Meteorological data is the foundation of the weather risk management market. Without weather data it would be impossible to price, track, and settle a weather hedge.
Current market activity is primarily based upon surface observations (weather stations) with the use of gridded datasets (reanalysis and satellite-derived data) becoming increasingly common.
Weather forecast data is also important in gauging how a hedge could perform throughout the forecast horizon. The scope of meteorological data ranges from the common variables of daily maximum and minimum temperature to more complex observations such as wind speeds at hub height (wind farms) to hourly solar radiation. The complexity of data used in this market has resulted in a number of vendors having become specialists in the sourcing of data and production of derived products specifically for this industry.