Fixed or variable electricity price? Pick your risk

Choosing between a fixed or variable electricity price is fundamentally a choice of risk, not of price. With a fixed contract you pay a premium to be spared the swings. With a variable one you carry the swings yourself, but pay less on average over time. Neither makes your bill smaller. They just distribute the uncertainty differently.

If you want to know which lever actually shrinks the bill, rather than shifts the risk, it comes down to how much electricity you buy and produce yourself. We work that through in the guide to the best electricity contract. Here we stay with the two classic contracts: how they behave, and who they suit.

A fixed electricity contract locks the price per kilowatt-hour for a set period, usually one to three years. You know what each kWh costs. A variable electricity contract instead follows the market spot price and changes continuously, often as a monthly average. The price can be low for long stretches and suddenly high during the odd week.

The electricity supplier takes on the price risk and charges for it. The premium is what you pay to know what the bill will be. During a price shock you're protected: your price stays put while others watch the spot price soar.

The downside shows during calm periods. When the spot price is low you pay more than you needed to, and if you've committed for a long term, ending it early can cost. You're buying predictability, not a lower average.

You pay what the market costs, with no markup for security. Over time, a variable price has historically been cheaper than a fixed one, precisely because you avoid the premium.

The price you pay for that is variation. On a cold, windless week the bill can be several times higher than the month before. You carry the risk, and you feel it most exactly when it's most expensive for everyone.

A fixed price suits you if you want to budget to the krona and would rather pay a little more to avoid worrying. If your margins are tight in a given month, or a bill you can't foresee keeps you up at night, the security is often worth the premium. Think of it as insurance, not a saving.

A variable price suits you if you can absorb an expensive month in return for a lower average across the year. The more you can shift consumption to cheap hours, the more you get out of it. If you'd rather not keep track, you still get the lower average, but also the full variation with it.

There's no objectively best choice between fixed and variable. There's only the level of risk you're prepared to live with. Fixed buys calm and costs a little extra. Variable is cheaper on average and more expensive on a really bad month.

But both only answer the question of how you want to carry the price, not how you lower it. If you want to know how much a house can cut by producing and controlling its own electricity, we start from your house and your consumption. Fill in your details and we'll get back to you with a concrete basis.