Challenges in Forecasting Electric Load in Deregulated Markets

By Podraza, Ernie | The Journal of Business Forecasting, Fall 2006 | Go to article overview

Challenges in Forecasting Electric Load in Deregulated Markets


Podraza, Ernie, The Journal of Business Forecasting


The biggest challenge in forecasting electric load is predicting weather ... generally, there is less error when forecasts are prepared at the aggregate level ... since electricity cannot be stored, the cost of forecast error in electricity business is very high.

Reliant Energy provides energy products and services to approximately 1.9 million customers in the deregulated markets known as ERCOT (Electric Reliability Council of Texas) and PJM Interconnection (Pennsylvania, New Jersey, and Maryland). The customers in the ERCOT market range from residences and small businesses to large commercial, governmental, industrial, and institutional customers in Texas; PJM Interconnection customers are commercial, governmental, and industrial. Reliant Energy is one of the largest independent power producers in the nation with approximately 16,000 megawatts (MW) of power generation capacity from continuing operations or under contract across the United States. It ranked 220 on the 2006 Fortune 500 List.

ERCOT is the organization entrusted to keep electric power flowing to approximately 20 million Texas customers-representing 85 percent of the state's electric load and about 75 percent of the Texas land area. As the Independent System Operator (ISO) for its region, ERCOT manages the scheduling of power on an electric grid consisting of 70,000 MW of active generation capacity and 38,000 miles of transmission lines. ERCOT also manages financial settlements for the hundreds of market participants in Texas's deregulated wholesale bulk power and administers customer switching. As one of 10 regional reliability councils in North America, ERCOT monitors and enforces industry reliability standards for grid and utility operations. ERCOT is a non-profit corporation regulated by the Public Utility Commission of Texas (PUCT) and is subject to oversight by the Texas Legislature. ERCOT's members include retail consumers, investor- and municipal-owned electric utilities, rural electric coops, river authorities, independent generators, power marketers, and retail electric providers.

PJM is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia. Acting neutrally and independently, PJM operates the world's largest competitive wholesale electricity market and ensures the reliability of the largest centrally dispatched grid in the world. PJM's members/customers include power generators, transmission owners, electricity distributors, power marketers, and large consumers. PJM's role as a federally regulated RTO means that it acts independently and impartially in managing the regional transmission system and the wholesale electricity market. PJM serves about 51 million people. The company dispatches 164,634 MW of generating capacity over 56,070 miles of transmission lines.

A forecaster in an electric company in deregulated markets faces a number of challenges; the most important among them are the following.

1. Cannot store electricity

2. Difficult to predict weather

3. Different meter types

4. New or lost contracts

5. Mass market customer switching

6. Market clearing price fluctuations

7. Regulated rules for financial settlement

8. Data problems

9. Models

CANNOT STORE ELECTRICITY

Unlike many other products, electricity cannot be stored for distribution to customers. This means that we cannot hold inventory as a buffer to cope with errors in forecasts. On the other hand, electricity moves at the speed of light, making it possible to deliver to the customer's doorstep in no time. Because of this, we need to forecast the needs of all the customers every hour, on the hour, on a continuous basis.

Hourly electric forecasts are very important to the supply desk personnel who are either dispatching electricity from the company-owned generators or procuring power with a purchased-power contract with a third-party provider. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Challenges in Forecasting Electric Load in Deregulated Markets
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.