Functional Data Approach for Short-Term Electricity Demand Forecasting

Abstract

In today’s liberalized electricity markets, modeling and forecasting electricity demand data are highly important for the effective management of the power system. However, electricity demand forecasting is a challenging task due to the specific features it exhibits. These features include the presence of extreme values, spikes or jumps, multiple periodicities, long trend, and bank holiday effect. In addition, the forecasts are required for a complete day as electricity demand is decided a day before the physical delivery. Therefore, this study aimed to investigate the forecasting performance of models based on functional data analysis, a relatively less explored area in energy research. To this end, the demand time series is first treated for the extreme values. The filtered series is then divided into deterministic and stochastic components. The generalized additive modeling technique is used to model the deterministic component, whereas functional autoregressive (FAR), FAR with exogenous variable (FARX), and classical univariate AR models are used to model and forecast the stochastic component. Data from the Nord Pool electricity market are used, and the one-day-ahead out-of-sample forecast obtained for a whole year is evaluated using different forecasting accuracy measures. The results indicate that the functional modeling approach produces superior forecasting results, while FARX outperforms FAR and classical AR models. More specifically, for the NP electricity demand, FARX produces a MAPE value of 2.74, whereas 6.27 and 9.73 values of MAPE are obtained for FAR and AR models, respectively.