The NOAA California Energy Security Project: Economic Benefits of
Weather and Climate Forecasts to the California Energy Sector
Primary Investigator Dr. Tim P. Barnett
Scripps Institution of Oceanography
Air conditioning use goes up on hot days, while natural gas use increases on cold days. The
energy industry anticipates this by using short-term weather forecasts, which increases
efficiency, improves reliability, and lowers operating costs. Similarly, hotter than normal
summers or colder than normal winters can have profound effects on the energy system. Climate
forecasts have skill at predicting these events, yet are hardly used in the energy industry. This
apparent disconnect is due to several factors, such as the probabilistic nature of climate forecasts,
which many energy generators are not used to dealing with; the unfamiliar language and
concepts of climate forecasts; and a perceived lack of benefit of using these forecasts.
This project aims to directly address all these issues, by producing forecasts tailored to energy
agencies and utilities, working directly with users to integrate those forecasts into decisionmaking, and evaluating the net economic benefits to the industry of using the information. Our
goal is to produce and communicate forecasts in ways that will be used by decision makers.
This research is timely because of recent events in the western U.S. In January 2001, hundreds of
thousands of California consumers experienced rolling blackouts, partly because of diminished
hydropower production, which is heavily influenced by regional precipitation patterns.
Expensive peaks in summer electricity demand often relate to air-conditioning loads. In winter,
demands for natural gas for heating can, in turn, influence supplies of gas available for electricity
generation in the summer. For instance, we have estimated that fluctuations in the North Pacific
Oscillation (NPO) climate phenomenon can make a $220M difference in residential and
commercial natural gas heating bills over the winter. Weather and climate forecasts provide
broad potential to better anticipate and manage fluctuations in energy production and demand.
Our work is proceeding in several steps. First, we work with key people in California energy
industries and agencies to identify the types of decisions that could benefit from forecast
information. Next, we generate weather and climate forecasts on timescales relevant to the
energy partners. We then communicate the forecasts to the energy partners, integrating them
into operational models and other decision processes, in order to understand how using forecasts
could yield benefits over existing information. Finally, we work together with the industries and
agencies to refine the most useful products, and evaluate the net economic benefit of the forecast
information. For example, working with the California Independent System Operator (Cal ISO),
we have calculated that a reduction of forecast error in the California central valley from the
current 3.05o F to 2.7oF would reduce weather-related error costs from $10M to $8M/year.
The work is being performed by weather and climate researchers at the Scripps Institution of
Oceanography, experts in hydrology and climate forecast use at the University of Washington
and the Georgia Institute of Technology, and industrial partners at Science Applications
International Corporation and the California Energy Commission who are intimately familiar
with California’s energy producers.
29 March 2004
Primary Accomplishments To Date, and Future Work
Objective 1. Produce weather and climate forecasts tailored for energy producers
Task 1. Assess weather-related issues of importance to the energy industry
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We have established collaborations with energy utilities and agencies involved with
energy planning and decision-making in California. These include the California Energy
Commission, California Department of Water Resources, California Public Utilities
Commission, California Independent System Operator, Sierra Energy, DSI Power, SoCal Gas,
Pacific Gas and Electric, PacifiCorp, and San Diego Gas and Electric.
Task 2. Identify the weather/climate information needed to address these issues
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We have conducted working sessions, with forecasters and users, at the California Energy
Commission, Cal-ISO, San Diego Gas and Electric, and PacifiCorp to identify key weather and
climate issues, and relationships between temperature extremes and energy demands and
supplies. We have analyzed relationships between climate fluctuations such as El Nino and the
North Pacific Oscillation (NPO), and seasonally averaged heating and cooling degree days
(HDD and CDD) and energy use in California.
Task 3. Produce operational 0-7 day weather forecasts for the energy industry
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We have devised a system to predict the occurrence of the California “delta breeze” on
sub-daily time scales. The Cal-ISO identifies poor prediction of the delta breeze as a major
cause of electrical load forecast errors in California. The forecast uses conditions at 7 AM to
determine if the upcoming afternoon will experience delta breeze conditions with 90%-95%
certainty. The change in direct energy costs associated with delta breeze days is about $210K, or
$12M/year; a larger economic effect may be the potential effects on system reliability when a
forecast is missed. We have extended the NOAA/ECPC high resolution California regional
forecast to two weeks every day, and providing daily average 2-m temperature, as well as the
corresponding diurnal maximum and minimum, from our CA RSM96 forecast for the San Jose
“swing region” area on our ECPC web site.
