Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 0:19

Hello listeners, and welcome to the Montel weekly podcast, bringing you energy matters in an informal setting. Europe and the world has seen crazy weather over the past few months. In this week's pod, we discuss the extreme weather. For example, we've all seen very dramatic pictures of flooding across the globe, heat waves, hurricanes, and wildfires. Are these the new normal? Will we need to prepare ourselves for such dramatic conditions? And what will the consequences be for the way we produce and consume energy? Helping me, Richard Sverson, to discuss these issues is Robin Girmas of Energy Weather. A warm welcome to you, Robin.

Robin Girmes, managing director, RM Energy Weather GmbH: 1:00

Thank you very much. And thank you for the opportunity to have a discussion with you on that podcast.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 1:05

Brilliant, Robin. I think, you know, we, as I mentioned in the introduction here, we, we've seen some extreme weather. I mean, crazy weather, quite dramatic, kind of extremely worrying as well. I'd say, um, heat waves, floods, droughts, wildfires, hurricanes, typhoons, um, typhoons, obviously not in Europe, but other parts of specifically in Asia. Is this the new normal or is 2023 a sort of an outlier?

Robin Girmes, managing director, RM Energy Weather GmbH: 1:31

Um, I think we have to distinguish here several things, especially on the timescale. So 2023 is extremely outlaying concerning Global mean temperature concerning water temperatures in North and Atlantic. There are some features which haven't been observed before and they are more to the climate change and corresponding to the climate change side. The effects which have direct impact like any weather situation, you named hurricanes, you named floodings, white fires. At least the wet ones, like hurricanes or floodings, are weather events and the contrast of them and their effects is, compared to normal years, in two dimensions. One dimension is, they are Also, gaining intensity due to the additional energy around. For example, warmer water can storage way more moisture and therefore energy than cooler waters. So, away to warm Mediterranean Sea. Allowing stronger precipitation than the common warmth temperature here. The other thing is that those features partly appearing more persistent or in regions which aren't used to that. That's a key feature of the vulnerability. So you have a weather happening. You have the weather happening or the feature turning to a catastrophe. Just in case of affecting people who are sensitive to it, who are vulnerable. That's what I'm getting out of insurance. And this year, quite a lot of regions are affected. Maybe didn't, which didn't observe such a feature before. Just. Um, maybe from recent Sundays and weeks, flooding in Slovenia, flooding in Greece, even the hurricane type flooding some days ago in Libya. These are features driven by the stronger warmth, but also at that season and on that intensity not appearing usually in these regions.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 3:40

That's very interesting, Robin. I mean, can you tell us a little bit about the regional variations?

Robin Girmes, managing director, RM Energy Weather GmbH: 3:45

Yeah, what currently is happening in recent some years is that features which are well known, like such a five below, surrounding the Alps, usually flooding central Europe, like Czech, like Poland, now appearing in some differing regions. either stalling south of the Alps like flooding Slovenia this year or making a further westward turn like two years ago flooding, uh, Mid Range Wessels and Western Germany. So regions that are not used to have some intense or extreme weather situations are more and more exposed to that and therefore vulnerable.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 4:27

So when you say five below, what's, what's that?

Robin Girmes, managing director, RM Energy Weather GmbH: 4:29

Five B, sorry, four. There are four. Common tracks of low pressure systems to each Europe, each of them from Southwest to Northeast, generally spoken. And just one track going from Northwest, like the UK, crossing France down to Mediterranean, and then having three opportunities to continue either Northward, Northeastward or Eastward, A, B, C and 5B. Yeah, that's a feature sometimes appearing late summer, not each year. And upper level cold, low, then sucking up all the warmth. Of summer in Mediterranean and being pressed against the Alps or hanging around for several days over Central Europe. That's the usual way. Which, uh, is just modified as explained.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 5:16

Perfect. I think we'll get into more of this terminology later. But if we, you know, you also mentioned the warming oceans. Um, what kind of effect is this happening? Because, I mean, you know, you're seeing temperatures close to 30 degrees in the Mediterranean. You also mentioned the North Atlantic. What kind of impact will that have?

