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Short Term Energy Forecasting with Neural Networks

Artificial neural networks are beginning to be used by electric utilities, to forecast hourly system loads on a day ahead basis. This paper discusses the neural network specification in terms of conventional econometric language, providing parallel concepts for terms such as training, learning, and nodes in the, hidden layer. It is shown that these models are flexible nonlinear equations that can be estimated using nonlinear least squares. It is argued that these models are especially well suited to hourly load forecasting, reflecting the presence of important nonlinearities and variable interactions. The paper proceeds to show how conventional statistics, such as the BIC and MAPE statistics can be used to select the number of nodes in the hidden layer. It is concluded that these models provide a powerful, robust and sensible approach to hourly load forecasting that will provide modest improvements in forecast accuracy relative to well-specified regression models.

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Energy Specializations: Energy Modeling – Forecasting and Market Analysis; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
D4 -
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: electricity load forecasting, neural networks, electric utilities

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No4-2

Published in Volume19, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.