Energy Demand Analysis and

Forecasting
(Energy Planning and Management)

Rabin Shrestha
Visiting Faculty
Pulchowk Campus, 2010

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 Energy Demand Forecasting
• It is the general term used to denote the
estimation of some unknown variable in the
future.
• All organizations need forecasts for
planning purposes.
• Forecasts are necessary inputs to decision
models, and are building blocks for
optimization and simulation models.

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 Sectoral Energy Demand

• Industry
• Agriculture
• Residential
• Commercial/Institutional
• Transportation

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Energy Consumption Sectors in
Nepal

Source : Energy Sector Synopsis Report 2006, Water and Energy Commission Secretariat

4
Energy Sources and Economic Sector

Energy Industry Residential Transport Others

Coal
Oil
Electricity
Solar
…
Total

5
 Forecasting Techniques

• Time Series Method

• Econometric Method
• End Use Method

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 Characteristics of Different Techniques
=============================================================
Characteristics Time Series Econometric End Use
--------------------------------------------------------------------------------------------------------
Best forecast Months to a 1 - 10 years 10 - 30 years
horizon few years

Data requirement Minimal 8 -10 years time Proportional to

series desired detail
Specialized skills Trivial for trend Relatively easy No specialized
to significant training
Suitability for analysis Poor Good for variables Generally the best
of system shocks/scenario explicitly in model method of all
=============================================================
Source: IAEA (1984)

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 Time Series Method
• Time series method search for systematic and recurrent
relationship between demands at various points in time
• Basic principle is energy demand is function of time.
• All information required to produce the forecast in
contained in the time series. No need for other
explanatory variables.
• The predictive accuracy varies form application to
application

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 Time Series Components
• Long Term Trend: any relatively consistent rate of
change from year to year
• Cyclical Behavior: a pattern that repeats itself over
many years, generally with a similar frequency and
amplitude
• Seasonal Variation: a pattern that repeats itself in
some similar fashion between different periods of the
year
• Random variation: Any effect remaining after
adjustment of above effects. Political events, adverse
weather conditions, etc
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Sample Trends

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 Guidelines for applying
time series method
• Avoid using monthly or quarterly data to indicate annual
trends
• Be careful in cases where sporadic changes from period
to period are very large relative to average historical
load
• Adjust data for extraordinary events like wars, strikes,
natural disasters, extreme weather conditions
• Watch for significant economic events like ‘oil price
shock’

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 Smoothing Techniques

• Moving Average
• Exponential Smoothing
• Box-Jenkins Analysis

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 Moving Average
Yt=(Yt-(M-1)/2 + Yt+1-(M-1)/2 + Yt+2-(M-1)/2 +Yt+ (M-1)/2)/M

Y2 = (Y1 + Y2 + Y3)/3
Y3 = (Y2 + Y3 + Y4)/3
Y4 = (Y3 + Y4 + Y5)/3

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 Exponential Smoothing

St = αYt + (1- α)St-1 0 ≤α ≤1

α is smoothing constant

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 t yt moving alpha=0.1 alpha=0.5
1 71 71 71
2 70 71 71
3 69 68.4 71 70
4 68 67.2 70 69
5 64 67.6 70 66 90
6 65 69.4 69 66 Original
7 72 70.8 70 69
85 Moving Average
8 78 73 70 73
9 75 75 71 74 Expo, alpha=0.1
10 75 74.6 71 75 Expo, alpha=0.5
80
11 75 74 72 75
12 70 74 71 72
13 75 73.8 72 74 75
14 75 74.4 72 74
15 74 77.6 72 74
16 78 79 73 76 70
17 86 79 74 81
18 82 78.8 75 82
19 75 77.6 75 78 65
20 73 75 75 76
21 72 73 75 74
60
22 73 73.4 74 73
23 72 75.4 74 73 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
24 77 77.2 74 75
25 83 78.8 75 79
26 81 81.4 76 80
27 81 83 76 80
28 85 83.2 77 83
29 85 78 84
30 84 79 84

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 Other Time Series Models
• Exponential Smoothing Forecasting Model:
– First, second, third -order
• Exponentially Weighted Moving Average
Model
• Holt-Winters and Box-Jenkins Forecasting
Model
• Hybrid Forecasting Model

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 Econometric Method
• Econometric method are usually more sophisticated and in
theory, promise greater forecasting accuracy
• The advantages of econometric method is that they can
take into account a number of important demand
determining variables, such as price and income.
• This approach combines economic theory and statistical
techniques
• Past energy demand is first correlated with other variables
such as prices and income. Then future demands are
related to predicted growth of these other variables.