Robin Girmes, managing director, RM Energy Weather GmbH: 5:36

Generally, more energy. Energy in the atmosphere is, um, temperature times water vapor. Let's aim it this way. And if you, yeah, the easiest way is to look at intensities for hurricanes for it. So they need a certain threshold being succeeded to develop. It's usually 26 and a half degrees water temperature. So if water temperatures as usual in tropical Atlantic are 28 degrees, this allows a certain intensity of hurricanes to form under ideal conditions. But if temperatures as currently are 30 degrees, 30 and a half degrees, then the outcome in such a non-linear weather setup is dramatically more intense. So some days ago there was, when Hurricane and Lee and soon to make landfall in North America, was able to become a category of five hurricanes. So the strongest category. Within just 48 hours after being named at all, so that was by far the fastest ramp up and not in Caribbean, not in Gulf of Mexico, where warm waters of 30 degrees are more common. It was an open Atlantic, so these are modifications maybe visible more often in the future. Do you think we've reached a tipping point that, you know, we've gone beyond a certain, certain threshold now we can expect these kind of situations to occur at least annually, if not more regularly? No, I would name it more, let's say, episodes. Whether it's in it's different, even extremes. matter of oscillation. So sometimes some periods or years to the one side, other periods to follow to the downside. And currently there seems to be, let's say, a combination of several positive feedbacks to the warm side. There is El Nino on the one hand, of course, having an impact due to its sheer size and the global temperature. There are some other features contributing to the same side. Last but not least with. A major impact as well, the climate warming trends.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 7:53

I want to sort of turn to the impact it has on, on the energy markets generally. And if we can start by looking at in terms of supply, these are extreme situations. So obviously flooding is not going to boost hydro reservoir levels. Um, you know, it will to some extent or, or hurricanes, you know, they're not going to produce more wind, uh, The power because the turbines will have to be switched off. But are there any sort of general ways that you can say that these extreme episodes will impact the energy market, Robin?

Robin Girmes, managing director, RM Energy Weather GmbH: 8:25

Yes, of course, it's more infrastructure problems. So far, we talked about extremes. Um, these are impacting infrastructure or transport usually. So, for example. Yes. So the opposite of El Nino, the cold side, there's a typical correlation to many cold demand, cold supply regions like Australia, like Southern Africa. They have. Um, these times more often being flooded than other years. So for example, quite often an infrastructure problem also looking into Europe. So having a stronger storm, having extreme weather being more frequent or intense. does not really change your gas reservoir, storage reservoirs, or the ones of hydropower in Nordic. It's more like transporting the power to the customer that could be impacted by extreme conditions.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 9:22

And in terms of demand, of course, when you have these extreme heat waves that we've seen just recently now over 35 degrees in early September, almost unheard of, that will boost the demand for Things in air conditioning, in those countries that have the air conditioning there, I don't know, maybe it's not so common in London, but elsewhere in Northern Europe maybe, or in Southern Europe, certainly it's a factor.

Robin Girmes, managing director, RM Energy Weather GmbH: 9:45

Yes, indeed. And that is the, let's say, exception with those extreme conditions, drought and heat is more or less the persisting side of extreme event. So it takes some days, weeks, or months even in terms of drought to get its extreme attribute. So, for example, if you face a heat wave in France, not the first or second day, water temperatures in rivers will be warm enough. To reduce power plant output, so it will take its time to warm up rivers, just in case of having any way low water, the water anyways is result of having some dry weeks in advance. So it's a coupled risk. And it takes its time, but obviously, this is taking place more often in recent summer years compared to other summers.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 10:36

And also in potentially cooling issues, those, those reactors or those plants that, you know, rely on seawater, they will also experience the same kind of issues.

Robin Girmes, managing director, RM Energy Weather GmbH: 10:45

I'm not aware about the thresholds here, which can be taken into account in, for example, northern French nuke plants on where the threshold to take the water into account or not.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 10:57

But I think certainly as you pinpointed the rivers, you know, some of the major rivers that you know, the, the run, uh, and others in France and also elsewhere in, uh, in Eastern Europe and Poland, etc. In recent years, we've seen very low levels and very high temperatures. So this is something that's going to occur more and more frequently.

