Neural Networks in Energy-Demand Forecasting

Abstract
This paper will determine whether neural networks (NNs) are a suitable modeling method for both short-term and long-term forecasting of energy-demand. While the energy crises of the past decade have pushed the industry to find a better indicator of anomalous peak load consumptions, it is unclear whether there is a single model that is effective for both short-term and long-term usage. With technology and mathematics at the forefront of forecasting methodology, it is crucial to understand the pivotal role NNs play in both short-term load forecasting (STLF) and long-term load forecasting (LTLF). Primarily examining the applications of both time-series, this paper will analyze the effectiveness of NNs through case studies in Iran and Italy. Overall, evidence and analysis show that NNs can be used to determine both types of energy-forecasting and that this method should be used in the future to do so.

Key words neural network (NN), energy-demand, long-term energy forecasting, short-term load forecasting (STLF), multi-layer perceptron (MLP)

Introduction Historical Context: What affects peak load consumption?

As the worlds population continues to grow, the need for appropriate energy-demand management has become substantially more apparent for the curbing of the high-capacity usage, especially during peak consumption periods. This past decade alone has seen the biggest and most widespread power usage blackouts in history. To a certain extent, it is expected that peak consumption will occur during high-energy usage months including days of extreme temperatures that require widespread intensive use of HVAC (Heating, Ventilation, and Air Conditioning) units. In this respect, past load and weather data are the main inputs necessary to any forecasting model. Considering the 2003 blackouts in Italy, which occurred unexpectedly in early June (as opposed to the typically high demand August season), it is evident that severe weather conditions are crucial in demand management.1 However, further examination into large power outages shows that several concurrent factors are the true cause of high electrical demand. For example, the Northeast Blackout of

2003 had several aspects contributing to the power loss of nearly 50 million people in the United States and Canada. Circumstances included extremely hot weather, along with heavily loaded transmission lines, local transmission systems forced to meet overwhelmingly large interregional power transfers, lags in operator response, and malfunctioning automatic controls. 2 Recognition of these multiple factors is key to determining how to accurately plan both shortterm and long-term energy demand management; the question is, how is this best accomplished, and is there a universal model that is effective for both periods of load consumption?

What are NNs?

Over the past 30 years, neural network research has grown to become the cornerstone of forecasting methods. Neural network models are inspired by the biological neurons and the connections that they make in the brain. Like the axon and dendrites of a neuron, input and output variables can be multiple for any one given model. Most artificial neural networks use network architecture known as multi-layer perceptrons (MLPs), in which data flows only forward from input to output through a basic processing unit, known as the neuron. Because of their inherent nonlinearity, neural networks are viewed as universal approximators of functions. 3 This mathematical technique is especially unique because it can learn as input changes are made. The neural network can be transformed into any time-series function, and is able to shadow these functions situationally; it has been shown to approximate ordinary least squares and nonlinear least squares regression, nonparametric regression, and Fourier series analysis. 3 In general forecasting practice, neural network models has been particularly successful in comparison to traditional statistical methods. In one such study by Hill, OConnor, and Remus, the applications of NNs are compared to those methods used in the well-known M-competition of 1982. The researchers framed their neural network model using back propagation to take the most successful fragments of 5 traditional statistical models as neuron inputs. Once the model was run, it was compared to the results of the actual M-competition models using the basis of mean absolute percentage error (MAPE). In this case, the MAPE of neural networking was compared to the mean errors of the 5 M-competition methods to determine the strengths of forecasting accuracy. As seen in the table below 3, the neural network performed far better than all other methods on both a quarterly and monthly (medium-term) basis, with a much lower

MAPE of 15.3 and 13.6, respectively. Meanwhile the annual (long-term) forecast performance of the neural network model was average in comparison to the other techniques. This study, along with many others with similar results, provides the basic understanding that NNs are effective, and brings forth the question of their forecasting accuracy in different disciplines. Forecasting method Neural Network Deseasonalized Exponential Smoothing Box-Jenkins Deseasonalized Holts Naive Annual 14.2 15.9 15.7 12.1 16.4 Quarterly 15.3 18.7 20.6 26.9 20.0 Monthly 13.6 15.2 16.4 19.2 27.0

