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Modeling peak electricity demand: A semiparametric approach using weather-driven cross-temperature response functions

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  • Miller, J. Isaac
  • Nam, Kyungsik

Abstract

We propose a novel method to model daily peak electricity demand using temperature and additional hourly and daily weather covariates, such as humidity and wind speed. Rather than enter into the temperature response function additively, the additional covariates may flexibly impact the demand response to temperature. Such flexibility allows differential responses to the actual temperature based on the heat index and wind chill factor, for example. Most notably, we find that ignoring humidity substantially underestimates the effect of high temperatures, while ignoring the effect of cloud cover overestimates the effect of low temperatures. Time of day also matters: a demand response to the same temperature may be different at different times of day. Moreover, accounting for weather-related covariates improves the model’s ability to explain daily peak demand.

Suggested Citation

  • Miller, J. Isaac & Nam, Kyungsik, 2022. "Modeling peak electricity demand: A semiparametric approach using weather-driven cross-temperature response functions," Energy Economics, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:eneeco:v:114:y:2022:i:c:s0140988322004212
    DOI: 10.1016/j.eneco.2022.106291
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    More about this item

    Keywords

    Daily peak electricity demand; Temperature response function; Cross-temperature response function; Environmental effects on electricity demand;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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