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ENERGY
State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Energy Forecasting Methods
Presented by:
Douglas J. Gotham
State Utility Forecasting Group
Energy Center
Purdue University
Presented to:
Indiana Utility Regulatory Commission
Indiana Office of the Utility Consumer Counselor
November 15, 2007
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Outline
Modeling techniques
Projecting peak demand from energy
forecasts
Determining capacity needs from
demand forecasts
Incorporating load management and
conservation measures
Uncertainty
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Using the Past to Predict the Future
What is the next number in the following
sequences?
0, 1, 4, 9, 16, 25, 36, 49, ....
0, 1, 3, 6, 10, 15, 21, 28, ....
0, 1, 2, 3, 5, 7, 11, 13, ....
0, 1, 1, 2, 3, 5, 8, 13, ....
These types of problems are at the
heart of what forecasters do
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
A Simple Example
1000
1100
1010
1080
1020
1060
1030
1020
1040
1000
1050
960
940
900
1040
980
920
1
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
A Little More Difficult
1000
1700
1100
1600
1210
1500
1331
1400
1464
1610
1300
1200
1100
1000
900
1
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Much More Difficult
16757
20000
17531
18851
19000
18843
18000
18254
19920
17000
?
16000
?
?
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Much More Difficult
The numbers on the previous slide were
the summer peak demands for Indiana
from 2000 to 2005.
They are affected by a number of
factors
Weather
Economic activity
Price
Interruptible customers called upon
Price of competing fuels
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ENERGY
State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Question
20000
15000
10000
5000
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
0
19
80
How do we find
a pattern in
these peak
demand
numbers to
predict the
future?
25000
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
The Short Answer
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Methods of Forecasting
Time Series
trend analysis
Econometric
structural analysis
End Use
engineering analysis
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Time Series Forecasting
Linear Trend
fit the best straight line to the historical data and assume that
the future will follow that line (works perfectly in the 1st
example)
Many methods exist for finding the best fitting line, the most
common is the least squares method.
Polynomial Trend
Fit the polynomial curve to the historical data and assume
that the future will follow that line
Can be done to any order of polynomial (square, cube, etc)
but higher orders are usually needlessly complex
Logarithmic Trend
Fit an exponential curve to the historical data and assume
that the future will follow that line (works perfectly for the 2nd
example)
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Good News and Bad News
The statistical functions in most commercial
spreadsheet software packages will calculate
many of these for you
These may not work well when there is a lot
of variability in the historical data
If the time series curve does not perfectly fit
the historical data, there is model error.
There is normally model error when trying to
forecast a complex system.
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Methods Used to Account for
Variability
Modeling seasonality/cyclicality
Smoothing techniques
Moving averages
Weighted moving averages
Exponentially weighted moving averages
Filtering techniques
Box-Jenkins
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Econometric Forecasting
Econometric models attempt to quantify the
relationship between the parameter of
interest (output variable) and a number of
factors that affect the output variable.
Example
Output variable
Explanatory variable
Economic activity
Weather (HDD/CDD)
Electricity price
Natural gas price
Fuel oil price
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Estimating Relationships
Each explanatory variable affects the output
variable in different ways. The relationships
can be calculated via any of the methods
used in time series forecasting.
Can be linear, polynomial, logarithmic
Relationships are determined simultaneously
to find overall best fit.
Relationships are commonly known as
sensitivities.
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
End Use Forecasting
End use forecasting looks at individual
devices, aka end uses (e.g., refrigerators)
How many refrigerators are out there?
How much electricity does a refrigerator use?
How will the number of refrigerators change
in the future?
How will the amount of use per refrigerator
change in the future?
