An Industry Perspective on the Global Observing System

1. An Industry Perspective on the Global Observing System  Dr. Mary Altalo Science Applications International Corporation8301 Greensboro DriveMcLean, Virginia 22102Phone (703) 676-468Mary.G.Altalo@saic.com

2. 2 Outline • Vision of An “Information” System • Mission Statement for Sustainability- Societies and Economies • Provider and User Concept • Market Segments for Information • Market Sector Decisions Requiring Information • Economic Valuations of Information • Implication for Observing System Design • New Industry Drivers • Further Issues Altalo

3. 3 Environmental Information and Sustainability Mission

4. 4 Provider and User ConceptDual Responsibilities Providers Push Users Pull Data & Information Actionable Knowledge Added Value Partnership -Interpret user Needs -Sensitize Market research GOOS IOOS OOI National Met-Ocean Services Research Government Business Altalo

5. 5 Target Market Segments or UsersDefine the Optimal System Configuration Research Community Governments Business • Energy • Water • Tourism & Leisure • Health • Construction • Transport • Financial Services • Defense Altalo

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7. 7 EXAMPLES OF PRODUCTS OF INTEREST TO INDUSTRY • Sea Level • Current speed, rip tides, undertows • Real time and Average daily temperature, humidity, rainfall • Average Annual temperature, humidity,rainfall • Heating and cooling degree-days (Last 30 years) • Wind speeds and direction • Cloud Cover • Wave height • Ocean current speed and direction • Red Tides

8. 8 • Building Energy Management • Oil and Gas Operations & Planning

9. 9 Other sectors---other uses

10. 10 How do Industries use the Information?Case Studies • Recreation and Tourism • Construction Industry • Energy

11. 11 Leisure Industry Needs . Altalo

12. 12 Recreation/Tourism Business Decision Models Requiring Environmental Information Revenue per available room (RevPar) Accommodation sector Occupancy rates Accommodation sector Occupancy percentage Accommodation sector Average Daily Rates (ADR) Accommodation sector Comparative Operating Rates (COR) Accommodation sector Gross Operating Profit (% before fees) Across the industry Economic Impact Assessment Across the industry Financial rate of Return (FRR) Economic Rate of Return (ERR) International arrivals Travel sector Journeys made Travel sector Input Both Statistical and Probabilistic Hindcast and Forecast Environmental Information Altalo

13. Utilities-Energy Pricing & 4hr forecasts of temp./ sea breeze - Scottish Power Oil and Gas- Regional Energy infrastructure master planning and climate/ocean conditions - BP Construction- Building codes & standards with 20 year heat/ precipitation/sea level forecasts- Building Research Establishment Leisure - Revenue projections and seasonal temperature/ppt forecasts– The Starwood Group, Europe/Africa Finance –Financial Risk Rating Index and air/water quality and climate forecasts- SERM Rating Agency Health and EM- Coastal metropolitan health alert planning and met/AQ forecasting-National Environmental Research Institute (DMEE) 13 Business/Policy Trials: Observing System Product Performance Assessment in Business Operations Altalo

14. 14 Starwood Hotel “Industry Trial”Marbella, Spain • Can seasonal environmental information improve the accuracy of Revenue Forecasting in the Ibearian Penninsula? Altalo

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16. 16 Resort Construction Decisions Requiring Environmental Information • Seismic/soil • Air/water Quality • Sea Level/beach • SST • Red tides • Ppt/temp • Storm surge • Winds • Sea breeze • Precipitation • T,humidity,cloud cover, ppt • Air quality • Emissions/air and water • Climate, ppt, temp, winds • Fire risk

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18. 18 Defining the Range of Uncertainty • NOAA 1998-2000-“Defining the weather/climate requirements for the energy industry”………breadth of use across all sectors and lead time Critical forecast periods for improvement Sub day, 2-4 day, 90 day Altalo

