Histograms of Heating and Cooling Degree Days

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Seasonal discomfort is measured by the deviation above or below a comfortable temperature. Exchange‐traded futures on weather use the comfort level of 65° F in the U.S. cities listed in a variety of futures contracts. This allows people to trade on expected deviations in the climate and to hedge exposure in the energy used to make our environment comfortable.

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The prices of futures contracts and the energy costs themselves are partially based on the historical record of deviations from 65° F in different locations. Here a heating degree day (hdd) count is incremented daily for each degree of mean temperature below 65° F. Similarly, a cooling degree day (cdd) count is incremented daily for each degree of mean temperature above 65° F.

The histograms display the cdd and hdd counts for the years 1980-2008, each year being a sample. Below them, the mean and standard deviations are listed.

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Contributed by: Jim Gerdy (March 2011)
Open content licensed under CC BY-NC-SA


Snapshots


Details

The attribution of historical data to years is done by calendar year. That is, a cold season, such as the winter of 2005, is taken from 1/1/05 and combined with the later cold season at the end of 2005. December 2004, commonly called part of winter 2004-2005, is entirely in 2004 in this analysis.

The contract definitions for exchange-traded weather futures can be found at www.cmegroup.com.

These histograms and the summary statistics allow one to begin a detailed comparison of the nature of risk in pricing degree days.



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