“Meteorology and climatology, referring to weather and climate respectively, both have a direct impact on the energy sector through energy supply and energy demand,” explains Vasilis Pappas, Senior Meteorologist at MET Group.
Why is meteorology important for an energy company?
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 Power Purchase Agreements, so-called PPAs).
Does it mean that a meteorologist working in the energy industry needs to keep an eye on a broad time horizon?
Absolutely. 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. 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.
Why is it so important to know what the weather is like on other continents?
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.
And how can climatology help energy companies?
When it comes to longer time ranges (in excess of 6 months), climatology comes into play. The global warming seen in the last 30 to 40 years adds certain challenges to the energy markets. For example, there are several studies showing a disruption in the hydrological cycle leading to water scarcity for large areas in Europe and globally.
This is what we saw in the summer of 2022, for example.
Yes, indeed. 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. 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.
How does your typical working day look like?
I start early in order to look at how the latest weather forecasts have developed, as some of them are released after market closes the day before. I prepare a daily report which is sent to our traders and analysts. After the daily analysis, my time is split in two: on one hand, it is my task to develop tools that deal with weather-related data with the final purpose of improving the accuracy of our price model. On the other hand, it is about combining weather updates and weather forecasts with current market prices, coupled with our price forecast model, in order to develop weather-based trading strategies.
Weather is becoming more and more extreme, as it seems.
This is true. 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. 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.
How does that impact an energy company and the market prices?
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.
Can meteorology support MET in reaching its renewables expansion goals?
Yes, of course. MET Group, just like other energy companies, significantly depends on weather and climate variability. 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 PPA market are now looking at regional climate projections. Certain areas around Europe are more affected by climate change than others.
What else is key when planning to set up a geographically diversified renewables portfolio?
Another important factor 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. This is the case, for example, at the Dunamenti site owned by MET Group.
What are the barriers to a more efficient integration of energy and meteorology?
One of the main barriers is the lack of data sharing. In the renewable energy industry, there are many non-disclosure agreements and relevant data is only available to the owners of a specific asset. In the new era of ‘big data’ and ‘machine learning’ though, it should be up to each user to better ‘translate’ the vast amount of available data. Already going in that direction, there is an increasing supply of ‘Open Data’. For example, the European Centre for Medium-Range Weather Forecasting (ECMWF), one of the top research centres in meteorology and climatology, has changed its strict data policy in the last 5 years and has been releasing more and more data for free.
Vasilis Pappas
Vasilis was born in Greece, studied Physics and Applied Meteorology in Greece and in the UK. He spent some years in research projects in England, Greece, and Australia. His research has focused on: a) urban climatology and identifying the impact of climate change to irrigation needs and practices; b) impact from atmospheric aerosols on solar radiation using data from the latest satellites.