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An Industry Perspective on the Global Observing System Dr. Mary Altalo Science Applications International Corporation 8301 Greensboro Drive McLean, Virginia 22102 Phone (703) 676-468 Mary.G.Altalo@saic.com Mary.G.Altalo@saic.com

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2 Your IT Business Partner to the Future 2 Outline Vision of An Information System Mission Statement for Sustainability- Societies and Economies Provider and User Concept Market Segments for Information Market Sector Decisions Requiring Information Economic Valuations of Information Implication for Observing System Design New Industry Drivers Further Issues Altalo

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3 Your IT Business Partner to the Future 3 Environmental Information and Sustainability Mission

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4 Your IT Business Partner to the Future 4 Provider and User Concept Dual Responsibilities Data & Information Actionable Knowledge Providers Push Users Pull Partnership Added Value -Interpret user Needs-Sensitize Market research Business ResearchGovernment GOOS IOOS OOI National Met-Ocean Services Altalo

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5 Your IT Business Partner to the Future 5 Target Market Segments or Users Define the Optimal System Configuration Research Community GovernmentsBusiness Energy Water Tourism & Leisure Health Construction Transport Financial Services Defense Altalo

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6 Your IT Business Partner to the Future 6

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7 7 EXAMPLES OF PRODUCTS OF INTEREST TO INDUSTRY 1.Sea Level 2.Current speed, rip tides, undertows 3.Real time and Average daily temperature, humidity, rainfall 4.Average Annual temperature, humidity,rainfall 5.Heating and cooling degree-days (Last 30 years) 6.Wind speeds and direction 7.Cloud Cover 8.Wave height 9.Ocean current speed and direction 10.Red Tides

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8 Your IT Business Partner to the Future 8 Building Energy Management Oil and Gas Operations & Planning

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9 Your IT Business Partner to the Future 9 Other sectors---other uses

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10 Your IT Business Partner to the Future 10 How do Industries use the Information? Case Studies Recreation and Tourism Construction Industry Energy

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11 Your IT Business Partner to the Future 11 Leisure Industry Needs. Altalo

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12 Your IT Business Partner to the Future 12 Recreation/Tourism Business Decision Models Requiring Environmental Information Revenue per available room (RevPar) Accommodation sector Occupancy rates Accommodation sector Occupancy percentageAccommodation sector Average Daily Rates (ADR)Accommodation sector Comparative Operating Rates (COR) Accommodation sector Gross Operating Profit (% before fees)Across the industry Economic Impact AssessmentAcross the industry Financial rate of Return (FRR) Economic Rate of Return (ERR) International arrivalsTravel sector Journeys madeTravel sector Input Both Statistical and Probabilistic Hindcast and Forecast Environmental Information Altalo

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13 Your IT Business Partner to the Future 13 Utilities-Energy Pricing & 4hr forecasts of temp./ sea breeze - Scottish Power Oil and Gas- Regional Energy infrastructure master planning and climate/ocean conditions - BP Construction- Building codes & standards with 20 year heat/ precipitation/sea level forecasts- Building Research Establishment Leisure - Revenue projections and seasonal temperature/ppt forecasts The Starwood Group, Europe/Africa Finance Financial Risk Rating Index and air/water quality and climate forecasts- SERM Rating Agency Health and EM- Coastal metropolitan health alert planning and met/AQ forecasting- National Environmental Research Institute (DMEE) Business/Policy Trials: Observing System Product Performance Assessment in Business Operations Altalo

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14 Your IT Business Partner to the Future 14 Starwood Hotel Industry Trial Marbella, Spain Can seasonal environmental information improve the accuracy of Revenue Forecasting in the Ibearian Penninsula? Altalo

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15 Your IT Business Partner to the Future 15

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16 Your IT Business Partner to the Future 16 Resort Construction Decisions Requiring Environmental Information Seismic/soil Air/water Quality Sea Level/beach SST Red tides Ppt/temp Climate, ppt, temp, winds Fire risk Storm surge Winds Sea breeze Precipitation T,humidity,cloud cover, ppt Air quality Emissions/air and water

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17 Your IT Business Partner to the Future 17

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18 Your IT Business Partner to the Future 18 Defining the Range of Uncertainty NOAA 1998-2000-Defining the weather/climate requirements for the energy industrybreadth of use across all sectors and lead time Critical forecast periods for improvement Sub day, 2-4 day, 90 day Altalo

