ecmwf products and the european energy markets ecmwf, reading, 16 th of june 2005 stefan meulemans...
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ECMWF productsECMWF productsand and
the European energy marketsthe European energy markets
ECMWF, Reading, 16th of June 2005
Stefan Meulemans
Sempra Energy Europe Ltd.
London
LiberalizationLiberalization
Free choice of gas and electricity provider
Opening of the European energy markets
Pan-European market?Pan-European market?
Currently national but interconnected gas and electricity markets
Goal is to have one European supply-demand based market
National electricity marketsNational electricity markets
Nord Pool ScandinaviaOMEL SpainPowernext FranceEEX GermanyAPX The NetherlandsUKPX The UK
Oil and GasOil and Gas
Brent crude, NYMEX and heating oil
Gas
Futures and forwardsFutures and forwards
Day ahead (EC) Week ahead (EC) Month Ahead (EC) Cal ahead
Daily QENOYc1 [Candle]08/03/2005 - 07/06/2005 (GMT)[Professional]
14 21 31 07 14 21 28 06 13 24 31 07Mar 05 Apr 05 May 05
PriceEUR
27.3
27.6
27.9
28.2
28.5
28.8
29.1
29.4
29.7
30.3
30.6
30.9
31.2
31.5
31.8
32.1
32.4
32.7
27
30
33
QENOYc1, Last Trade, Candle06/06/2005 31.90 32.25 31.80 32.23
Demand and supplyDemand and supply
These two variables determine the forward electricity, gas and oil prices
Weather important parameter, both for demand and supply
TemperatureTemperature
Heating demand (contrast north-south)
Cooling demand, more in USA but changing climate?
Cooling water nuclear plants
Melt ice and snow
Cold spell early March (Paris)Cold spell early March (Paris)
-5
0
5
10
15
20
25
30
01/0
1/20
05
15/0
1/20
05
29/0
1/20
05
12/0
2/20
05
26/0
2/20
05
12/0
3/20
05
26/0
3/20
05
09/0
4/20
05
23/0
4/20
05
07/0
5/20
05
21/0
5/20
05
04/0
6/20
05
Date
Deg
rees
Cel
sius
Cold spell early March NBPCold spell early March NBPDaily QGA2NB [Line]
11/11/2004 - 10/06/2005 (GMT)[Professional]
Dec Jan Feb Mar Apr May Jun2004 2005
PriceGBp
20
40
60
80
120
100
QGA2NB, Close(Last Trade), Line06/06/2005 30.25
Day ahead German electricityDay ahead German electricity
Daily QDE-B-1D=RWEE [Line]21/12/2004 - 08/06/2005 (GMT)[Professional]
03 17 31 14 28 14 28 11 25 09 23 06Dec 04 Jan 05 Feb 05 Mar 05 Apr 05 May 05
PriceEUR
20
40
60
80
0
100
QDE-B-1D=RWEE, Close(Last Quote), Line06/06/2005 42.00
Gas demand UKGas demand UK(Sempra)(Sempra)
223.5
0
221.0
9
234.8
0
207.5
0
220.0
322
6.35
197.4
8
188.1
0 191.5
8
207.6
4
216.6
0
217.3
0 220.5
9
219.8
4
170
180
190
200
210
220
230
240
250
11-J
un
12-J
un
13-J
un
14-J
un
DA - 15
-Jun
BOW
- 16
-Jun
BOW
- 17
-Jun
WE -
18-J
un
WE -
19-J
unW
DNW -
20-J
unW
DNW -
21-J
unW
DNW -
22-J
unW
DNW -
23-J
unW
DNW -
24-J
un
-40
-20
0
20
40
60
850 hPa temperature anomaly850 hPa temperature anomaly(WSI)(WSI)
Hot weather August 2003Hot weather August 2003
Prices spikes due to A/C Cooling water nukes Drought and low
hydro levels Low wind in
Germany
WindWind
Short range deterministic – storms!
