Chapter 1 - Forecasting energy demand with econometrics

Abstract

Demand forecasting is of crucial importance in the liberalized electricity markets. Many electricity markets have been under considerable regulatory transformations like unbundling. Further, issues like energy transition, electronic vehicles, distributed energy sources, environmental regulation and energy storage will alter the nature of the electricity demand in the future. Since supply capacity is almost constant in the short-term, it is important to derive a sharp forecast on demand. However, this is difficult since demand forecasting in the short-term is dependable on many variables (hour, season, working or public holiday day). Further, market stakeholders must decide on future investment. Future capacity is dependable on future demand. Long-term forecasting is difficult and subject to different drivers. We apply econometrics to investigate the relationship between economic (price and GDP), and weather conditions (number of heating and cooling degrees) in three European markets. We investigate the demand’s reactions both in the long- and short-term. Our results differ even if we researched countries with common energy regulations. European Energy Union aims at a fully integrated market. Market stakeholders should take this kind of convergence into consideration but also the still markets’ regionality.