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 Microeconomics: Consumers and
Producers
• Two key players in the economy: Consumer and
Producer

• Consumer tries to Maximize the satisfaction within

the given expenditure

• Producers tries to Minimize total cost of production

with electricity as one of the inputs

• Therefore, need to examine consumer and

producer demand separately
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 Energy Demand by Household
Eenergy demand by household at any time
Qe=Qe (Pe, Pnon-e, I, Z)

Qe= αI/Pe

Per capita agricultural GDP is used as proxi for

consumer income

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 Market Demand
• Demand for groups of individual consumer
are Market demand
• Requires some form of aggregation
assuming similarity of consumers or firms
D = ∑Qe = No of consumers x Qe

= (Population/HH size)x(Coverage) x (Pe, Per

capita GDP)

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 Energy Demand of a firm

qe = qe(Pe, Pnon-e, x, S)

• Output is measured in terms of Industrial

GDP

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 Market Demand
• Demand for group of firms are Market
demand

• Requires some form of aggregation

assuming similarity of firms

Qe = ∑qe = No of firms · qe

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 Econometric Method
Step 1.Define the likely explanatory variables (GDP,
disposable income, price, etc.)
Step 2. Define the functional relationship of
explanatory variables to electricity demand
Step 3.Research time series of these variables
Step 4.Perform multiple regression analysis
Step 5.Test and validate model

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 Econometric Method
Residential Demand Driving Variables
• Price of Different types of Energy
• Disposable Income per household
• Number of Customers
• Appliance Price Index
• People per Household

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 Econometric Method
Commercial Demand Driving Variables

• Price of Energy
• Occupied Office Space
• Commercial Employment
• Price of Competing Fuels

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 Econometric Method
Industrial Demand Driving Variables
• Level of Industrial Output
• Price of Energy
• Industrial Employment
• Output per Worker
• Earnings in Manufacturing

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 Constant Elasticity Model
• The most widely used formulation has the form:
Q=A0 Xa Yb Zc
ln(Q) = ln A0 + a ln(X) + b ln(Y) + c ln(Z)

Q
Q a 1
 A0Y Z aX
b c Q
a
X X
X

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 Partial Adjustment Model

ln Q(t) = ln A0 + a ln Q(t-1)+ b ln X(t) + c ln Y(t)

– This type of model gives the energy usage response

inertial effects
– A consumer may receive a price signal and not respond
immediately, but take 2-3 years

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 Limitation of Econometric Method

• Past relationship would prevail in future

• The relationship between driving variable is
really causal or is it casual (or coincidental)
• Role of new variable in the future is ignored
• Data availability and accuracy

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 End-Use Method
The basic concept is forecasting the annual
number of additions of energy consuming
devices and energy consumption per device.
These two quantities gives annual energy
consumption.

Also refer to as Engineering Method or

simulation method

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 Types of End-Use
Sector End-Use

Residential/ Commercial Lighting

Space heating/cooling
Cooking
Electro-mechanical
Industrial Indirect heat
Direct heat (high temperature)
Process
Motive power
Off-road industrial vehicle
Lighting
Agriculture Motive power, off-road, process

Transport Passenger travel: car, bus, rail, air,

motorcycle
Freight travel: truck, rail, marine, air 31
 End-Use Model
Total energy consumption by appliance i in year t:

Esit = Nsit ·UFsit · Psi · esit · Hsit

Nit = number of appliances of type i in sector s in year t
UFit = utilization factor (ratio of the number of appliances in use to the total
stock) of appliance i in sector s in year t
Pis = fuel consumption by appliance i in sector s
eit = efficiency improvement factor of appliance i in sector s in year t
Hit = annual operating hours of appliance i in sector s in year t

Total energy consumption by sector s in year t:

Est = ∑Esit
Total energy consumption in year t: Et = ∑Est
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 Residential End-Use Model
• Forecast number of household in service territory
• Determine current level of appliance in the area
• Forecast new energy consuming devices
• Forecast future penetration of appliances
• Determine electricity usage of existing appliances
• Forecast future efficiency improvements in energy
usage per appliance
• Forecast total energy consumption
• Validate the forecast

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 Example of Residential Disaggregated
End-Use Model
National Regional Geographical Urban/Rural Income Level End-use

Country East Plain Urban High Lighting

Cooking
West Hilly Rural Medium
Heating

North Others
Low

South

Central

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 Commercial End Use Model
• Classify building types
• Classify end uses
• Determine building floor area
• Determine commercial end-use penetration rate
and annual energy usage per floor area
• Forecast future building floor area additions
• Forecast future penetration rate and annual
energy end use per floor area
• Forecast commercial consumption
• Validate the forecast

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The End

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