Prediction of daily peak electricity demand in South Africa using volatility forecasting models

Abstract

Daily peak electricity demand forecasting in South Africa using a seasonal autoregressive integrated moving average (SARIMA) model, a SARIMA model with generalized autoregressive conditional heteroskedastic (SARIMA–GARCH) errors and a regression-SARIMA–GARCH (Reg-SARIMA–GARCH) model is presented in this paper. The GARCH modeling methodology is introduced to accommodate the possibility of serial correlation in volatility since the daily peak demand data exhibits non-constant mean and variance, and multiple seasonality corresponding to weekly and monthly periodicity. The proposed Reg-SARIMA–GARCH model is designed in such a way that the predictor variables are initially selected using a multivariate adaptive regression splines algorithm. The developed models are used for out of sample prediction of daily peak demand. A comparative analysis is done with a piecewise linear regression model. Results from the study show that the Reg-SARIMA–GARCH model produces better forecast accuracy with a mean absolute percent error (MAPE) of 1.42%.