Mitigating Risk from Weather and Generation Events

by Gaby Flores

Business risk is defined as the variables that a company or organization is exposed to that might lead it to lose significant profit or even to go out of business, according to Investopedia. Clearly, mitigating business risk is vital, regardless of what industry you’re in. In fact, Forbes claims that worldwide volatility will likely only increase in the future, and businesses must prepare themselves for this uncertain and risk inherent future.

There are several types of business risk, one of which is external risk. External risks are risks that occur outside of the business that might negatively impact it. This includes politics, the economic environment, weather, and climate change. In February of this year, a cold snap affected a significant portion of the United States. The unusual weather led to volatility in power markets all over the country, but primarily the Southwest Power Pool (SPP) and the Electric Reliability Council of Texas (ERCOT). This is a good example of an external risk causing significant problems for organizations. During the February winter storm, some organizations made millions, while others went bankrupt. In the chart below, we compare the past five years of the monthly average on-peak real-time and day-ahead prices for February at ERCOT North Hub and SPP South Hub.

the past five years of the monthly average on-peak real-time and day-ahead prices for February at ERCOT North Hub and SPP South Hub

Clearly, the weather drove energy prices significantly higher than the average in both ERCOT and SPP. While this event had a substantial impact on utilities and energy providers, the loss of power negatively impacted almost every industry, including financial services, healthcare, agriculture, retail and the public sector (see articles below*). In the future, the ability to identify indicators of events like this will prove essential for risk mitigation in both the energy world, and across industries.

This is where Yes Energy’s data comes in. By performing analysis with Yes Energy’s robust data sets, organizations can identify when external risks, such as those that contributed to the February power crisis, might occur. Armed with this information and more advanced notice than the competition, you and your organization can mitigate risk, and increase your chances of coming out on the right side of weather and generation events such as this.

In order to understand potential market volatility and risk, tracking forecast and planned events data can be incredibly helpful. Yes Energy has all the data you need, and more. Yes Energy never deletes a forecast, so you always have access to historic forecasts, real-time data, and future forecasts. We collect further data to help you analyze the supply stack, including wind, solar, and outage forecasts. Additional data series are also available to support load analysis. Equipped with Yes Energy’s infinite power market data on Snowflake, granular analysis can also be performed using planned transmission line outages to assist you with building strategies around future congestion. You can see a few of our favorite data series for this type of analysis below.