Applications of Neural Networks in Energy-Demand Short-term

As was seen in the study by Hill, OConnor, and Remus, shorter-term neural networking has a very low MAPE and is therefore very effective. While this study confirmed success with little error in quarterly and monthly forecasting, the needs of the energy-demand industry require more precise forecasts to predict daily, even hourly usage. The research of the Universita degli Studi di Palermo implemented a 2 layered NN to forecast demand based on climate variability, weather data, and historical load data from 2001 to 2003 in the town of Palermo, Italy. 1 Using a simple 2 layered MLP with an input and hidden layer, the model carried many of the same characteristics as the previous case. It was established using back propagation and a forward-feed approach, while incorporating a Self Organizing Map (SOM) to collect raw data, normalize it, and organize it into meaningful clusters to input to the NN architecture. This model, applied to an hourly forecast, was able to closely mirror that of the actual load performance for a given day, even accounting for anomalous behavior. As reflected in the graph below, the forecasted load of power usage over a 24-hour period, in this case for June 30, 2001, closely mirrors the days actual load consumption. The trained neural network was able to successfully project 3 years out from the historical data set, and provide an average error of only 1.97%. 1 Furthermore, this studys success speaks to its general ability for precision forecasting, as it was able to so closely

match actual data using a very limited amount of data for a small suburb with a highly unpredictable consumption patterns. Based on this study, it is clear that it is not so much the historical data and the amount available that influence suitable results, but rather the organization of the data into useful and meaningful ways for the neural network to interpret.

Comparison between actual and forecasted loads for June 30, 2001

Long-term

In a study using real data in Iran from 1979 to 2003, researchers used an algorithm based on artificial neural networks (ANNs) and analysis of variance (ANOVA) to forecast long-term electricity consumption in high-energy consuming industries. While the STLF primarily revolves around weather variability and socioeconomic situations, long-term energy consumption especially in high-energy consuming industries, has far more heterogeneity and is thus subject to further changes. Because of this heterogeneity and the emphasis on aggregate energy consumption for LTLF, the most commonly used forecasting models have been regression and time-series based. However, due to the nonlinearity of long-term consumption, ANNs have recently come to the forefront of this type of forecasting, as they can be utilized in conjunction

with ANOVA to produce near-perfect results. 4 Using a more complex 3 layer MLP with an input layer and two hidden layers (as opposed to the simple two hidden layers of the previous case), this ANN was able to generate a precise prediction with even less errors. As shown by the graph below, the use of ANNs with ANOVA leads to very little error in comparison to the actual historical data values for electricity demand. When compared to the generally used regression models, ANNs have a much higher accuracy, with a MAPE that is 87% less than that of a regression. In addition, the mean absolute error (MAE) and the mean square error (MSE) of the neuron-based MLP were significantly lower than the errors of the regression model. 4 This technique reduces the amount of cumbersome data entry and analysis, and additionally brings

forth more accurate data than that of traditional LTLF models.

Conclusion Why should NN models be considered right now?

Overall, the use of neural networks has grown substantially, particularly in the field of energy forecasting. The need for the most precise forecasting models has been the focus of not only energy demand management providers, but also of lawmakers, nuclear operators, and commercial and residential electricity consumers, as the effects of power outages are extensive and costly. During any extended period of time without electric power, businesses lose money

and real-time streaming data that are difficult, if not impossible, to recover. The Northeast Blackout of 2003 was estimated to have cost between 4 and 6 billion dollars over the course of only a 31-hour power outage.5 A total of 49,400 megawatts were lost in the United States alone (based on reported losses from PJM, NYISO, MISO, and ISO NE), impacting major cities such as New York City and Boston, while roughly 70,500 MW were lost overall.6 Blackouts cause concern for nuclear operators, as power plants are stressed to the point of overheating and are forced off-service for hours, if not days.6 Situations of large regions left without power indicates a vulnerability that if left unsolved, could lead to threats to national security, in addition to the strain of economic and information loss. Based on these various impacts, it is essential for energy demand response providers to accurately predict energy usage and best prepare a region to avoid a blackout.

How should neural network methods be further examined?

While the need for short-term forecasting has been emphasized by the large, widespread power outages of the past decade, it is equally important to continue researching better forecasting methods for the long-term as well. These methods, largely researched following major power outages in 2003, have since lost importance in the energy demand management field as the fears of energy crisis have subsided. However, managing electricity demand continues to be pressing problem, with 25 million people experiencing power loss in 2012 from the U.S. alone. 5 As has been shown in these studies, NNs provide an effective modeling technique that, when used in conjunction with other analytical methods, produce very accurate forecasts. However, each of the aforementioned cases has several variables that could significantly impact the ability of NNs to predict with high accuracy. In terms of short-term forecasting, research with larger amounts of data will most likely yield a lower mean error, but conclusive evidence is still in progress. Studies in STLF should also examine other measures of accuracy, such as MAE and MSEboth of which were used in the LTLF case reviewed above. Long term forecasting, particularly in the case of Azadeh, Ghaderi, and Sohrabkhani, should be tested further by combining NNs with other effective prediction methods, such as genetic algorithms and particle swarm optimization. A study of this type should also be conducted with the incorporation of SOMs to better parallel the STLF case, and to more easily compare results and identify input similarities. Overall, the use of NN modeling has been proven to be an

effective method for both STLF and LTLF, but it is important to continue research to confirm if similar models can be used for both applications to reduce input and analysis needs.

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