Robin Girmes, managing director, RM Energy Weather GmbH: 11:15

Yeah. And, um, question is, is there a climate change trends towards more persistence of weather conditions, especially in the core seasons of a year, winter and summer? And so far, in recent some years, without having reached any substantial significance level yet, due to the lack of total amounts, it seems to become a trend that conditions were known at Mediterranean in summer, start to cross the Alps, start to affect more and more of CWE, at least for quite some portions of the summer and several weeks in a row. What we can see is a reduction of waste studies since more than 20 years. In summer half of season, which is part of that, let's say, feature, keeping weather conditions longer in place, either the wet or the dry ones in summer as well. Whenever any pattern is persisting too long, it's turning into extreme, both dry conditions as wet conditions.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 12:17

Yeah. And when you say Westerlies, if in terms of the, the lay person view here, uh, Robin, what do you mean by that? Is that

Robin Girmes, managing director, RM Energy Weather GmbH: 12:25

Um, Westerlies meaning, um, what is commonly expected to happen in mid latitude like Europe. So, um, it's the climatologically spoken band of West winds taking place, crossing the Atlantic and affecting most of Europe in summer, more than Northern half and winter entire Europe with. winds from Atlantic and causing the moderate, compared to other continents, it's still moderate outcome of temperatures and especially in winter, avoiding to extreme frost.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 13:00

This is fascinating. It's kind of more like a crash course in meteorology here, Robin. So, so thank you for that. But if we can, you mentioned El Niño and La Niña. But at the moment we're experiencing El Nino, are we not? And this is more of a phenomenon that's seen in the Pacific. How, how does that impact us here in Europe, for example?

Robin Girmes, managing director, RM Energy Weather GmbH: 13:22

Yeah, nearly to the least. So the key impact of El Nino is switching conditions, even turning it to the opposite side, everywhere around the equator. So the very warm conditions in tropical Pacific turning around the trade winds in Pacific. So usually dry Western slopes of Southern America turning wet, usually wet Amazonas turning drier than normal, same for Africa, India, and Southeast Asia, Indonesia, for example, facing drought, Australia, no flooding, good for coal supply, but probably not that good for agriculture. That's an inorganic direct consequence. Let's say a bit more indirect, just transporting out of tropics northwards into extra tropics. That's Northern America, North America being situated at Pacific, at least Westerlies, they are coming from Pacific into the continent and therefore a relatively direct impact on that as well. For example, this year's current hurricane tracks, more or less avoiding Gulf of Mexico and Caribbean Sea due to some sheer winds out of current and inu. That's, let's say, a meteorological detail. Um, most of you probably would like to know which impact there will be on winter, especially in Europe. Yeah, and that's a problem. It's two waves away from North America. From North America, there's a relatively direct impact. Facing Koda southeast and the less cold northern half of the continent. But for Europe, it's the question then, will there be active westernies? Then it's transported west to east from the milder portions of northeastern US and Canada. Or is it more a wave or half a wave more, then we're turning into more northwesterly pattern in the cooler side, but let's zoom out a bit. And one feature in Nino is slightly supporting is a bit reduced westerly current in winter, just a bit and other features. Appearing this year, also pointing a bit on maybe not that typical intense westerlies or starting a bit delayed. So, and just in case of weakened westerlies, there's at all a chance for central and Western Europe to turn to the cold side, Eastern Europe, Northern Europe have their own features, but Western and Central Europe need.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 15:52

So, this could increase the likelihood of a potential cold snap?

Robin Girmes, managing director, RM Energy Weather GmbH: 15:57

Yeah, if it's from north instead of from south. The alternative is also there's the potential for southern currents and persisting southern setups. Then it's the warm winter despite having maritima. That's the less westerly setup, it's maritima. And, um, Yeah, of course, the Northerlies are also a bit more likely than usual then.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 16:20

But it's still very early days. I mean, this is mid September. Things could change, couldn't they, Rob? I mean, a lot of your, your customers and clients want to know about the winter. It's, uh, you know, ahead of, you know, the, the, the gas and buying season, et cetera. But, um, it's hard to pinpoint with any accuracy beyond 10 days in weather forecasting anyway. But the winter's a long way away, right?

Robin Girmes, managing director, RM Energy Weather GmbH: 16:41

Yeah, indeed. So we have to distinguish here between weather forecast, which indeed is, um, with poor confidence beyond 10 days, sometimes up to 15 days, but then turning to more and more hovering around somewhat normal. And, um, what you can do to help out is a bit on statistics, looking into statistics and correlations in between single features. And their outcome. Having said that, there's no feature being that important as the so-called N A O for European Winter Northern Atlantic oscillation. What does it mean? You may have heard about Iceland low or high, and in between them, if both are appearing, there's westerly wind. So if any of these two pressure systems is weaker and and a O potentially is weaker on negative as well, less westerly, and then. Or that potential cold scenarios are appearing. So this feature is key to our conditions. And this has the least far forecast in realism here. So here, indeed, you're struggling to forecast it more than 10 or 14 days in advance. That's a problem with long term forecast in Europe. Um, but of course you can kind of count special features like low Arctic ice coverage, negative QBO and all that other features. which are then cited by the meteorologists and give some trend indication what could happen.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 18:19