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19 Your IT Business Partner to the Future 19 Observing System Information in the Value Chain of CONOCO Business Units & Functions Strategic planning Risk assessment -Political -Safety/environ. -Social impact -Economic Host government negotiation Strategic planning Risk assessment -Political -Safety/environ. -Social impact -Economic Host government negotiation Field development plan Risk assessment next level Sustainable development plan next level Production wells -Land based pads -Offshore platforms -Supply systems Field processing Transportation system Field development plan Risk assessment next level Sustainable development plan next level Production wells -Land based pads -Offshore platforms -Supply systems Field processing Transportation system Crude oil gathering systems Terminals and trucks Overland crude oil pipelines Offshore underwater pipelines FPSO & shuttle tankers Inland waterway barges Tankers design Crude oil gathering systems Terminals and trucks Overland crude oil pipelines Offshore underwater pipelines FPSO & shuttle tankers Inland waterway barges Tankers design Oil refineries Floating processing tankers Fixed platform processing Deepwater tension leg platforms Natural gas processing Carbon fibers Natural gas refining Safety, environment, and social issues Oil refineries Floating processing tankers Fixed platform processing Deepwater tension leg platforms Natural gas processing Carbon fibers Natural gas refining Safety, environment, and social issues Liquid product pipelines Gas pipelines LPC pipelines Product terminals Trucking Inland waterway barges Product tankers environment and social issues Liquid product pipelines Gas pipelines LPC pipelines Product terminals Trucking Inland waterway barges Product tankers environment and social issues Business strategy Demand forecasting - Economic growth - Energy switching - Weather/ climate Supply forecasting Hedging and futures Transportation and inventory Business strategy Demand forecasting - Economic growth - Energy switching - Weather/ climate Supply forecasting Hedging and futures Transportation and inventory Seismic evaluation Land prospect Underwater prospect Risk assessments Sustainable development plan Exploration and drilling Economic assessment Strategic alliances Seismic evaluation Land prospect Underwater prospect Risk assessments Sustainable development plan Exploration and drilling Economic assessment Strategic alliances Listen-Understand Balance Quality, Flexibility,Cost Safety & Environment NIMBY Competition Listen-Understand Balance Quality, Flexibility,Cost Safety & Environment NIMBY Competition Altalo

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Alternative Energy Supply Issues Renewables Portfolio Targets for National Needs Governors targets- e.g. CA, 20% Renewables by 2017- currently at 12%; Federal Needs-Energy Security, energy efficiency, emissions reductions (health) Renewables (wind/hydro) Siting, Construction & Operation Offshore wind fields, wave height, subsurface currents, storm prediction, sea level, sedimentation, precipitation, evaporation, floods Renewable Energy Delivery and Storage Demand variability due to extremes, storms, fog portfolio management with offshore wind prediction Altalo

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21 Your IT Business Partner to the Future 21 Economic Valuation of Information

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22 Your IT Business Partner to the Future 22 How to Calculate the National Return on Investment? 1. Economic Cost-Benefit Analysis- holistic approach based on assumptions 2. Business/Policy Trials or Performance Assessment a.User-Supplier Partnership with short term Goals b.Environmental Forecast Transforms into Business/Policy Forecast c.Improved Skill of Environmental Forecast increases Skill of the Business/Policy Forecast, thus Demand Pull d.Requires Information from Ocean, Weather and Climate Observing Systems e.Guides Marketplace Decisions and Strategy f.Informs National Policy and Strategy g.Prioritizes National S & T Strategy for Observing system design, implementation and operational decisions Altalo

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23 Your IT Business Partner to the Future 23 Method Template or Roadmap 1. Generic concept portable to all nations, industries, observing systems and products 2. Starts with the Function of Decision Making 3. ID Organisational Units making the decision into which environmental information fits 4. ID the business forecast models, formats, portals 5. Tailors environmental forecasts to need 6. Assimilate information 7. Generate scenarios 8. Analyse options 9. Evaluate consequences (fiscal and risk) Altalo

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2002-5 Regional Market and Policy Imperatives as Drivers for US Coastal GOOS

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The Northeast Energy Network Performance Analysis University of New Hampshire

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26 Your IT Business Partner to the Future 26 Overall Goal Examine the value of improvement in weather/climate forecast accuracy to major stakeholders in the Electric Power Value Chain (Sellers, Distributors, Buyers) Determine the precise requirements of the stakeholders for the improvements of decisions-what do you do? Establish the Impact of forecast accuracy on the operation and planning decisions of the Industry Examine and Improve the Decision Support Tools of the User community to institutionalize information Develop the Stakeholder Advocacy through experience Altalo

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27 Your IT Business Partner to the Future 27 The Setting for the Stakeholder Assessment 1 New England Grid Operator weather impacts on short term load forecasting Major Urban Utility weather impacts on distribution system loads Major state owned end user use of weather forecasting to control day ahead electric prices and manage natural gas and electricity costs at state facilities Altalo

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28 Your IT Business Partner to the Future 28 The Industry Trials Approach Identify stakeholder industries Vulnerability assessment Benchmark Use of environmental Information Perform an error analysis Generate scenarios Options analysis Beta Test Environmental Information Determine Costs and optimize Altalo

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29 Your IT Business Partner to the Future 29 Key Utility functions/decisions requiring coastal weather/climate/ocean data Load Balancing-single utility and grid Generation commitment- fuel mix choice (fossil fuel, hydro, wind) Dispatch scheduling Power Marketing Cash trading Power pricing Fuel pricing and procurement Tariff Scheduling Pump Load (Irrigation) Forecasting for Hydro Natural Gas Storage Management Revenue Projections Infrastructure siting Management strategic planning Altalo

