April 24, 2007Nihat Cubukcu

Utilization of Numerical Weather Forecast

in Energy Sector

Table of Contents

• Introduction to Numerical Weather Prediction

• Weather influence on Energy (Natural Gas)

• Design of Forecaster- Decision Maker Interface

• Summary

Numerical Weather Prediction

Short-Term Prediction

• 1-15day • Temperature,

Precipitation, …• Adaptive Prediction• High frequency variations• Very High Resolution

Long-Term Prediction

• 1-6 months• Temperature,

Precipitation, …• Global Scale• Low Frequency Variations• Moderate Resolution• More Directional Forecast

than Magnitude

Weather Impacts on Energy Commodities

• Weather forecast is an important input to power load forecasts.

• Energy demand increases with more extreme temperatures.

• Accurate forecasts can help to save or make money during volatile times.

Weather Impacts on Energy Commodities cont.

• Power flows in the path of least resistance – greatest demand. Can’t store power, so physical power is traded from hours ahead to day ahead.

• Power contracts can be used for necessary demands weeks to months in advance.

• Natural gas also needs to be transported to where demand is. However, it can be stored.

Natural Gas Chart Jun ’05 to Feb ’06

Hurricane

Katrina

Hurricane Rita

December 2005

January 2006

Forecaster-Decision Maker Interface

Forecaster

• Create and maintain a Weather Forecast System

• Produce hindcast simulations for statistically long period of time

• Produce real-time weather forecast

• Perform model output statistics

• Interpret model output for decision maker

Decision Maker

• Define the event to mitigate• Estimate cost of action• Estimate loss if no action• Integrate weather information in

to decision process• Determine if action needs to be

taken• Evaluate the process regularly

Flow of Information

ForecastTransformation

StatisticalAnalysis

Decision Process

Cost-LossAnalysis

Observation

Fcst TempColder than Normal

Forecast SkillROC

If:60% confidence: ActionHit rate > C/L : Action

Cost: CLoss: L

C/L =0.40Observed Temp

ROC (Relative Operating Characteristics)

• Forecaster uses ROC components to compute all vital statistics

• Decision maker uses ROC components together with the forecast event to better tune his/her decision process

ROC Table for a Binary System

Verified Not Verified

Warning Hits False

Alarm

No Warning Misses Correct

Rejection

Forecast

Observed

ROC Graphics

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

0.00% 20.00% 40.00% 60.00% 80.00% 100.00%

False Alarm Rate (%)

Hit

Rat

e (%

)

Summary• Weather forecast should be integral part of load

forecasts, storage models, hedging practices, …. • It helps to avoid significant losses that may arise

from adverse weather conditions• Forecast integration into a decision process should

be carefully crafted in order to obtain positive results

• Forecast skill and decision process need to be examined regularly