When we think of energy trading, exchanges, strategies, data and risks are usually the first things that come to mind. But there is another key component in this dynamic business - meteorology. It is the crucial component that significantly influences our energy prices and availability. For this reason, RWE Supply & Trading (RWEST) has its own team of nine meteorologists who provide the traders with ongoing weather forecasts and analyses.

In this interview, Nils, Head of Weather Analysis, gives exciting insights into the work of his team and also shows that the work of the RWEST meteorologists goes far beyond a simple weather forecast.

Why is weather such an important factor in energy trading? What consequences could it have on our business?

Nils: Weather is a fundamental driver of energy supply and demand. Traditionally, weather, or specifically temperature, drove energy demand but now with the green revolution, renewable energy from wind, solar and hydroelectricity have become increasingly key contributors of supply. It follows that increased heating demand during winter can be driven by colder than normal temperatures, low wind and solar production while hot weather in summer is often accompanied by increased cooling demand.

We also monitor extreme weather events across the globe such as tropical weather activity, flooding and drought. These primarily lead to supply issues, for example due to evacuations from oil/gas platforms, damage to infrastructure or potentially higher freight costs, due to low river levels or when sea ice blocks navigable routes.

Our forecasts and analysis of various weather parameters are fed directly into decisions taken by many teams across the company including Power, Gas, Coal, Freight, Oil and LNG Trading. We provide analysis for many regions across the globe, including Europe, Asia and the US, and at various timescales ranging from intra-day and day-ahead all the way through to the month and season ahead.

Climate change is another topic of interest across the company. In one of our current projects we are investigating how a changing climate influences utilization factors for wind and solar generation.

Can you please give us some insight into your tasks and projects? How do you analyse and interpret weather data to support any energy trading activities?

Nils: The operational meteorologists within the team start very early in the morning and focus quite heavily on weather forecasting. We have to check latest weather models, how they have changed since the previous day and whether we need to adapt our forecast.

We have access to the most important numerical weather models, that vary in forecast duration, but mostly cover the entire globe. To get an idea how weather will develop, we analyse pressure fields, temperature distribution and wind patterns. This is essential to come up with a base case view. Maybe even more important is the illustration of risks and alternatives. For all the various trading teams it’s very important to understand and be aware of things, that could develop differently.

Apart from operational forecasting our weather data scientists spend a lot of time analysing weather data. We build several maps, tables and statistics to condense the sheer amount of data. This could involve Brazilian hydro data, river levels for the Danube or soil moisture anomalies for the US, just to name a few examples.

However, it’s not only about describing the current or future status of weather. It’s also about historical measurements and realisations. Analysing them significantly helps us to understand all the worldwide relationships and dependencies that might affect the trading business.

How do you work jointly with other teams within RWEST to ensure weather information is used efficiently?

Nils: We have a very close relationship to many teams within RWEST. There are daily weather briefings for the trading desks in which we provide all relevant information that might be important for future price developments.

Apart from that we’ve established different channels on MS Teams to communicate ad-hoc updates and comment on the latest model results within day.
A few times per year we offer an Intro to Weather course to give some background on weather forecasting and our daily routines so that people, not so familiar with the matter, learn a bit more about our tasks and how our products should be read and understood.

Just recently we also set up our own knowledge sharing page, which provides a good insight into our work and current projects. So, there are several ways to get in touch with us if you are interested in the topic or need some support for your business.