But as you say, it's, um, it's very early days, the El Nino and the lack of the westerlies, it could be, it could be a concern in terms of, um, winter energy supply. But if we say, how could companies... protect themselves against these weather effects. I mean, how is there a way, you know, the renewables producers, for example, um, how, how can they, in any sense, ensure against sort of dramatic weather conditions?

Robin Girmes, managing director, RM Energy Weather GmbH: 18:47

Yeah, it is. It's tricky to directly hedge against weather output. So, um, what is possible is, of course, To look into correlations, and for example, in winter, a warm day usually has high wind, a cold day, low wind. So, summing that up, you can imagine high wind power production in that case of any way being milder than normal, okay, that's bearish, and the opposite around for low wind situations. Um, temperature is easier to forecast than wind power, at least on the confidence side, but here we still talk about days or front week. To hedge a winter against any significant weather anomalies so far is not that easy in Europe. There are so called weather derivatives, which are just not liquid enough. So there were approaches since 20 or 30 years ago from CME, Chicago Mercantile Exchange, having such a trading opportunity in Northern America on temperature and hedging gas demand here, but they just copy pasted it for Europe and copy pasting was not that easy. best clue as most of the regions here are highly correlated to each other. So if you just trade London, Paris and Essen, it's the same weather usually. And that was a problem in getting these products liquid, it didn't work.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 20:09

Have there been more developments in terms of the weather derivatives, um, Robin?

Robin Girmes, managing director, RM Energy Weather GmbH: 20:13

Yes, indeed. In recent... One and a half to two years due to the very extreme price situations and an increasing decoupling of prices and volumes for both gas market and power market due to the new bit of renewables. Um, there are several, let's say initiatives to set up indices on how to trade weather. At least how to trade volume using weather as an indication. We ourselves also created one, it's called NVEX dealing with temperature, wind and solar anomalies. And, um, I think the need is clearly described by the, by the industry because of the sheer additional volume new bid year on year, especially on PV currently, but also for wind, which puts the merit order system at risk. So for example, this summer, there were nearly 30 percent of the hours cheaper in power, nevertheless in Germany, than any generation type of fuel. So how to price it? That's not just a problem for the direct marketers with their wind farms. It's also a problem for utilities and their hedging structure and fuel.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 21:24

Absolutely. I mean, I think, you know, we've seen just in recent weeks, we've seen both negative prices and extremely, extremely high prices, you know, and, and generally either due to the prevalence of wind or the absence of wind or the prevalence of solar and, and the absence of solar at a certain time of the day. I mean, do you, is this just the start of this kind of volatility or this weather generated volatility? And, and are we likely to see kind of more instances of Such extreme price movements and curtailments potentially as well. Um, Roman

Robin Girmes, managing director, RM Energy Weather GmbH: 21:59

speaking for c w e, I clearly believe that it's, um, key drivers central.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 22:05

That's central Western Europe for those, Western Europe, for those business. Yeah. Yeah.

Robin Girmes, managing director, RM Energy Weather GmbH: 22:08

Um, so, um, I clearly believe that because, um, what we're currently dealing with is a lack of transport, new bit of transport capacity since 15 or 20 years. It's lagging. And on the other side, just starting to go ballistic on the new bid of renewable production with batteries, not keeping pace yet or mobility with vehicle to grid or whatever could be solutions, but just part of solutions. And as long as the new installed capacities on renewable production will be higher than the new bid in transport or battery storage. Things will turn worse, or more volatile, and this way it's not always worse.

Snjólfur Richard Sverrisson| Editor-in-Chief, Montel News: 22:51

Robin, I mean, there's many more things I'd like to ask you, but I think, uh, in the interest of time, we have to call it a day. I think, you know, hopefully we can come back somewhere closer to the winter and discuss, you know, what the outlook is then when it's within that 10 15 day time frame. But thank you very much for being a guest on the Montel Weekly

Robin Girmes, managing director, RM Energy Weather GmbH: 23:10

Podcast. Thank you very much for that opportunity. Thank you, Richard.