Assuring explainability on demand response targeting via credit scoring

Abstract

As data-driven innovation becomes a main trend in the energy sector, explainability of data-driven actions is becoming a major fairness issue for the residential applications, and it is expected to become a requirement for regulatory compliance. Explainability, however, often demands a sacrifice in prediction performance and affects the effectiveness of data-driven actions. In this study, we consider data-driven customer targeting in an incentive-based residential demand response program, and investigate the explainability-performance tradeoff when using simple-rule based, machine learning, and credit scoring methods. Credit scoring, that has been a popular solution in the finance discipline for over 60 years, is a scorecard based modeling method that can surely provide explainability. We first provide the detailed steps of applying credit scoring to the demand response problem. Then, we use a dataset of 14,525 households obtained from a real demand response program and analyze two prediction problems – participation prediction and behavior change prediction. The results show that credit scoring can achieve a comparable performance as the best-performing machine learning methods while providing full explainability. Our results suggest that credit scoring can be a promising explainability option for broader energy sector problems.