NYISO thunderstorm alerts: a trading opportunity

Lightning strikes during thunderstorms can cause significant damage to power lines and other electrical infrastructure. To minimise the operational impact, the New York system operator (NYISO) takes proactive measures; this can create opportunities for traders equipped with accurate information predicting the likelihood of electrical storms.  

Members of our Power Trading Analytics team for New York Independent System Operator (NYISO) recently did a deep dive into the topic highlighting how traders can capitalise on weather-driven market volatility. Fill out the form at the top of the page to access an extract from the presentation or read on for a quick primer on NYISO’s Thunderstorm Alerts (TSAs) and their implications for power trading. 

A short history of TSAs 

The origins of NYISO’s proactive approach to thunderstorm warnings go back to the infamous 1977 New York City blackout (as immortalised in the eponymous film Blackout and Spike Lee’s Son of Sam). On the evening of 13 July, lightning strikes hit substations and transmission lines in the Hudson Valley in downstate New York. Cascading issues led to a total loss of electricity to most of the New York metropolitan area, with power only being fully restored the following evening. By then, looting and arson had resulted in well over a thousand stores being damaged or destroyed. 

In the wake of the blackout, local utility Con Edison implemented TSAs as a proactive operational measure to protect the electricity transmission system from similar events. Initially a threshold of 15 predicted or actual strikes over 30 minutes within the transmission corridor was set. This was amended to 30 strikes over 30 minutes in 2020, as an analysis of historical data showed that grid improvements had significantly reduced the risk of storms impacting grid reliability. 

What causes TSA conditions? 

Lightning-producing thunderstorms that trigger TSAs develop in situations where there is strong convection (whereby warm air rises while colder air sinks). The process of convection requires atmospheric instability, a lifting mechanism and moisture for the air to rise and form storm clouds. Instability and lift come from frontal systems – especially cold fronts – as well as heating of the surface by the Sun.  

When are TSAs most common? 

Because thunderstorms usually require surface heating to drive convection, TSAs are most common in summer, with 75% of TSA hours occurring during June, July and August. They mainly occur in the late afternoon and evening, when hours of sunshine during the day have warmed the land mass sufficiently (see charts below). The incidence of TSAs can also vary considerably from year to year, with wetter summers like those in 2023 and 2024 generally corresponding to higher TSA hours. 

What are the consequences of TSAs for local power markets? 

TSAs can result in a range of system stresses and constraints that drive operational decisions and result in predictable congestion patterns. The resulting divergence between day-ahead and real-time pricing across multiple zones creates prime arbitrage conditions.  

How does Wood Mackenzie data help traders predict TSAs? 

Wood Mackenzie employs a dedicated meteorology team for its North America Power Solutions. We use both global scale and high-resolution regional weather models to assess the risk of lightning, providing timing and severity details up to several days out to help power traders predict market moves. 

Remember to fill in the form at the top of the page to download the presentation extract, which covers this topic in more detail and includes further charts and data.