I wish there was enough for me to write an essay about, but there's only this:
The author of the video is Nemon, head of exteriors for the ambitious "Tamriel Rebuilt" mod for Morrowind that seeks to recreate the Morrowind mainland that landlocks Vvardenfell on three sides. If I am not mistaken, he is using vanilla textures. The beautiful lighting and shadows is thanks to MGE XE of which I have notes on here.
Can't wait for Tamriel Rebuilt's next release, or for the day when MGE XE hits 1.0!