Abstract
BackgroundEnergy extraction, production, and transmission systems are highly sensitive to states of the natural environment such as temperature, wind speed, and even ice cover. Forecasts of such state variables are termed environmental predictions. How much value can such environmental predictions provide to the operator of a given energy system? This paper presents three illustrative Canadian case studies, selected to provide a good cross section across sectors, forecast types, and decision time scales, to provide insights into this important question.ResultsUsing these case studies this paper examines what distinguishes economically valuable forecasts from economically less valuable forecasts. It is found that the risk aversion of the decision makers, the degree to which the decision has multiple inputs, and the certainty of the forecasts, together with the sensitivity of the system to the environmental variable in question, all play important roles.ConclusionsTo the extent that risk aversion results from government regulations and organizational guidelines, the conclusions suggest changes in public policy and industry practices that could help unlock value from currently underused forecasts.
Highlights
Energy extraction, production, and transmission systems are highly sensitive to states of the natural environment such as temperature, wind speed, and even ice cover
The focus of this paper is on demonstrating the economic value of environmental prediction information to selected agents or enterprises involved in the production, transmission and distribution of energy
Why isn’t Environmental predictions (EPs) used where results suggest it would be very beneficial? For example, before 2007, the Alberta utility we interviewed was not using hydrological EP to manage their hydroelectric assets, they were at that time considering the purchase of some hydrological decision support tools
Summary
Production, and transmission systems are highly sensitive to states of the natural environment such as temperature, wind speed, and even ice cover. Forecasts of such state variables are termed environmental predictions. Many aspects of the energy web-demand, production, transmission and distribution-remain sensitive and vulnerable to the fluctuating states and elements of the natural environment, as thoroughly reviewed in (Larsen, 2006). The focus of this paper is on demonstrating the economic value of environmental prediction information to selected agents or enterprises involved in the production, transmission and distribution of energy. While the goals of this paper are narrower than (Teske & Robinson, 1994), they are broader than the results reported by (National Renewable Energy Laboratory, 1995)
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