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30 Your IT Business Partner to the Future 30 Urban Utility Case Study Findings 1: Significant load error due to weather Most utilities calculate weather error in MW as well as percentage of variance of the load. Analysis indicates that on some days, variance in the load forecast in MW may be solely due to weather error. This appears to be from events or unmodeled mesoscale features such as back door fronts, sea breeze and afternoon thunderstorms. The cost of such events can be up to $10M/day Altalo

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Wind Resource Map Produced by SiteWind NESTING THE COASTAL INTO THE GLOBAL: KEY TO DESIGNING FOR APPLICATIONS

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32 Your IT Business Partner to the Future 32 Key Cost Findings 2002-2003 NOAA Northeast Energy The project estimated that the benefits of improving day ahead weather forecast accuracy by one degree F or by reducing forecasting error by 50% for days 2-7 is: --$20-25 million per year for a regional transmission authority --$1-2 million/year for a major distribution utility. Optimal use of weather information could yield savings of $818 million/year for a major university system (electric and natural gas). If these savings were generalized to other regional transmission organizations, large statewide colleges and universities and regional transmission authorities the total savings would be for the Northeast Region: -- $100-140 million/year for ISOs --$30-60 million for regional electric distribution companies. -- $38-67 million for Statewide university campuses Furthermore, capturing the events on top of this will yield significantly higher savings (millions/day).- seabreeze, backdoor fronts, afternoon showers Altalo

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33 Your IT Business Partner to the Future 33 Case Studies 2 and 3

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34 Your IT Business Partner to the Future 34 Relationship of Weather Uncertainty and Cost: Grid Operating Companies

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35 Your IT Business Partner to the Future 35 ISO Mean Daily Forecast Error Delta Breeze and weather/load forecast errors contribute to major errors in prediction of Delta Breeze effects Delta Breeze is defined as the conditions when the wind speed is > 12 knots, and the direction being between 190 degrees and 280 degrees. Multiple causes and dynamics that cause Delta Breeze. A major priority of the ISO is to reduce this error

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36 Your IT Business Partner to the Future 36 The Inextricable Relationship of Weather Uncertainty and Cost: Grid Operating Companies Cost: Driven by spot market and last marginal unit required Replacement power costs are often highest during periods of high peak demand and congestion Replacement power costs can be anywhere from from $200/MWh to over $1000. Price caps exist in California and western states which artificially suppress real market clearing prices Potential market value costs might range anywhere from $200-$1000/MWh Cutting forecast error by 70% can save as much as $560,000-$2,800,000 per hour during critical peak periods!

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37 Your IT Business Partner to the Future 37 Principle Causes of Uncertainty on Energy Operations and Planning Uncaptured WIND Events Delta Breeze- Cal ISO Lake effects- Salt Lake City- Pacificorp, Great Lakes- SUNY Buffalo Seabreeze- NE ISO Frontal passage- 2-4 day Uncaptured PRECIPITATION Events Rain vs. snow/ice Regional day ahead error in precipitation- Pacificorp Afternoon thunderstorms Marine Layer, fog- SDG&E Drought and flood, flash flood Uncaptured CLIMATE Events Climate outlooks weather events frequency El Nino and seasonal events Decadal ocsillations- NAO RESOLUTION- Spatial, temporal Sub grid level Targeted watershed level, Nodal, congestion and population Topographic Effects- microzones Hourly changes during events Load Model Error 50% load error at certain event periods Cant incorporate probabilities/ ensembles Sub-optimal Use Altalo

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38 Your IT Business Partner to the Future 38 Requirements Altalo

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39 Your IT Business Partner to the Future 39 Business Process Reengineering Needed for Improved Decision Making Incorporate Climate Change parameters into planning Incorporate Probability Distribution forecasts into models Incorporate Ensemble Forecasting into methods Incorporate complex topographic features for microclimate estimates Include rainfall behavior on sub-grid level (soil moisture and evaporation) Incorporate seabreeze, lake effect, fog, afternoon thunderstorms and frontal passage into forecasts Altalo

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40 Your IT Business Partner to the Future 40 New Industry Sustainability Drivers Triple Bottom Line Metrics Environmental Protection Social Enhancement Company Profit Socially Responsible Investment

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41 Your IT Business Partner to the Future 41 Sustainability as a Driver for System Requirements As more corporations are adopting efficiency measures and "sustainability strategies" in which "triple bottom line" company performance metrics of profit, environmental health and social benefit are valued equally, the requirements for new information from observing systems will escalate.

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42 Your IT Business Partner to the Future 42

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43 Your IT Business Partner to the Future 43 Design to social and economic requirements Formulate Long term investment strategy with all parties Define socially relevant metrics Prepare the business community to mainstream environmental Information in business decision aids Conduct pilots for engagement Focus on Outcomes and Impacts Prepare the ROI ISSUES Altalo