Power and Renewables

Weather Insights for FTR Trading – Harnessing Nodal Forecasting

byEric Yen

In the fast-paced world of energy trading, where every fluctuation in supply and demand can have significant implications, weather events wield unparalleled influence over power pricing. Natural phenomena, like sudden storms, prolonged heatwaves or even just an anomalously windy day, can disrupt energy production, alter consumption patterns and send prices soaring or plummeting at a moment’s notice. But amidst this volatility lies an opportunity – the chance to leverage advanced forecasting tools like Mid-Term Nodal Renewable Forecasting to navigate the complexities and risks of the everchanging power markets with confidence and precision.

Understanding the Impact of Weather Events

Weather events have a profound effect on power pricing for several reasons:

Let’s delve into an example of our past forecast on ERCOT wind power, temperature, and load to illustrate how Mid-Term Nodal Renewable Forecast aids users in quantifying uncertainty.

  1. Renewable energy generation: Wind and solar power, which are key components of renewable energy production, are completely weather dependent and sensitive to weather variations. Drops in wind speed or increases in cloud cover can lead to a significant decrease in power output, while favorable conditions can result in surplus generation.
  2. Demand fluctuations: Extreme weather conditions often coincide with spikes in energy demand as consumers crank up their heating or cooling systems. Conversely, milder weather can lead to decreased demand, impacting pricing dynamics.
  3. Transmission constraints: Weather-related disruptions, such as fallen trees or damaged power lines, can create transmission constraints, limiting the flow of electricity between regions and causing congestion on the grid.

Leveraging Mid-Term Nodal Renewable Forecasting

Mid-Term Nodal Renewable Forecasting offers a comprehensive solution to the challenges posed by weather-related volatility. By providing an ensemble of highly granular generation and demand data, this tool empowers FTR traders to:

  • Understand risk: By analyzing historical weather data, numerical weather models, and machine learning algorithms, traders gain insights into potential disruptions in renewable energy generation and demand patterns, allowing them to assess risk and adjust their strategies to hedge against high- risk events.
  • Identify opportunities: With forecasts spanning up to 15 months, traders can track market-level trends in wind and solar production, identify emerging trading opportunities, and optimize their FTR auction strategies.
  • Navigate congestion: By digging down to the farm, balancing authority, state, and regional levels, traders can gain high-level congestion insights, compare different areas of interest, and estimate potential congestion and curtailment scenarios.
ercot-system-wide-wind-vs-forecast-production-graph

Through 100 simulations of possible weather scenarios, our forecast provides the probability of wind power generation and load reaching specific megawatt levels within each hour over the next 120 days. This probability is shown in shaded bands. The blue line represents the actual outcomes, which consistently fall within our uncertainty envelope, affirming the accuracy of our forecasts. The 100 simulations enable us to analyze probabilities of high and low wind generation hours during a month, along with the corresponding load hence the net demand, which we can directly correlate with pricing signals.

nordal-wind-hourly-distribution-april-2024-forecast
ercot-wind-on-peak-differential-trends-graph

The Mid-term Nodal Renewable Forecast extends its precision to smaller areas, including the farm-level, employing the same 100 simulations of potential weather scenarios. This granularity enables users to attain more localized insights. At the farm level, we can look at both time series views and generation distributions across the month. The above figure (left) displays a histogram of wind production for a single farm (Ajax Wind AKA Western Trail Wind). We can dig even deeper with the Mid-Term Nodal Renewable Forecast data and look at how renewable generation distributions change from on/off peak hours and change over months and identify regions where renewable generation is rapidly expanding (see right figure).

With these forecasts, users can gain a better understanding of uncertainty of renewable generation from the ISO level down to the farm-level for the next 120 days. With this stronger understanding of uncertainty, users can more confidently identify which nodes and regions of the ISOs are likely to be impacted by congestion and position their trades and assets accordingly. The Mid-Term Nodal Renewable Forecast provides a unique sense for FTR traders to examine the market from a probabilistic lens.

In an industry where uncertainty is the only constant, the need for accurate and reliable forecasting tools has never been greater. Mid-Term Nodal Renewable Forecasting offers FTR traders a competitive edge in the face of weather-related volatility, allowing them to make informed decisions, navigate the intricacies of the market and unlock new opportunities for growth and success. As the energy landscape continues to evolve, those who embrace the power of advanced probabilistic forecasting will emerge as leaders in the field, shaping the future of power trading for years to come.

Picture of Eric Yen

Eric Yen

Eric is a Product Marketing Manager for Enverus on the Power & Renewables team. He supports the content development and strategy for the Power & Renewables solutions. Prior to Enverus, he had over 5 years of experience in project and product management within the energy industry.

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