Mid range ensemble ECMWF
Installed wind capacity
DeterministicDeterministic
Wind production Spain (MWh/h)
0
500
1000
1500
2000
2500
3000
3500
4000
2 81
42
0 2 81
42
0 2 81
42
0 2 81
42
0 2 81
42
0 2 81
42
0 2 81
42
0 2 81
4
Tue Wed Thu Fri Sat Sun Mon Tue
Ensemble GermanyEnsemble Germany(Point Carbon)(Point Carbon)
Nordic marketsNordic markets
Weather crucial due to very high hydro capacity
Market very dependent on ECMWF model
Dry weather in Nordic…Dry weather in Nordic…
Cal 03 in 2002
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
02/0
1/20
02
02/0
2/20
02
02/0
3/20
02
02/0
4/20
02
02/0
5/20
02
02/0
6/20
02
02/0
7/20
02
02/0
8/20
02
02/0
9/20
02
02/1
0/20
02
02/1
1/20
02
02/1
2/20
02
Wet weather in Nordic…Wet weather in Nordic…
Cal 05 in 2004
150.00
170.00
190.00
210.00
230.00
250.00
270.00
290.00
02/0
1/20
04
02/0
2/20
04
02/0
3/20
04
02/0
4/20
04
02/0
5/20
04
02/0
6/20
04
02/0
7/20
04
02/0
8/20
04
02/0
9/20
04
02/1
0/20
04
02/1
1/20
04
02/1
2/20
04
Currently…Currently…
Cal 06 hovering and no obvious trend
Very important to see extreme drought or wet weather
Confidence level crucial
Daily QENOYc1 [Candle]16/03/2005 - 14/06/2005 (GMT)[Professional]
22 01 08 15 22 29 09 18 25 01 08 15Mar 05 Apr 05 May 05 Jun 05
PriceEUR
27.9
28.2
28.5
28.8
29.1
29.4
29.7
30.3
30.6
30.9
31.2
31.5
31.8
32.1
32.4
32.7
30
33
QENOYc1, Last Trade, Candle13/06/2005 32.80 32.80 32.70 32.75
ECMWF 10 day ensembleECMWF 10 day ensemble(Point Carbon)(Point Carbon)
ECMWF cluster day 10ECMWF cluster day 10(Meteo Consult)(Meteo Consult)
NAO outlookNAO outlook
Based on ECMWF Particularly day 10
important Only what is not yet
known by market important!
Negative NAO years bullish et vice versa
Nordic NAO day 10 based on EC ensemble (12Z and 00Z)
-2
-10
1
2
34
5
23/0
2/20
0525
/02/
2005
27/0
2/20
0501
/03/
2005
03/0
3/20
0505
/03/
2005
07/0
3/20
0509
/03/
2005
11/0
3/20
0513
/03/
2005
15/0
3/20
0517
/03/
2005
19/0
3/20
0521
/03/
2005
23/0
3/20
0525
/03/
2005
27/0
3/20
0529
/03/
2005
31/0
3/20
05
ECMWF northern hemisphereECMWF northern hemisphere(WSI)(WSI)
Monthly outlookMonthly outlook(Met Office)(Met Office)
Probabilistic long-range outlookProbabilistic long-range outlook
Reduced risk on mid-range positions Now particularly for temperatures and
precipitation, but wind would be interesting too
When signal is strong, it makes sense to take significant long or short positions
Seasonal outlookSeasonal outlook(Met Office)(Met Office)
Particularly useful if strong trends
Interesting for electricity, gas and fuel oil markets (also USA)
Also hydro
Also COAlso CO22 and weather derivatives and weather derivatives
Cold winter or hot summer would also increase CO2 output, and eventually general electricity prices
Reduce risk in speculative weather derivatives contracts, or decreased hedging if seasonal outlook is showing strong trend
SummarySummary
ECMWF products useful to be ahead of the energy markets. Know first
What could be done?What could be done?
ECMWF 15-day but should start soon?Monthly outlook on daily base? Very
interesting for development significant large-scale trends. Ready in morning?
NAO ensembles?Skill research wind (extremes)
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