The likely formation of strong El Nino conditions in the last quarter of 2026 is likely to have wide-ranging impacts across the energy sector, from renewables to gas demand, Wood Mackenize's Vice Chair for the Americas Ed Crooks said last week.
The El Nino's warming of ocean waters due to a slowing of east-to-west trade winds in the Pacific Ocean can lead to heatwaves and drought in places, and colder temperatures and heavy rain in others. The effects tend to be most acutely observed in the Americas.
In the US, the typical characteristics are milder, drier winters in the north and in Canada and above-average rainfall in the southeast.
Both wind and solar output tend to be affected by changing cloud cover, wind speeds, precipitation and snow melting, the article said.
The 2023-24 El Nino forced the Panama Canal Authority to restrict ship sizes due to a drop in water levels forcing some shippers to resort to alternative, longer routes. The authority has since invested in water-saving measures whose effectiveness the next El Nino will reveal.
Elsewhere, in China and India, the same prior El Nino caused a sharp drop in hydropower generation, underscoring the scope of the impacts.
Wood Mackenzie's team foresees warmer-than-normal weather conditions in the Southern Hemisphere summer at the end of the year and a milder US and Canada winter with a cooler southern and Mexican tier.
Conditions are expected to be very wet for the southern US and Mexico, the Middle East, North Africa and Asia, especially in China. Equatorial South America and South Asia are likely to experience dry weather, the article said.
Solar output is likely to be stronger in the US east of the Rockies, in Iberia and in the Middle East in the autumn. The outlook for solar is bearish overall with the biggest impact seen in the south and west of the US.
The greater likelihood of a milder winter in the northern US and possibly Europe will weigh on demand for natural gas.
Such conditions could be a blessing for Europe as some analysts voice concerns that it will struggle to refill the reserves it relies on each winter as the US and Iran return to fighting and as traffic through the Strait of Hormuz appears to have stalled again.