In my previous post, I talked about the typical day of an energy trade floor meteorologist on the Natural Gas trading floor in two parts: Part 1 and Part 2.  Today I’d like to introduce the world of energy trade floor meteorology on the Power Trading Floor, west of the Rockies.

West Power trading is unique in the fact that you have to take into consideration a lot more renewable sources of power including wind, solar, and a lot more hydro.  These renewable forms of energy all play a major role in driving power and gas prices in the West.  In addition, each state has their own set of microclimates that can make the West very challenging but fun at the same time.

It’s also important to understand where the major demand areas are (ie “load centers”).   So when forecasting the weather, the goal is to focus on major load centers that may affect prices for the major west trading hubs within the WECC.  I won’t list all of these here…but think of the major population centers west of the Rockies.   It’s also important to understand the terms heavy load hours and light load (daytime/nighttime) hours as they are traded separately on ICE.

Again, the goal in Energy trade floor meteorology for power trading (as in Natural Gas trading) is to try and beat the vendors/market perception and make money for your traders.   Energy Trade floor meteorologists out West also forecast temperatures (high and low) up to 10 days in advance.  This includes displaying departures from normal. (ie above normal, below normal, etc).

But precipitation is also a very important variable in the West.  And forecasting the elevation of the snowpack is even more important.   Why?  The more high elevation snow that falls, the more perceived snow melt there will be in the Spring…and thus more hydroelectric power output.    So energy trade floor meteorologists need to be able to understand when the snowpack will fall, where precisely the snow will fall, how much will fall, and what elevation it will be at…potentially up to 7-10 days in advance.  Fun stuff!

One of the biggest trade-able “weather” events that energy trade floor meteorologists forecast for in the Northwest is the “Rain-on-Snow” event.  The goal is to forecast any “pineapple express” type mild & rainy pattern  (well in advance) over a lot of high elevation built up snow in the Early Spring.  This would create a major deluge of snowmelt thus resulting in a major boost in hydroelectric power…which can drive light load prices to near zero and sometimes negative in the Mid Co (one of the trading hubs).

That’s one of the reasons why many energy companies hire hydrologists on the trade floor in the West to better understand hydro conditions at various elevations (and dams) in the Cascades in Washington and Canada and the Sierra Mountain Range in California.  Knowing the storage levels of these dams at all times is extremely important to west power traders.

Another major event that energy trade floor meteorologists in the West look for is the onset of the Monsoon in the Desert SW in the Summer.   We all know summers in PHX are very hot…but when the monsoons kick in…it can potentially lower temperatures to the 70s and 80s with cloud cover throughout many parts of the Desert SW.  This can kill load and demand and potentially lower prices in the PV trading hub (Phoenix area), Mead (Southern Nevada), 4 corners (where Utah, Colorado, Arizona, and New Mexico intersect), and potentially affect prices in So Cal too.

In California, the “marine layer” is one of the toughest forecasting challenges for many along the west coast…especially in the summer months when trying to nail an all out heat wave.   I can confidently say the marine layer is a major driver of temperature for major load centers in California, Oregon, and Washington in the Summer.

For example, trying to forecast a heat wave in the city of downtown San Francisco 8 days in advance is quite challenging.   Even if all the models and tele-connections are pointing to a major heat event… a little afternoon onshore breeze at the Golden Gate Bridge can kill that heat wave in San Francisco…a high population commercial and residential load center.  And it may be strong enough to kill the heat in other large Bay Area cities too including Oakland, Berkeley which can further reduce load on the system.

I was fortunate to have been born and raised in California…and have been studying and analyzing the marine layer for more than 20 years…especially in Nor Cal.  It’s quite interesting…Nor Cal and So Cal marine layer forecasting is totally different.  It’s all very intriguing and very challenging at the same time…especially when trying to forecast it 8-10 days in advance.

It’s always important to remember that weather is not the only driver of west power prices.    Sometimes when we’re on the floor we forget that…so it’s also great to understand all the pieces of the puzzle and what other fundamentals are driving power prices.

Otherwise it’s pretty much the same game you play on the Natural Gas trading floor.  Beat the vendors on the significant hot or cold events…beat market perception and let the traders know when you’re confident, and when you’re not.  And as always communication of your information is very  key in this business.  You are out there to sell confidence.  You are out there to build credibility.  You are out there to make money for your traders.  If you can’t do all three of these consistently…you won’t be on the energy trade floor for long.

Questions? Comments?  Thoughts?    (Photo credit: Reuters)