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Density forecasting for long-term peak electricity demand

Rob Hyndman () and Shu Fan ()

No 6/08, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: Long-term electricity demand forecasting plays an important role in planning for future generation facilities and transmission augmentation. In a long term context, planners must adopt a probabilistic view of potential peak demand levels, therefore density forecasts (providing estimates of the full probability distributions of the possible future values of the demand) are more helpful than point forecasts, and are necessary for utilities to evaluate and hedge the financial risk accrued by demand variability and forecasting uncertainty. This paper proposes a new methodology to forecast the density of long-term peak electricity demand. Peak electricity demand in a given season is subject to a range of uncertainties, including underlying population growth, changing technology, economic conditions, prevailing weather conditions (and the timing of those conditions), as well as the general randomness inherent in individual usage. It is also subject to some known calendar effects due to the time of day, day of week, time of year, and public holidays. We describe a comprehensive forecasting solution in this paper. First, we use semiparametric additive models to estimate the relationships between demand and the driver variables, including temperatures, calendar effects and some demographic and economic variables. Then we forecast the demand distributions using a mixture of temperature simulation, assumed future economic scenarios, and residual bootstrapping. The temperature simulation is implemented through a new seasonal bootstrapping method with variable blocks. The proposed methodology has been used to forecast the probability distribution of annual and weekly peak electricity demand for South Australia since 2007. We evaluate the performance of the methodology by comparing the forecast results with the actual demand of the summer 2007/08.

Keywords: Long-term demand forecasting; density forecast; time series; simulation (search for similar items in EconPapers)
JEL-codes: C14 C15 C52 C53 L94 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-for
Date: 2008-08
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