Task 4. Produce 0-14 day hindcasts to evaluate forecast skill over the period of record
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We have used the hindcasts to characterize the skill of current operational weather
forecasts of the delta breeze phenomenon described above. We have additionally used them to
evaluate forecast strategies for calling “load demand management” days (i.e., peak-usage days
when certain customers will be requested to curtail usage) for SDG&E. We have extracted
maximum and minimum 2-meter air temperature over greater California region for search of
multi-day "spells" - periods with three or more hot/cold days, with the goal to examine model
skill (in 2-14 day forecasts).
Task 5. Produce seasonal forecasts for the energy industry.
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We have analyzed California HDD and CDD distributions, by station, depending on the
phase of climate phenomenon such as El Nino and the North Pacific Oscillation. There is a
strong correlation between the NPO and winter temperatures; HDDs differ by about 150 (out of a
mean of 3000 or so) depending on the NPO phase. This means the state of the NPO can be used
to estimate above- or below-normal winter natural gas use (for space heating) for the upcoming
winter. This change in temperature represents about $220M in residential and commercial
natural gas consumption in California.
Task 6. Iterate to produce the optimal weather/climate forecasts
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We have worked with decision-makers to deliver, communicate, and receive feedback on
forecast products, then revise and redeliver products. Products for the California Energy
Commission included probability of maximum daily temperatures ≥ 95 degrees F for three or
more consecutive days (situations where electricity use spikes sharply upwards), and
contingency tables with tercile distribution of mean December-January-February (DJF)
temperature by the phase of El Nino and the NPO, for stations in California.
Task 7. Evaluate the skill of the climate forecasts
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We have evaluated the skill of several sets of climate forecasts, emphasizing the role of
the users (the energy industry participants) in evaluating the tradeoffs between forecast lead time
and predictive skill. For example, we have evaluated a range of sub-daily forecasts of the delta
breeze, using lead times from 3 to 24 hours. We have evaluated the skill of a simple forecast
scheme for determining load management days, at lead times of 3 days, and showed how it
produces results superior to the process used by the energy utility before this project started.
Objective 2. Quantify the economic benefit of weather and climate forecasts
Task 1. Identify key weather/energy “scenarios”
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We have developed five potential applications for the economic valuation of forecast
information. Energy industry partners in these scenarios include the California Energy
Commission, Cal-ISO, SDG&E, and PacifiCorp.
Task 2. Evaluate climate connections between California and the Pacific Northwest
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Summer electricity prices in California are significantly affected by hydroelectric power
supplies in the Pacific Northwest. This links wintertime climate variability in the Pacific
Northwest with summer California electricity prices. To better examine this, we have extended a
50-year retrospective derived hydrologic data set for the continental U.S., originally for the
period 1950-2000, back to 1916 and forward to 2002. This will enable us to analyze, with better
statistical confidence, the skill of climate forecasts of wet or dry conditions in the Pacific
Northwest.
Task 3. Calculate the economic effect of various strategies used during the scenarios
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We have gathered and analyzed data that will be critical to the economic evaluation,
including statewide prices for gas and electricity supplies, by sector, retail/wholesale, and the
total expenditures on energy according to type, sectors, and year. For the California delta breeze
scenario, we have developed a simplified economic model (tuned to the actual data derived by
Cal-ISO) that determines the decrease in costs expected for a given increase in forecast skill. An
improved temperature forecast was estimated to be worth $2M/year. Work is ongoing to
increase the skill of the forecast to realize this savings. This work is continuing for the other
scenarios.
Task 4. Evaluate the sensitivity of the business forecast to the weather forecast
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This work is currently being conducted.
Task 5. Evaluate the economic benefits of the weather-enhanced business forecasts
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Calculated the economic impact of weather and climate fluctuations on energy
consumption in California, using CEC analyses and data. Our estimates of the influence of the
NPO, described above, are about $220M/year in natural gas use. This work is ongoing for other
climate phenomenon.