Weather risk: gauging the exposure

Weather derivatives market

Utilities have been grappling with the effect of weather on their operations for decades. The expansion and growing maturity of the weather derivatives market now affords these companies an unprecedented ability to hedge exposures that hitherto were effectively unmanageable. Meanwhile, the increasing prevalence of wind power has added a whole new dimension to the problem, making the management of integrated electricity portfolios even more challenging. This article discusses approaches to the