Summer 2021 Recap

Back in April, our Summer Outlook called for intense warm anomalies in the Southwest, warm anomalies west of the Mississippi River and in the Northeast, and normal conditions in the Midwest and Southeast (Fig. 1). Actual anomalies are shown in Figure 2. Overall, the warmest anomalies were in the West, as was predicted. However, these warmest anomalies extended to southern Canada and into the northern Plains. The biggest miss was in Texas, where cool anomalies gripped the interior of the state. For the Midwest and Northeast, our prediction was generally in the ballpark.

FIGURE 1

FIGURE 2

Winter Indicators

El Nino / La Nina.

The overarching winter indicator is the state of the Southern Oscillation Index (SOI) and its numerous derivatives….the climatic index that determines El Nino, La Nina, or Neutral conditions. We started 2021 in Neutral conditions which have consistently built towards La Nina conditions. Since the beginning of summer, we have formally been in a “La Nina Watch” situation. What this means is that climate scientists and modelers have been closely monitoring environmental conditions with the expectation that La Nina conditions will develop as we get closer to winter. As of now, there is an 80% chance that La Nina will fully develop this winter (Fig. 3). Please note that consensus is for a “weak” Nina that will likely peak in the DEC/JAN timeframe. Climate scientists indicate that there is less than a 10% chance of a “strong” Nina.

FIGURE 3

Arctic Sea Ice

The current state of Arctic sea ice coverage is shown in Figure 4. For the last 10+ years, it seems that we are entering Fall to the low side of the 30-year average. For this Fall, we are closer than usual to that lower boundary. Prior to this year’s minimum, the minimums of the last 15 years were the lowest 15 minimums since Arctic Sea Ice statistics have been tracked (beginning 1978). This year as in years past, the minimum sea ice coverage occurred in mid-September. As a matter of fact, this year, we were at the highest minimum value since 2014! Arctic sea ice will continue to build as we progress through winter. The one thing I tend to monitor during the winter season is the instantaneous slope of the line. That slope is a direct indication of the strength of the Arctic cold pool at any given time. In looking at a map of current coverage in relation to the 30-year average (Fig. 5), the North American side of the Arctic Ocean has far more coverage than the Eurasian side. We saw similar this time last year.

FIGURE 4

FIGURE 5

Soil Moisture

Soil moisture is one of the more short-term variables when coming up with a winter outlook. Outside of Extreme or Exceptional Drought categories which require sustained, longer-term precipitation to alleviate, the other drought categories can be easily eaten into with a series or two of moderate precipitation. At this point (Fig. 6), Extreme and Exceptional Drought conditions are generally west of the Rockies. This will require prolonged periods of light to moderate precipitation to alleviate. Moderate to Severe Drought conditions exist mainly in the Plains. East of the Mississippi River, soil moisture is generally at non-drought levels. In focusing on the more extreme drought areas, if cold temperatures enter the West, the lack of soil moisture could exacerbate the cold conditions, both in magnitude and longevity.

Figure 6

The Winter 2021/22 Outlook

Based on the conditions outlined above, POWWR’s winter (Nov-Mar) outlook is shown in Figure 7. Our analogs are showing the coldest temps being confined to the West Coast. In the northern Plains and western Mid-West, we expect to see somewhat cold anomalies. Warm anomalies are shown from New England, hugging the East Coast into Florida, and across the Gulf Coast into Texas, with normal conditions elsewhere. Additionally, analogs are showing a coldish start for Nov and Dec (especially in the Plains and Mid-West) before transitioning to a warmer outlook for Jan-Mar as the La Nina comes off its peak strength. Please keep in mind that this outlook is for the November to March period in aggregate. An overall warm location can have short-term cold events (including severe Arctic Blasts) just as an overall cold location can have short to medium term warmth. Risks to this forecast involve much colder conditions than forecast from the Plains and into the Great Lakes and New England.

Figure 7

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NOTE: POWWR provides this information as a courtesy to enhance the risk management process and are not responsible for the accuracy of this forecast and/or actions taken as a result of this forecast information.
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Ian Palao

Mr. Palao specializes in commodity risk management and the science of meteorology/climatology. He serves as one of POWWR’s many subject matter experts. He has 20 years of experience in the energy/utility industry where he used his skills and knowledge of meteorology and advanced statistics. From 2000 through 2011, he worked at TXU Energy Trading/Luminant Energy in Dallas where he served in three capacities. Most recently, he served as Capital/Liquidity Manager of the trading portfolio, optimizing the use of capital while still maintaining profitability. Prior to that, he managed the Weather Derivatives trading desk, devising strategies and executing trades for both speculative and hedging purposes. Upon joining TXU, he served as manager of the Quantitative Risk Group, assisting the company in the identification, quantification, and remediation of financial risks inherent in the company’s multi-commodity trading portfolio. In his first foray into energy/utilities, he was a Marketing Executive with Louisiana Gas Service Company, a local distribution company, where he primarily marketed natural gas technology to commercial and industrial customers. Before that, he served as a Research Scientist under contract to the National Oceanic and Atmospheric Administration (NOAA). Mr. Palao has an M.B.A. from Tulane University. He also has both an MS and BS in Meteorology from Florida State University. He is a member of the Financial Risk Management Committee of the American Meteorological Society (AMS).

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