As stock market tycoon, Gordon Gekko told his protégé in the movie Wall Street, information is a most valuable commodity.
And information is exactly what a new web-based application called TempRisk gives investors trading in the multi-trillion dollar energy market sector. The application is the entrepreneurial offspring of an unlikely marriage between a venture capital operation called EarthRisk Technologies, and a small group of climate researchers at Scripps Institution of Oceanography, UC San Diego. Stephen Bennett, former director of business development at Scripps and hedge fund weather guru, designed the deal.
TempRisk allows meteorologists to predict extreme heat or cold events up to 40 days before the temperatures surge or plummet. Conventional tools used by meteorologists today can manage a 14-day forecast at best. The TempRisk advantage gives investors and utility companies time to buy energy commodities weeks before their competition realizes that a surge in demand is upon them.
“I was working at an energy trading firm that used weather science in its decision-making process when I first started talking to Scripps’ director Tony Haymet,” said EarthRisk’s founder, Stephen Bennett. Bennett wanted to find a way to use research talent at Scripps to develop technologies for energy investors. Haymet wanted to find funding opportunities for Scripps researchers.
But building a working relationship between the private sector and a university is a tricky proposition. “There’s a cultural mismatch,” said Bennett. The business community focuses on speed and definable deliverables, while a university focuses on exploration, according to Bennett. Someone has to manufacture a relationship between the two, since university researchers and entrepreneurs rarely move in the same circles, he said.
Bennett bridged the gap between the private sector and Scripps for three years as the Director of Business Development before leaving to join forces with venture capitalist John Plavan. Together they launched EarthRisk Technologies. Their latest product, TempRisk, is bringing an infusion of funding for the university, and high-paying jobs to the San Diego community.
EarthRisk used innovative new research from Scripps weather scientists Alexander Gershunov and Kristen Guirguis to create their product. Over a period of [TK], Gershunov and Kristen Guirguis examined 60-years’ worth of weather data to search for atmospheric precursors that precede extreme temperature events. Their research yielded a 6,000-page catalog of data that, among other things, identifies statistically significant links between certain weather patterns and the eventual development of an extreme heat wave or cold snap in a defined region.
“But what can a private sector company do with that?” said Plavan. He partnered with a technology company called Digital Telepathy to turn the data into a usable, marketable, product. The product, TempRisk will soon be generating millions of dollars annually, and Scripps gets a share of the revenues through a licensing agreement, said Plavan. Though both declined to give specifics of the arrangement with Scripps, Plavan and Bennett said it’s a price that they are happy to pay.
EarthRisk hopes to partner with new researchers next to create an application that forecasts hurricanes with more lead-time than the current technology allows. The team they are working with has been exploring statistical methodologies similar to those employed by Gershunov and Guirguis.
“We’re happy to fund the exploration,” Plavan said. “We build it into the plan.”
Guirguis said that she and Gershunov are continuing their work at Scripps in extreme weather predictability and would welcome similar collaborations with private sector firms in the future.
Plavan says that he knows that only a small portion of the research they fund will lead to profitable, intellectual property. But investing in university research gives his company access to information that competitors do not have.
And that, as Gekko would say, is a very valuable commodity.
— Donna Hesterman
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