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Energy Demand Modeling with Noisy Input-Output Variables

Abstract:
One of the most important challenges facing energy analysts is to predict future energy consumption levels. The volatility of energy prices following the 1973 oil embargo and the unexpected elasticity of demand to higher prices caught most energy forecasters off the mark (see Energy Daily, "How It Didn't Turn Out: The Forecasters Who Failed," 1986). The same can be said of electricity forecasters who consistently overshot growth rates for over a decade despite compelling signs to lower their projections (Uhler and Nelson, 1985), (see Figure 1).

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Energy Specializations: Energy Modeling – Sectoral Energy Demand & Technology; Energy Modeling – Other

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q40: Energy: General, C58: Financial Econometrics, C53: Forecasting Models; Simulation Methods

Keywords: Electricity demand modeling, Forecasting, Noisy input-output variables

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-4


Published in Volume 8, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.