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ECMWF products and the European energy markets

ECMWF products and the European energy markets. ECMWF, Reading, 16 th of June 2005 Stefan Meulemans Sempra Energy Europe Ltd. London. Liberalization. Free choice of gas and electricity provider Opening of the European energy markets. Pan-European market?.

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ECMWF products and the European energy markets

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  1. ECMWF productsand the European energy markets ECMWF, Reading, 16th of June 2005 Stefan Meulemans Sempra Energy Europe Ltd. London

  2. Liberalization • Free choice of gas and electricity provider • Opening of the European energy markets

  3. Pan-European market? • Currently national but interconnected gas and electricity markets • Goal is to have one European supply-demand based market

  4. National electricity markets • Nord Pool Scandinavia • OMEL Spain • Powernext France • EEX Germany • APX The Netherlands • UKPX The UK

  5. Oil and Gas • Brent crude, NYMEX and heating oil • Gas

  6. Daily QENOYc1 [Candle] [Professional] 08/03/2005 - 07/06/2005 (GMT) Price EUR 33 32.7 32.4 32.1 31.8 31.5 31.2 30.9 30.6 30.3 30 29.7 29.4 29.1 28.8 28.5 28.2 27.9 27.6 27.3 27 14 21 31 07 14 21 28 06 13 24 31 07 Mar 05 Apr 05 May 05 Futures and forwards • Day ahead (EC) • Week ahead (EC) • Month Ahead (EC) • Cal ahead QENOYc1, Last Trade, Candle 06/06/2005 31.90 32.25 31.80 32.23

  7. Demand and supply • These two variables determine the forward electricity, gas and oil prices • Weather important parameter, both for demand and supply

  8. Temperature • Heating demand (contrast north-south) • Cooling demand, more in USA but changing climate? • Cooling water nuclear plants • Melt ice and snow

  9. Cold spell early March (Paris)

  10. Cold spell early March NBP

  11. Day ahead German electricity

  12. Gas demand UK(Sempra)

  13. 850 hPa temperature anomaly(WSI)

  14. Hot weather August 2003 Prices spikes due to • A/C • Cooling water nukes • Drought and low hydro levels • Low wind in Germany

  15. Wind Installed wind capacity • Short range deterministic – storms! • Mid range ensemble ECMWF

  16. Deterministic

  17. Ensemble Germany(Point Carbon)

  18. Nordic markets • Weather crucial due to very high hydro capacity • Market very dependent on ECMWF model

  19. Dry weather in Nordic…

  20. Wet weather in Nordic…

  21. Daily QENOYc1 [Candle] [Professional] 16/03/2005 - 14/06/2005 (GMT) Price EUR 33 32.7 32.4 32.1 31.8 31.5 31.2 30.9 30.6 30.3 30 29.7 29.4 29.1 28.8 28.5 28.2 27.9 22 01 08 15 22 29 09 18 25 01 08 15 Mar 05 Apr 05 May 05 Jun 05 Currently… • Cal 06 hovering and no obvious trend • Very important to see extreme drought or wet weather • Confidence level crucial QENOYc1, Last Trade, Candle 13/06/2005 32.80 32.80 32.70 32.75

  22. ECMWF 10 day ensemble(Point Carbon)

  23. ECMWF cluster day 10(Meteo Consult)

  24. NAO outlook • Based on ECMWF • Particularly day 10 important • Only what is not yet known by market important! • Negative NAO years bullish et vice versa

  25. ECMWF northern hemisphere(WSI)

  26. Monthly outlook(Met Office)

  27. Probabilistic 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

  28. Seasonal outlook(Met Office) • Particularly useful if strong trends • Interesting for electricity, gas and fuel oil markets (also USA) • Also hydro

  29. Also CO2 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

  30. Summary • ECMWF products useful to be ahead of the energy markets. Know first

  31. 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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