Changing climate poses challenges to energy producers across Europe, including Southeast Europe (SEE), but a geographically diversified portfolio can help offset them, says Vasilis Pappas, senior meteorologist at MET Group, a Swiss-based energy company.
Source: SeeNews
"When deciding on the purchase or sub-lease of wind farms or solar parks, energy companies mainly look at some short history of production data. However, an increasing number of participants in the Power Purchase Agreements (PPA) market are now looking at regional climate projections," Pappas said in a recent interview for SeeNews.
Certain areas around Europe are more affected by climate change than others, he noted.
"SEE is a region with plenty of weather-related energy resources, thanks to its topography – hydrological resources as well as wind and solar power potential are all available there. However, the changing climate poses challenges in this part of the world too," Pappas said in a recent interview for SeeNews.
"Although there is no clear signal of increasing or decreasing precipitation volumes in Southeast Europe, the intra-annual pattern has become more erratic. For example, during winter the western part of the Balkan Peninsula has been receiving more precipitation, while the eastern part has been receiving less. In the summer, an opposite trend has been observed. When it comes to hydrological power production, all this needs to be appropriately simulated and optimised," he added.
As for the increasing wind and solar power capacity, it means increasing intermittent injections into the electricity grid. SEE weather patterns bringing windy events are not the same as in Northern or Western Europe, and due to the mountainous topography, weather models often struggle to correctly capture these events, the meteorologist explained.
"At MET Group, the ownership of renewable assets enables us to closely monitor the production and, at the same time, provide an accurate production forecast for the next couple of days," he said.
MET Group is an integrated energy company with activities in natural gas, and power markets, focused on multi-commodity wholesale, trading and sales, renewable energy and industrial assets. In SEE, the group is present in Bulgaria, Croatia, Romania and Serbia.
Another important factor, according to the meteorologist, is how to optimally spread the portfolio across Europe.
"Without going into details, a wind farm in Spain could complement very well a wind farm in Germany – when it is very windy in one of the countries, it is usually not windy in the other one. And, of course, when renewable technologies go hand-in-hand with batteries for storing the excess renewable energy production and also with flexible generation, such as gas-fired power plants, the supply of energy becomes very efficient," he said, adding that this is the case, for example, at the Dunamenti site owned by MET Group.
Meteorology and climatology, referring to weather and climate respectively, both have a direct impact on the energy sector through energy supply and energy demand, Pappas explained.
"In the last 30 years, there has been a boom in renewable energy installations. European regulations for a more efficient utilization of energy sources have led to a greater need for accurate forecasts of the expected wind and solar production. Time horizons for these forecasts range from the next couple of hours (intraday markets) to months and quarters (Futures markets and PPAs)," Pappas said.
That is why, in his view, a meteorologist working in the energy industry needs to keep an eye on a broad time horizon.
"There are a number of different weather models, mainly based on equations describing the physical interactions in the atmosphere, from various research centres around the world. The atmosphere follows the rules of chaos theory, so it can be argued that with an increased forecast horizon “all forecasts become wrong”. Therefore, we need to put resources into further statistical processing," he said.
The longer the forecast horizon, the bigger the volatility in the forecasts.
"Our in-house analysis looks into quantifying that volatility, creating distinct scenarios based on different possible outcomes and, with the help of an experienced meteorologist picks the most likely scenario," he explained.
Knowing what the weather is like on other continents is crucial, Pappas stressed.
"As energy markets are truly global, keeping an eye on other parts of the world, such as Northeast Asia is, of course, necessary. A cold outbreak in Asia, for example, increases the demand for LNG in that region, and as both Europe and Northeast Asia are competing for the same LNG supplies from the United States, Qatar and other sources, this will have an effect on all local markets around the world," he explained.
When it comes to longer time ranges in excess of six months), climatology comes into play. The global warming seen in the last 30 to 40 years adds certain challenges to the energy markets, he said, adding that several studies are showing a disruption in the hydrological cycle leading to water scarcity for large areas in Europe and globally, as seen in the summer of 2022.
"Water is crucial for the energy sector – rivers are used for cooling purposes in nuclear and other thermal power plants, for producing electricity via run-of- river hydropower plants and for transporting coal and other fuels via barges. Therefore, low river levels immediately cause issues in the energy supply chain, he said. "Snowpack has been decreasing in the past few winters in Europe, and that has a direct impact not only on hydro resources to be used in the spring and summer, but also on the fresh water supply."
A typical working day for Pappas starts early with a check how the latest weather forecasts have developed, as some of them are released after market closes the day before. The expert then prepares a daily report which is sent to the MET Group traders and analysts. After the daily analysis, his time is split in two: on one hand, it is his task to develop tools that deal with weather-related data with the final purpose of improving the accuracy of the group's price model. On the other hand, it is about combining weather updates and weather forecasts with current market prices, coupled with the MET Group price forecast model, in order to develop weather-based trading strategies.
"Some aspects of the weather we have been experiencing in the last couple of years can be considered as extreme weather. For example, we have seen some of the worst droughts for the past 150 years," Pappas said. "Summers are getting hotter with maximum temperature records being broken almost every year, especially in Southern Europe. There is a lot of ongoing research on why this is happening. One of the culprits for the European area is the reduced sea ice extent in the Arctic.
For the energy sector in particular, as extreme weather events cannot be predicted more than a couple of days in advance, agility is important. Spot markets can be very volatile, as supply needs to match demand. A couple of very windy days in Europe would drop the demand from thermal power plants and make their production uneconomical, he explained.