optimization of the commercial utilization of these assets. This approach ensures that the customer understands from the outset what opportunities the market has to offer. Today, the energy sector is no longer just about operating machinery, but about the long-term management of technology, its economics, and the ability to respond to changing market conditions.