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Under the Weather – Cooling Degree Days, Natural Gas Storage and Price

 

With natural gas storage at record levels in early June, it looks like it’s going to be a long summer for gas producers hoping for better prices. The most important factor will be hot weather, or lack thereof.   Temperatures this summer will have a significant impact on how much of that gas in storage is put to use for electric power generation. In today’s blog we’ll work through the degree day numbers and explain how a milder than usual summer could impact storage levels.

What are degree days?

Degree days are measures of daily temperatures over summer and winter seasons as compared to average, or “normal” temperatures.   It is a way to quantify when it is hotter than normal, or colder than normal.  The data tells us how often temperatures get cold enough to turn on the heating or warm enough to turn on the AC. This information is highly valuable when trying to understand energy usage patterns. The two types of degree day data commonly calculated are heating degree days and cooling degree days.

In effect, heating degree days (HDDs) are a measure of how much heat is required to keep you at a comfy 65 degrees.  Cooling degree days (CDDs) are a measure of how much AC is required to keep you at that same temperature.  So we measure HDDs in the winter and CDDs in the summer.

How do you compute degree days?

The starting point is averaging daily maximum and minimum temperatures at a given location to arrive at a mean daily temperature. The mean daily temperature is then compared against a “normal” 65°F as the base for both HDD and CDD computations. If the mean daily temperature is above 65°F then it is counted as a cooling day and if the mean daily temperature is below 65°F it is counted as a heating day. Next calculate how many degrees F the mean daily temperature is above or below 65. Then, over a period of time HDDs are calculated by summing the negative differences between the mean daily temperature and the 65°F base and CDDs are calculated by summing the positive differences from the same base. The box below shows a worked example.

Over the seven day period, the daily mean temperature is either above 65 °F meaning it is a cooling day, exactly at 65 °F meaning zero degree days or below 65°F meaning it is a heating degree day. In our example there are 24 CDD’s and 13 HDD’s over the seven days.

Three Year Trend

To view degree day data, we will use information from the US National Oceanic and Atmospheric Administration (NOAA), who provide the majority of the climate data that weather forecasters use, (including the guy on the 6 O’clock news). A division of NOAA called the Climate Prediction Center calculates degree day data and provides an updated report every week. The NOAA degree days are population weighted using census data so that the results reflect actual heating and cooling use. If you don’t population weight the data, the results would be skewed by locations where temperatures are extreme but the population is low. (Those guys don’t use much heating or cooling). The NOAA degree day data is derived from daily temperature observations at nearly 200 major weather stations in the contiguous United States. The chart below shows the data for the whole United States over the last three years.

 

In the chart, the seasons are easy to see since higher heating degree days run from October through April in the winter months (red color) and higher cooling degree days in the summer (blue color). The population weighting in the data is reflected in lower overall cooling degree days because more people live in colder regions and use heating than live in warmer regions and use cooling. By looking at this macro picture of the whole United States, one thing we can see straight away is that the winter of 2011/2012 was milder than the two preceding winters. Keep that in mind as we continue.

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