The Financial Times article highlights how extreme weather, from jellyfish swarms to a "Super El Niño," is increasingly jeopardizing energy security worldwide. The 2023-2024 El Niño event, for instance, led to substantial reductions in wind output in the central US, solar output in California, and hydro generation in China and India. This weather phenomenon also caused the warmest winter on record for the Lower 48 states of the US, impacting gas demand. The World Meteorological Organization has forecasted a strong El Niño, with the US National Oceanographic and Atmospheric Administration indicating an 81% chance of a "very strong" event in the last quarter of this year, potentially ranking among the largest since 1950.
These weather conditions have wide-ranging implications for energy sources such as solar, wind, and hydropower, as well as natural gas demand and shipping. Changes in cloud cover, wind speeds, precipitation, and snowmelt directly affect renewable energy generation. A strong El Niño is anticipated to result in milder winters for the northern US and Canada, which could reduce gas demand, while potentially causing cooler conditions across the southern US, Mexico, and most of Asia. Precipitation forecasts suggest very wet conditions for the southern US, Mexico, the Middle East, North Africa, and Asia, particularly China, contrasting with dry weather in equatorial South America and South Asia.
The impact extends to international energy trade, as evidenced by disruptions to the Panama Canal. The severe drought in the region during 2023-2024, partly driven by El Niño, forced the Panama Canal Authority to impose restrictions on ship sizes. The maximum allowable draft in the Neopanamax locks was reduced from about 15 meters to below 14 meters for much of 2023 and the first half of 2024, sometimes dropping as low as 13 meters 26 centimeters. These restrictions compelled LNG carriers bound for Asia to take longer routes around the Cape of Good Hope or via the Suez Canal, adding two to three weeks to their journeys. The increasing reliance on weather-dependent renewable energy sources makes events like El Niño even more critical, and climate change further exacerbates physical risks to energy assets from extreme events like storms and wildfires. woodmac.com
