October 14, 2020

Winter is Coming

Part 1: Past performance is not always indicative of future results

Dominic Hernandez - Climate Resilience Analyst

For much of the northeastern U.S, Winter 2019-2020 could be described with one word: mild.

West Virginia and Rhode Island each had their fourth warmest December–February on record. Twenty-two additional states had a top 10 warmest winter.

Winter temperatures were above average across most of the contiguous U.S. and much-above-average across the eastern U.S.

Mild, however, hardly describes the season’s business impact. Volatility of snowfall and cold weather cause large shifts in expected costs and revenue for winter-linked businesses. Property managers, snow-removal companies, heating oil providers and other industries are greatly impacted by an uneventful winter like 2019.  Mild winters and severe winters both demonstrate the need for businesses to be cognizant of their operational climate sensitivities.

Climate Change is leading to increased precipitation in some areas. Counterintuitively, most heavy snowfalls occur when there is relatively warm air near the ground. A warming climate can actually lead to increased snowfall and, therefore, higher snow removal costs in many areas.

The cold-weather recreation industry particularly has a large stake in the changing nature of winter weather. Climate Central reports: “Activities from downhill skiing to ice fishing and outdoor ice hockey all rely on low temperatures, ample snowfall, or both. Every year, winter recreation contributes billions of dollars to the United States’ economy.”

PHOTO from “ON THIN ICE: How Climate Change is Shaping Winter Recreation; Credit: Jonathan Fox/flickr”

 

Climate Central’s analysis of long-term snowfall trends finds that snowfall has been decreasing across much of the United States in the spring and fall (“shoulder seasons”). In the heart of the winter, however, snow trends were a mixed record.

 

And according to the Washington Post, even in cities like Washington DC where snowfall trends are declining, year-to-year variability is increasing.

From “ With climate change, Washington may have entered era of more blockbuster snowstorms but less snow overall” in the Washington Post.

Inconsistencies in snowfall present both challenges and opportunities for business managers whose revenue and/or costs are directly correlated with snowfall. High snowfall seasons yield high returns for snow-removal companies and high expenses for property managers. Lack of snow reduces the costs for property managers who contract with snow-removal companies and, in-turn, reduce operating revenue for those snow-removal companies.

The Climate Prediction Center’s 2020-2021 Winter Outlook predicts above normal temperatures again this upcoming winter for much of the U.S.  But what does this mean for “blockbuster” snowstorms?  Regional differences in winter weather highlights an increasing need for businesses to be aware of their individual sensitivities.

Think about the goods and services your company provides — do they fluctuate with a constantly changing variable like the weather? If the easy answer is: Yes;

Are you gambling on the winter of 2020-2021?

In Part 2 of “Winter is Coming” we will explore financial protections for a hypothetical snow-removal company, MegaPlow Inc.