Repeat for other end uses
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
The Good News
Account for changes in efficiency levels (new
refrigerators tend to be more efficient than
older ones) both for new uses and for
replacement of old equipment
Allow for impact of competing fuels (natural
gas vs. electricity for heating) or for
competing technologies (electric resistance
heating vs. heat pump)
Incorporate and evaluate the impact of
demand-side management/conservation
programs
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
The Bad News
Tremendously data intensive
Primarily limited to forecasting energy
usage, unlike other forecasting methods
Most long-term planning electricity
forecasting models forecast energy and
then derive peak demand from the energy
forecast
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Example
State Utility Forecasting Group (SUFG)
has electrical energy models for each of
8 utilities in Indiana
Utility energy forecasts are built up from
sectoral forecasting models
residential (econometric)
commercial (end use)
industrial (econometric)
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Another Example
The Energy Information Administrations
National Energy Modeling System (NEMS)
projects energy and fuel prices for 9 census
regions
Energy demand
residential
commercial
industrial
transportation
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
SUFG Residential Sector Model
demographics
households
household income
energy prices
15000
10000
19
67
19
71
19
75
19
79
19
83
19
87
19
91
19
95
19
99
20
03
5000
0
Ye a r s
Annual Use per Non-Electric Space Heating
Custom er
12000
10000
8000
6000
4000
2000
0
19
67
19
71
19
75
19
79
19
83
19
87
19
91
19
95
19
99
20
03
Major forecast
drivers
25000
20000
Ye
ar
electric
non-electric
Annual Use per Electric Space Heating
Custom er
Ye
ar
Residential sector
split according to
space heating
source
Ye a r s
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Residential Model Sensitivities
Source: SUFG 2005 Forecast
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
NEMS Residential Module
Sixteen end-use services
i.e., space heating
Three housing types
single family, multi-family, mobile home
34 end-use technologies
i.e., electric air-source heat pump
Nine census divisions
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
SUFG Commercial Sector Model
Major forecast drivers
floor space inventory
end use intensity
employment growth
energy prices
10 building types
modeled
offices, restaurants,
retail, groceries,
warehouses, schools,
colleges, health care,
hotel/motel,
miscellaneous
14 end uses per
building type
space heating, air
conditioning, ventilation,
water heating, cooking,
refrigeration, lighting,
mainframe computers,
mini-computers, personal
computers, office
equipment, outdoor
lighting, elevators and
escalators, other
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Commercial Model
Sensitivities
Source: SUFG 2005 Forecast
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
NEMS Commercial Module
Ten end-use services
i.e., cooking
Eleven building types
i.e., food service
64 end-use technologies
i.e., natural gas range
Ten distributed generation technologies
i.e., photovoltaic solar systems
Nine census divisions
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
SUFG Industrial Sector Model
Major forecast drivers
industrial activity
energy prices
15 industries modeled
classified by Standard Industrial
Classification (SIC) system
some industries are very energy intensive
while others are not
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Indianas Industrial Sector
Source: SUFG 2005 Forecast
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Industrial Model Sensitivities
Source: SUFG 2005 Forecast
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
NEMS Industrial Module
Seven energy-intensive industries
i.e., bulk chemicals
Eight non-energy-intensive industries
i.e., construction
Cogeneration
Four census regions, shared to nine
census divisions
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Energy Peak Demand
Constant load factor / load shape
Peak demand and energy grow at same rate
Constant load factor / load shape for each
sector
Calculate sectoral contribution to peak demand
and sum
If low load factor (residential) grows fastest, peak
demand grows faster than energy
If high load factor (industrial) grows fastest, peak
demand grows slower than energy
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Energy Peak Demand
Day types
Break overall load shapes into typical day
types
low, medium, high
weekday, weekend, peak day
Adjust day type for load management and
conservation programs
Can be done on a total system level or a
sectoral level
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Load Diversity
Each utility does not see its peak demand at
the same time as the others
2005 peak demands occurred at:
Hoosier Energy 7/25, 6PM
Indiana Michigan - 8/3, 2PM
Indiana Municipal Power Agency 7/25, 3PM
Indianapolis Power & Light - 7/25, 3PM
NIPSCO 6/24, 1PM
PSI Energy 7/25, 4PM
SIGECO 7/25, 4PM
Wabash Valley 7/24, 5PM
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Load Diversity
Thus, the statewide peak demand is less than
the sum of the individual peaks
Actual statewide peak demand can be
calculated by summing up the load levels of
all utilities for each hour of the year
