A Vector Autoregressive Model of Forecast Electricity Consumption in France

This provides a VARX approach for the estimation of electricity demand in metropolitan France. Our methodology takes into account the complex relation- ship between weather variables and electricity demand, especially in the short and medium run, and the correlation in the longer run, between electricity and macroeconomic variables. We are able to provide a reliable conditional forecasting that, within the VAR framework, takes into account the common dependency of electricity consumption and other variables. While the VAR approach is not novel within this literature, our main contributions lie on the use of exible functions that capture the role of weather to explain electricity consumption together with macroeconomic trend and cycle variables, and on the use of very detailed and comprehensive data on actual metered consumption of electricity in France. In- sample and out-sample forecasts provide evidence that our method is reliable for predicting future scenarios conditional on exogenous variables.