Integrating Information, Misinformation and Desire: Improved Weather-Risk Management for the Energy Sector

Weather-risk management has many facets. One particularly costly challenge comes from “chasing the forecast.” The Forecast Direction Error (FDE) approach was deployed to address the dilemma facing decision-makers who face this challenge: today’s probabilistic weather forecasts contain too much information to be ignored, but not enough information to be safely acted on as probability forecasts. Success was obtained by focusing on the information content of forecasts, and restricting their use to tasks in which the forecasts are informative in practice.