Diversity factor is an indication of the level of
load diversity
Historically, Indianas diversity factor has
been about 96 97 percent
that is, statewide peak demand is usually about 96
percent of the sum of the individual utility peak
demands
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Peak Demand Capacity Needs
Target reserve margin
Loss of load probability (LOLP)
Expected unserved energy (EUE)
Assigning capacity needs to type
peaking
baseload
intermediate
Optimization
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Reserve Margin vs. Capacity
Margin
capacity demand
capacity demand
CM
=
x100%
RM =
x100%
capacity
demand
Both reserve margin (RM) and capacity
margin (CM) are the same when expressed in
megawatts
difference between available capacity and
demand
Normally expressed as percentages
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Reserve Margins
Reserve/capacity margins are relatively
easy to use and understand, but the
numbers are easy to manipulate
Contractual off-system sale can be treated
as a reduction in capacity or increase in
demand
does not change the MW margin, but will
change the percentage
Similarly, interruptible loads and direct load
control is sometimes shown as an increase
in capacity
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
LOLP and EUE
Probabilistic methods that account for the reliability of
the various sources of supply
Loss of load probability
given an expected demand for electricity and a given set of
supply resources with assumed outage rates, what is the
likelihood that the supply will not be able to meet the
demand?
Expected unserved energy
similar calculation to find the expected amount of energy that
would go unmet
Both are used in resource planning to ensure that
sufficient capacity is available for LOLP and/or EUE
to be less than a minimum allowable level
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Capacity Types
Once the amount of capacity needed in a
given year is determined, the next step is
to determine what type of capacity is
needed
peaking (high operating cost, low capital cost)
baseload (low operating cost, high capital
cost)
intermediate or cycling (operating and capital
costs between peaking and baseload)
some planners only use peaking and baseload
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Assigning Demand to Type
SUFG uses historical load shape analysis for
each of the utilities to assign a percentage of
their peak demand to each load type
Percentages vary from utility to utility
according to the characteristics of their
customers
utilities with a large industrial base tend to have a
higher percentage of baseload demand
those with a large residential base tend to have a
higher percentage of peaking demand
Rough breakdown:
baseload 60%, intermediate 15%, peaking 20%
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Assigning Existing Resources
SUFG then assigns existing generation to
the three types according to age, size, fuel
type, and historical usage patterns
Purchased power contracts are assigned
to type according to time period (annual or
summer only) and capacity factor
Power sales contracts are also assigned to
type
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Assigning Capacity Needs to Type
Future resource needs by type are
determined by comparing existing capacity
to projected demand, while accounting for
interruptible and buy through loads, as well
as firm purchases and sales and
retirement of existing units
Breakdown of demand by type is not
projected to change across the forecast
horizon
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
NEMS Electricity Market Module
Eleven fossil generation technologies
i.e., advanced clean coal with sequestration
Two distributed generation technologies
baseload and peak
Seven renewable generation technologies
i.e., geothermal
Conventional and advanced nuclear
Fifteen supply regions based on NERC
regions and sub-regions
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Load Management and
Conservation Measures
Direct load control and interruptible loads
generally affect peak demand but not energy
forecasts
delay consumption from peak time to off-peak time
usually subtract from peak demand projections
Efficiency and conservation programs
generally affect both peak demand and
energy forecasts
consumption is reduced instead of delayed
usually subtract from energy forecast before peak
demand calculations
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Sources of Uncertainty
Exogenous assumptions
forecast is driven by a number of assumptions
(e.g., economic activity) about the future
Stochastic model error
it is usually impossible to perfectly estimate the
relationship between all possible factors and the
output
Non-stochastic model error
bad input data (measurement/estimation error)
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Alternate Scenarios
Given the uncertainty
surrounding long-term
forecasts, it is not
advisable to follow
one single forecast
SUFG develops
alternative scenarios
by varying the input
assumptions
Source: SUFG 2005 Forecast
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Back to the Short Answer
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State Utility
Utility Forecasting
Forecasting Group
Group (SUFG)
(SUFG)
State
Further Information
State Utility Forecasting Group
[Link]
Energy Information Administration
[Link]