Energy Evolution How weather analytics is powering modern energy trading
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Dec 9, 2025 Theresa Kammel, a weather derivatives expert at Munich Re, and Pierre Buisson, a quantitative weather-risk modeller, discuss the crucial role of weather derivatives in managing financial risks in energy markets. They explore seasonal patterns and the growing granularity of products to better hedge against weather impacts. Sean Kelly, CEO of Amperon, shares insights on how AI is revolutionizing energy forecasting with midterm predictions. The conversation highlights the importance of innovative strategies to stay ahead in a rapidly evolving market driven by climate change.
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Weather Derivatives' Origins And Evolution
- Weather derivatives began ~20 years ago as gas traders linked temperature to gas demand and evolved into renewables hedging.
- Renewables (wind+solar) now dominate Europe’s capacity and make weather risk central to energy finance.
Renewables Make Weather A Primary Price Driver
- Growing renewable capacity makes weather the primary driver of power production variability in Europe.
- Major wind droughts or surpluses can cause multi-hundred-million-euro impacts that firms can hedge with derivatives.
Hedge Market Positions With Weather Contracts
- Power traders and retail gas companies use weather derivatives to hedge cold or warm exposure and renewable shortfalls.
- Buy weather options or swaps (e.g., on high wind) to neutralize weather-driven price moves against your market positions.