19. 19 Observing System Information in the Value Chain of CONOCO Business Units & Functions • Business strategy • Demand forecasting • - Economic growth • - Energy switching • - Weather/ climate • Supply forecasting • Hedging and futures • Transportation and inventory • Strategic planning • Risk assessment • -Political • -Safety/environ. • -Social impact • -Economic • Host government negotiation • Field development plan • Risk assessment – next level • Sustainable development plan – next level • Production wells • -Land based pads • -Offshore platforms • -Supply systems • Field processing • Transportation system • Oil refineries • Floating processing tankers • Fixed platform processing • Deepwater tension leg platforms • Natural gas processing • Carbon fibers • Natural gas refining • Safety, environment, and social issues • Listen-Understand • BalanceQuality,– Flexibility,Cost • Safety & Environment • NIMBY • Competition • Seismic evaluation • Land prospect • Underwater prospect • Risk assessments • Sustainable development plan • Exploration and drilling • Economic assessment • Strategic alliances • Liquid product pipelines • Gas pipelines • LPC pipelines • Product terminals • Trucking • Inland waterway barges • Product tankers • environment and social issues • Crude oil gathering systems • Terminals and trucks • Overland crude oil pipelines • Offshore underwater pipelines • FPSO & shuttle tankers • Inland waterway barges • Tankers – design Altalo

20. Alternative Energy Supply Issues • Renewables Portfolio Targets for National Needs • Governors targets- e.g. CA, 20% Renewables by 2017- currently at 12%; • Federal Needs-Energy Security, energy efficiency, emissions reductions (health) • Renewables (wind/hydro) Siting, Construction & Operation • Offshore wind fields, wave height, subsurface currents, storm prediction, sea level, sedimentation, precipitation, evaporation, floods • Renewable Energy Delivery and Storage • Demand variability due to extremes, storms, fog • portfolio management with offshore wind prediction Altalo

21. 21 Economic Valuation of Information

22. 22 How to Calculate the National Return on Investment? • Economic Cost-Benefit Analysis- holistic approach based on assumptions • Business/Policy Trials or Performance Assessment • “User-Supplier” Partnership with short term Goals • Environmental Forecast Transforms into Business/Policy Forecast • Improved Skill of Environmental Forecast increases Skill of the Business/Policy Forecast, thus “Demand Pull” • Requires Information from Ocean, Weather and Climate Observing Systems • Guides Marketplace Decisions and Strategy • Informs National Policy and Strategy • Prioritizes NationalS & T Strategy for Observing system design, implementation and operational decisions Altalo

23. 23 Method Template or Roadmap • Generic concept portable to all nations, industries, observing systems and products • Starts with the Function of Decision Making • ID Organisational Units making the decision into which environmental information fits • ID the business forecast models, formats, portals • Tailors environmental forecasts to need • Assimilate information • Generate scenarios • Analyse options • Evaluate consequences (fiscal and risk) Altalo

24. 2002-5 Regional Market and Policy Imperatives as Drivers for US Coastal GOOS

25. The Northeast Energy Network Performance Analysis University of New Hampshire

26. 26 Overall Goal • Examine the value of improvement in weather/climate forecast accuracy to major stakeholders in the Electric Power Value Chain (Sellers, Distributors, Buyers) • Determine the precise requirements of the stakeholders for the improvements of decisions-”what do you do?” • Establish the Impact of forecast accuracy on the operation and planning decisions of the Industry • Examine and Improve the Decision Support Tools of the User community to “institutionalize” information • Develop the Stakeholder Advocacy through experience Altalo

27. 27 The Setting for the Stakeholder Assessment 1 • New England Grid Operator– weather impacts on short term load forecasting • Major Urban Utility – weather impacts on distribution system loads • Major state owned end user– use of weather forecasting to control day ahead electric prices and manage natural gas and electricity costs at state facilities Altalo

28. 28 The “Industry Trials” Approach • Identify stakeholder industries • Vulnerability assessment • Benchmark Use of environmental Information • Perform an error analysis • Generate scenarios • Options analysis • Beta Test Environmental Information • Determine Costs and optimize Altalo

29. 29 Key Utility functions/decisions requiring coastal weather/climate/ocean data • Load Balancing-single utility and grid • Generation commitment- fuel mix choice (fossil fuel, hydro, wind) • Dispatch scheduling • Power Marketing • Cash trading • Power pricing • Fuel pricing and procurement • Tariff Scheduling • Pump Load (Irrigation) Forecasting for Hydro • Natural Gas Storage Management • Revenue Projections • Infrastructure siting • Management strategic planning Altalo

30. Most utilities calculate weather error in MW as well as percentage of variance of the load. Analysis indicates that on some days, variance in the load forecast in MW may be solely due to weather error. This appears to be from events or unmodeled mesoscale features such as back door fronts, sea breeze and afternoon thunderstorms. The cost of such events can be up to $10M/day 30 Urban Utility Case Study Findings 1: Significant load error due to weather Altalo

