As electricity cannot currently be stored in large amounts, supply and demand must always be matched or balanced by system operators. Accurate energy demand forecasting plays a key role in this.
The liberalization of the electricity industry and introduction of competition in recent decades has introduced wholesale electricity markets where suppliers, generators, traders and customers buy and sell energy. Electricity retailers, investment banks and large energy users trade large quantities of electricity and make deals that cover timescales ranging from several years ahead to on-the-day spot trading.
Wholesale prices are highly sensitive to available production and transmission capabilities. Forecasting energy demand is a key skill for organizations involved in the business. Long-term energy demand forecasting (five to 20 years) is needed for resource management and development investments. Mid-term forecasting (one month to five years) is used in planning power production resources and tariffs, while short-term forecasting (up to a week ahead) is mostly used for scheduling and analyzing the distribution network.
For power plants operating in competitive regions, accurate prediction of plant capacity and fuel consumption under conditions for the days ahead is essential. Where priority dispatch is given to renewables, fossil fuel generators have to be flexible. Forward bids for gas-powered generation consider the likely future demand and availability of renewable energy.
This predictive work enables operators to look at the cost of stop-go generation and determine how many start-ups they want to make over the following weeks. This enables them to decide how best to operate. For example, it helps them determine whether to have a low load parking position, or reduce load to a minimum and be on standby to be paid for fast ramp if immediate need arises.