GUEST POST: Better forecasts could lead to huge savings for industry

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CICERO Center for International Climate Research is working to develop more reliable and informative seasonal forecasts. This could lead to huge savings for both energy traders and farmers, as well as for other weather-dependent industries.

Most people in the Nordic countries would describe this past summer as the best summer ever. The summer when people in the southern parts of Norway and Sweden could enjoy sunshine and temperatures of around 30 degrees almost every day for three months, and the summer where it almost didn’t rain.

It was, according to the Norwegian Meteorological institute, the hottest summer in Norway, at least since 1900 – which is the earliest year for which there is data available – and it was the summer when there was no point going further south in Europe to get some sun and warm weather.

Not good for everyone

But this summer was also the summer when lots of fires raged through the forests in Sweden and Norway, and the summer when both barbecuing and watering gardens became illegal in several places due to water shortages. It was the summer when people were encouraged to leave out drinking water for squirrels and hedgehogs to prevent them from dying of thirst.

And it was the summer that led to lots of failed crops and several farm animals being put down due to farmers fearing that they would not have enough grass and hay to feed them with the coming winter.

It was also the summer when several energy companies lost money after having sold their power production at way too low prices on the forward market, having expected electricity prices to plunge as soon as the enormous amounts of snow from the exceptionally long winter started to melt.

Inflated summer electricity prices

Electricity prices in Norway and Sweden tend to be higher in the winter than in the summer because people here use power for heating, and power demand falls as the weather warms and people start turning off their electrical heaters.

In addition, snow melt usually puts further pressure on electricity prices in these two countries because it fills up the hydropower reservoirs. This tends to lead to a large surplus of hydropower because producers are forced to generate power to reduce the water levels.

The S2S4E project aims to make the energy sector in Europe more resilient to high-impact weather but also to the year-to-year variability of the climate.

Nathalie Schaller

This year, however, spring was completely skipped, as winter quickly turned into summer around the month of May, and the weather changed from cold and snowy to hot and sunny. And with that, lots of snow simply just dried up instead of going into the hydropower reservoirs, reservoir levels became much lower than expected, and electricity prices rose sharply.

In July, the Nordic system price averaged EUR 51.70/MWh, markedly higher than January’s average of EUR 32.93/MWh, and almost double the level from July 2017, when the system price averaged EUR 26.37/MWh, according to Nord Pool Spot.

Money losses on failed bets in the power market

Following a three-month heatwave, August suddenly became cold and wet, and electricity prices in the forward market on contracts for delivery in the autumn started falling.

This again led to huge losses for some market players who had bought electricity at high prices in the forward market for delivery this coming winter, having bet on prices remaining inflated amid expectations of continued drier than normal weather.

The Nordic power contract for the fourth quarter of 2018 shed almost EUR 15 – or 25% –over the first three weeks of September, closing at EUR 44/MWh on 21 September on the EEX exchange.  

Could perhaps have been prevented

As the examples show, there is a need for more reliable and informative seasonal forecasts – forecasts that would show whether the next three weeks or three months will be particularly dry or wet, or rather normal.

With better seasonal forecasts, several energy companies would possibly not have lost so much money on electricity sales and purchases this summer. Lots of cows and horses that were put down in June and July would perhaps also still be alive because, as the rain in August showed, they would not have experienced any food shortages this coming winter.

Everyone agrees that this past summer was rather unusual but, according to climate researchers, such summers will only become increasingly more frequent in the future as climate change leads to warmer and more extreme weather.

Need to be better prepared

“Global warming means we have to be prepared for more surprising weather going forward. It is important that we prepare for that the best way we can, by deepening our knowledge both about what kind of weather and climate we should expect, and about how vulnerable we are,” said Marianne Tronstad Lund, senior researcher at CICERO Center for International Climate Research.

Climate change means that Norway and the other Nordic countries may see more tropical summers in the future, and they need to be ready when that happens.

 “Hot summers are on the rise due to global warming. Improved and better tailored seasonal forecasts could help decision-makers to be more prepared for extreme conditions and to reduce the respective impacts on their operations and affected people,” said research director Jana Sillmann at CICERO.

With more reliable seasonal forecasts, people and industries would be able to prepare better for when extreme weather events do occur, and they would get an idea of how long these events would last, and thus also for their possible consequences.

They would therefore be more adept at finding suitable solutions for how to react when such events occur, and to make smarter financial and business decisions.

Joint project

Researchers from CICERO are currently – together with partners such as the French and Germany energy companies EDF and ENBW, forecasters SMHI and Nnergix, consultancy Capgemini, the University of Reading, the Barcelona Supercomputing Center and other European research institutes – working to improve the reliability of seasonal forecasts for the energy sector.

In their joint project S2S4E – Sub-seasonal to Seasonal Climate Predictions for Energy – they are seeking to make seasonal forecasts for weather-dependent solar, wind and hydropower more usable.

They are also working to develop more credible long-term forecasts for energy demand, which is highly weather-dependent in countries that rely on electricity for heating and cooling.

“The S2S4E project aims to make the energy sector in Europe more resilient to high-impact weather but also to the year-to-year variability of the climate. To achieve this, scientists and users – mainly energy companies – are working together to build a novel decision support tool (DST) and provide real-time seasonal-to-sub-seasonal (S2S) forecasts, which will be freely accessible to everyone,” said Nathalie Schaller, senior researcher at CICERO.

“Hopefully, the DST will be widely used and allow for better planning in cases where the S2S forecasts are reliable,” she added.

S2S4E is a three-year project funded by the European Union’s research and innovation programme Horizon 2020. It will by the end of 2020 lead to the development of a new computer interface for improved and more reliable seasonal forecasts for renewable power production and electricity demand – the above-mentioned DST.


This is a guest post, first published 26.09.2018 by ISELIN EKELI RØNNINGSBAKK at CICERO's website