31. NESTING THE COASTAL INTO THE GLOBAL: KEY TO DESIGNING FOR APPLICATIONS Wind Resource Map Produced by SiteWind

32. 32 Key Cost Findings2002-2003 NOAA Northeast Energy “The project estimated that the benefits of improving day ahead weather forecast accuracy by one degree F or by reducing forecasting error by 50% for days 2-7 is: • --$20-25 million per year for a regional transmission authority • --$1-2 million/year for a major distribution utility. Optimal use of weather information could yield savings of $8–18 million/year for a major university system (electric and natural gas). If these savings were generalized to other regional transmission organizations, large statewide colleges and universities and regional transmission authorities the total savings would be for the Northeast Region: -- $100-140 million/year for ISO’s --$30-60 million for regional electric distribution companies. -- $38-67 million for Statewide university campuses Furthermore, capturing the “events” on top of this will yield significantly higher savings (millions/day).- seabreeze, backdoor fronts, afternoon showers Altalo

33. 33 Case Studies 2 and 3

34. 34 Relationship of Weather Uncertainty and Cost: Grid Operating Companies

35. 35 ISO Mean Daily Forecast Error • Delta Breeze and weather/load forecast errors contribute to major errors • in prediction of Delta Breeze effects • Delta Breeze is defined as the conditions when the wind speed is > 12 knots, • and the direction being between 190 degrees and 280 degrees. • Multiple causes and dynamics that cause Delta Breeze. • A major priority of the ISO is to reduce this error

36. 36 The Inextricable Relationship of Weather Uncertainty and Cost: Grid Operating Companies • Cost: • Driven by spot market and last marginal unit required • Replacement power costs are often highest during periods of high peak demand and congestion • Replacement power costs can be anywhere from from $200/MWh to over $1000. • Price caps exist in California and western states which artificially suppress real market clearing prices • Potential market value costs might range anywhere from $200-$1000/MWh • Cutting forecast error by 70% can save as much as $560,000-$2,800,000 per hour during critical peak periods!

37. 37 Principle Causes of Uncertainty on Energy Operations and Planning • Uncaptured WINDEvents • Delta Breeze- Cal ISO • Lake effects- Salt Lake City- Pacificorp, Great Lakes- SUNY Buffalo • Seabreeze- NE ISO • Frontal passage- 2-4 day • Uncaptured PRECIPITATION Events • Rain vs. snow/ice • Regional day ahead error in precipitation- Pacificorp • Afternoon thunderstorms • Marine Layer, fog- SDG&E • Drought and flood, flash flood • Uncaptured CLIMATE Events • Climate outlooks –weather events frequency • El Nino and seasonal events • Decadal ocsillations- NAO • RESOLUTION- Spatial, temporal • Sub grid level • Targeted watershed level, Nodal, congestion and population • Topographic Effects- microzones • Hourly changes during events • Load Model Error • 50% load error at certain event periods • Can’t incorporate probabilities/ ensembles • Sub-optimal Use Altalo

38. 38 Requirements Altalo

39. 39 Business Process Reengineering Needed for Improved Decision Making • Incorporate Climate Change parameters into planning • Incorporate Probability Distribution forecasts into models • Incorporate Ensemble Forecasting into methods • Incorporate complex topographic features for microclimate estimates • Include rainfall “behavior” on sub-grid level (soil moisture and evaporation) • Incorporate seabreeze, lake effect, fog, afternoon thunderstorms and frontal passage into forecasts Altalo

40. 40 New Industry Sustainability Drivers • Triple Bottom Line Metrics • Environmental Protection • Social Enhancement • Company Profit • Socially Responsible Investment

41. 41 Sustainability as a Driver for System Requirements • As more corporations are adopting efficiency measures and "sustainability strategies" in which "triple bottom line" company performance metrics of profit, environmental health and social benefit are valued equally, the requirements for new information from observing systems will escalate.

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43. 43 ISSUES • Design to social and economic requirements • Formulate Long term investment strategy with all parties • Define socially relevant metrics • Prepare the business community to mainstream • environmental Information in business decision aids • Conduct pilots for “engagement”” • Focus on Outcomes and Impacts • Prepare the ROI Altalo