2021 Summer Outlook Report

By Ian Palao | April, 2021

2021 POWWR Summer Outlook Report
2021 POWWR Summer Outlook Report | Photo by Luca Bravo

Winter 2020/21 Rewind

Back in October, our prediction for Winter 2020/21 consisted of cold anomalies in the northern tier, especially the inter-mountain west and the Great Plains, with warm anomalies stretching from the desert Southwest into Texas and the lower, central Gulf Coast, with the “middle-belt” of the country to experience seasonal normal conditions (Figure 1). As you all know, mid-February saw the arrival of a severe Arctic blast which brought negative overnight low temperatures into Texas. Prior to that, 95% of the country had experienced warm anomalies, in aggregate, from November through January. For November through March, the actual anomalies are displayed in Figure 2. East of the Rockies, in aggregate for the 5 months, actual anomalies were generally warm for the northern tier and normal in the south, with slight cool anomalies in south-central TX.


FIGURE 1



FIGURE 2

Summer 2021

The Following Topics Factored Into This Summer Outlook.


Currently, all the major ENSO models are pointing to an “ENSO neutral” summer (Fig. 3). Given that we are coming off of a moderate (at best) La Nina, and knowing that the ENSO signal is an amplification of a winter-maximum event, one would expect substantial waning of the Nina signal beginning in spring and sustaining through summer. The question to ponder is what the coming Fall/Winter will bring in terms of ENSO. As is seen in the same figure, current model guidance is pointing to another Nina. We will have to monitor. Although too late to impact summer temperatures, the potential for a Fall La Nina may have a substantial impact on the tropical storm situation in September-November.



FIGURE 3


The other piece of info that is useful in determining upcoming summer temperature anomalies is soil moisture. Most important are the areas where long-term drought are an ongoing problem. It is these locations that, if they align with what the temperature anomaly analogs are showing, can provide confidence in the seasonal outlook. And such is the case with the current drought situation (Fig. 4). As is evident, the Southwest, Intermountain west, and parts of west/south Texas are experiencing a level of drought for which persistent, multi-event rainfall is the only solution. A downpour will likely lead to excessive run-off and will not ameliorate the drought conditions. Historically the monsoon (wet) season for the Southwest begins in August.


FIGURE 4


Given the above, we are calling for the May-Sep period (in aggregate) to experience very warm anomalies in the Southwest and Inter-Mountain West, perhaps creeping into west Texas (Fig. 5). Other areas west of the Mississippi River will likely be somewhat warmer than normal, according to our analogs. We are calling for normal conditions for the central third of the country, with a slight warm signal for the Northeast. In ERCOT, 100% of our analogs are calling for a slight warm signal. The key word in that sentence being “slight”. Because of the long-term drought, we extended the “very warm” anomaly into west TX towards the western reaches of South Zone.

In our analysis, the major risk to our outlook lies in the northern tier east of the Rockies. A small percentage of the relevant analogs show some instances of significant cold anomalies stretching from the northern Plains into New England. Additionally, whenever dealing with current Spring-time drought conditions in any part of Texas, there is always the chance that these conditions extend deeper into the state with time, thus producing the risk of much warmer anomalies than predicted.


FIGURE 5




Topical Outlook

In an “average year”, the Atlantic Basin experiences 12 named storms, of which 6 are of hurricane strength, and 3 of those hurricanes are classified as “major”, with sustained wind speeds at or above 111 mph. For the upcoming season, we are predicting this to be an “above-average” year with 16 named storms, 9 hurricanes, and 5 major storms. The main driver to this is the current thinking that a La Nina event will once again begin to develop in late summer / early fall and through the winter. As for likelihood of landfall, we are showing equal chances among the central Gulf Coast, Florida, and the East Coast. One notable point in the analogs is the lack of activity on the Texas coast. This could also play into the warmer-than-normal scenario we are predicting for the ERCOT market.



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.


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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