Solving the Utility Load Forecasting Conundrum

Deck: 

A New Framework

Fortnightly Magazine - October 2017
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Load forecasting errors have grown to an unprecedented level, and the corresponding risks are astounding. Flat or declining loads, downward pressure on earnings, customer-owned distributed generation, energy efficiency programs, and new codes and standards are the new normal. Casting blame on the weather is a common refrain.

The time has come for a more comprehensive approach to load forecasting that can address the increasing complexities of the Energy Cloud. If you are a utility executive concerned about suffering significant forecast misses and want guidance on how to fix the problem, keep reading.

See Figure One.

The focus of this article is on long-term forecasting, which we define as anything a year or more in the future. In the 1970s, utilities started using econometric and mixed end-use econometric models to produce long-term forecasts. Out went twelve-inch rulers, a previously powerful tool, as OPEC, inflation, industrial productivity, and energy efficiency entered our vocabulary and were directly addressed by the new methodology.

This econometric forecasting paradigm has since enjoyed a forty-year run as the predominant long-term load forecasting approach. But, as any well-trained econometrician will tell you, the underlying causal modeling structure leads to spectacular failures when its foundation changes.

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