News item | 2014-04-01 | 10:21 AM

How the weather affects the electricity price

The weather is the factor which has the greatest effect on the price of electricity. This is why Vattenfall has four meteorologists employed who work with specially adapted weather forecasts so that the company can calculate supply, demand and price of electricity.

On an ordinary morning Johan Sohlberg is at work on the twelfth floor in Waterfall's office in Arenastaden, Stockholm, at ten past six. In the following 90 minutes he runs through new material and is in contact with colleagues in Amsterdam and Hamburg.
"At 7.40 am we have a briefing which all traders can listen in on, and twenty minutes later the market opens."

Electricity prices on the Nordic electricity exchange, Nordpool, are 70 per cent governed by the elements. Even though Swedish nuclear power is independent of the weather, it is very significant for hydro and wind power.
"Say that the weather forecasts show signs of cold weather. Then the prices rise. The water level in the storage reservoirs also determines the price forecasts in the market," says Johan Sohlberg.

While an ordinary weather forecast gives rainfall in millimetres and wind in metres per second, the Vattenfall meteorologists' forecasts are completely different.
"We give rainfall in GWh and wind in MW."

Plausible weather
Sweden's mix of electricity generation consists of about 40 per cent nuclear power, 50 per cent hydro power and 7 per cent wind. The remaining three per cent consists of coal and oil. Waterfall's business unit Trading is dependent on weather forecasts to calculate supply, demand and price of electricity. This is where Johan Sohlberg and his colleagues come into the picture. Together they assess the plausibility in weather models.
"We do a plausibility check and give our opinion. We also state how we feel that the models can be changed. We have a number of web-based tools to assist us. The difference in relation to an ordinary weather forecast is that we work in the long-term, often one month ahead. For example, we supply new material every day for the following two weeks.

Anyone who has ever seen a ten-day weather forecast on TV knows that the weatherman usually throws in a reservation that the forecast is uncertain.
You do forecasts one month ahead, how do you do that?
"We work on a large-scale with our assessments of the weeks to come and always have an opinion one month ahead, in some cases a couple of months. On that scale we don't look at individual days, you only do that in the short-term perspective. Put simply, we work with both numerical modelling and statistical correlations in the atmosphere and the biosphere. We try to capture the environment in which we are working. We always work probabilistically as it's going to be wrong at some time or another. We use chaos theory."

Summer in May
Waterfall's meteorologists were able to predict the unusually mild winter in the Nordic region and on the Continent in November last year. According to Johan Sohlberg, it is sometimes simpler to work with the winter than the spring in terms of the weather.
"Now it's starting to get a bit tricky. In the winter the sun doesn't have much of an effect. In the spring more small-scale factors are involved. But each season has its difficulties."

Sweden is divided into four electricity areas and Johan Sohlberg and his colleagues in Stockholm supply forecasts for each of them.
"It is the rainfall in the Norwegian mountain districts and in the area north of Lake Vänern in Sweden which has the most effect on the price of electricity."

How often are you asked what the weather's going to be like in the summer?
"Not that often any more. But at some point in May we might start to see small signs of summer's arrival."