ORGANIZED BY UNIVERSITI TENAGA NASIONAL, BANGI, SELANGOR, MALAYSIA; 28-30 AUGUST 2006

Forecasting the Maximum Demand of Electricity in Malaysia

Fadhilah Abd. Razak1, Mahendran Shitan2, Amir .H. Hashim3, Izham. Z. Abidin3
1
Department of Science & Mathematics, College of Engineering,
Universiti Tenaga Nasional. fadhilah@uniten.edu.my
2
Department of Mathematics, Faculty of Science, Universiti Putra Malaysia &
Statistics & Applied Mathematics Laboratory, Institute for Mathematical Research
(INSPEM),Universiti Putra Malaysia. mahen@fsas.upm.edu.my.
3
Department of Electrical Engineering, College of Engineering,
Universiti Tenaga Nasional. amir@uniten.edu.my, izham@uniten.edu.my

Keywords: System load forecasting, ARMA models,
Parameter estimation, AICC statistic, Validation Tests
Abstract
Forecasting the maximum demand of electricity is important
for power system planners and demand controllers in ensuring
that there would be enough generation to cope with the
increasing demand. Accurate demand forecasting can lead to
a better budget planning, maintenance scheduling and fuel
management. This paper presents an attempt to forecast the
maximum demand of electricity by finding an appropriate
time series model. The methods considered in this study
include the Naïve method, Exponential smoothing, Holt’s
Linear method, Seasonal Holt-Winters, ARMA and ARAR
algorithm. The performance of these different methods was
evaluated by using the forecasting accuracy criteria namely,
the Mean Absolute Error (MAE), Root Mean Square Error
(RMSE) and Mean Absolute Percentage Error (MAPE).
Based on these three criteria the pure autoregressive model
with an order 2, or AR (2) emerged as the best model for
forecasting. The forecast is likely to increase over the coming
months and it is expected to be in the vicinity of 10659 MW
to 14072 MW at 95 % confidence for the month of December
2006.
1 Introduction
Malaysia’s National electricity utility company (TNB) is the
largest in the industry, serving over six million customers
throughout Malaysia. TNB’s core activities are in the
generation, transmission, and distribution of electricity. The
Transmission Division is responsible for the whole spectrum
of transmission activities ranging from system planning,
evaluating, implementing and maintaining the transmission
assets. One of the requirements of the system planning is
load forecasting.
Load forecasting is a process of predicting the future load
demands. It is important for electricity power system planners
and demand controllers in ensuring that there would be
enough supply of electricity to cope with an increasing
demand. Load forecasting can also determine which
generators need to be dispatched, or kept as a backup or on
spinning reserve status [2]. Thus, accurate load forecasting
can lead to an overall reduction of cost, better budget
planning, maintenance scheduling and fuel management.
Load forecasts can be divided into three categories: short-
term (STLF), medium- term (MTLF), and long-term forecasts
(LTLF). STLF, which is usually from one hour to one week,
is concerned with forecast of hourly and daily peak system
load, and daily or weekly system energy. It is needed for
control and scheduling of power system, and also as inputs to
Load flow study or contingency analysis. Some of the
techniques used for STLF are multiple linear regression,
stochastic time series and artificial intelligence based
approach. MTLF relates to a time frame from a week to a
year and LTLF relates to more than a year. MTLF and LTLF
are required for maintenance scheduling, fuel and hydro
planning, and generation and transmission expansion
planning. The common techniques used for MTLF and LTLF
are time trend extrapolation and econometric multiple
regression [2, 9, 10, 11].
However, time series modelling is one of the popular methods
used by many researchers for load forecasting. Cho et al [7]
proposed ARIMA model and transfer function model for
customer load forecasting during one week by considering
weather-load relationship. Results showed that ARIMA
Transfer Function. Models could achieve better accuracy of
load forecast than the traditional ARIMA model. Amjady [8]
proposed a modified ARIMA, which combined the operators’
estimation as the initial forecasting with the temperature and
load data in a multi-variable regression process. The
forecasting accuracy of the modified ARIMA was found to be
better than ARIMA. Carter and Zellner [5] found out that the
non-linear least squares estimation of the ARAR estimation of
the parameters required less iteration than ARMA estimates.
Gould et al [6] discussed the weakness of Holt-Winters (HW)
exponential smoothing approach in forecasting the hourly
electricity demand. They claimed that HW failed to pick up
the similarities from day-to-day at a particular time and
proposed a new approach for forecasting time series with
Multiple Seasonal Pattern (MS). The MS model, which
employed single source of error models, provided more
accurate forecasts than the HW models because of its
flexibilities. The MS model allowed for each day to have its

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 ORGANIZED BY UNIVERSITI TENAGA NASIONAL, BANGI, SELANGOR, MALAYSIA; 28-30 AUGUST 2006
own hourly pattern or to have some days with the same
pattern.
In this paper, an attempt was made to forecast the maximum
demand of electricity by finding an appropriate time series
model. The time series models considered in this study
include Naïve, Holt’s Linear, Seasonal Holt-Winters, ARMA
and ARAR algorithm. The performance of these different
models will be evaluated using the forecasting accuracy
criteria namely, the Mean Absolute Error (MAE), Root Mean
Square Error (RMSE) and Mean Absolute Percentage Error
(MAPE).
2 Time series Modelling
A time series is a set of observations xi , each one being
recorded at a specific time t and denoted by { X t } . It can be
represented as a realization of the process based on the
general model called Classical Decomposition Model, and
specified as follows:
X t = mt + st + Yt (1)
t = 1, 2, … , n. where mt is a trend component , s t is a
seasonal component and Yt is a random noise component
which is stationary [1].
The goal for a time series modelling is to predict a data series
that typically not deterministic but contain a random
component. The deterministic components, mt and s t need
to be estimated and eliminated in the hope that the residue or
noise component Yt will be stationary time series. The time
series { X t } is said to be stationary if the mean and the auto-
covariance function of { X t } are independent of time. A non-
stationary time series needs to be transformed to a stationary
time series. Then only a satisfactory probabilistic model can
be determined for the process Yt to analyse its properties and
to use it for prediction purposes.
3 ARIMA Processes
ARIMA (auto-regressive integrated moving average)
processes are a major part of time series analysis and used for
a wide range of non-stationary series. Each ARIMA process
has three parts; the autoregressive part (or AR), the integrated
(or I) part, and the moving average (or MA) part. The models
are denoted by ARIMA (p, d, q). ARMA (auto- regressive
moving average) models denoted by ARMA (p, q) come from
an important parametric family of linear time series models,
which provide a general framework for studying stationary
processes. Method of differencing is introduced to transform
the non-stationary ARIMA into stationary series ARMA and
parameter d stands for the degree of first differencing
International Conference on Energy and Environment 2006 (ICEE 2006)
involved. In other words, when d = 0, the model represents a
stationary process [3, 4].
{ X t } is an ARMA (p, q) if { X t } is stationary and if for
every t
X t − φ1 X t −1 − ... − φ p X t − p = Z t + θ1Z t −1 + ... + θ q Z t − q , (2)
where {Z t } ∼ WN (0, σ 2 ) and the polynomials
(1 − φ1 z − ... − φ p z p ) and (1 + θ 1 z + ... + θ q z q )
have no common factors [1].
The process { X t } is said to be an ARMA (p, q) process with
mean μ if { X t − μ} is an ARMA (p, q) process and
conveniently written in the more concise form of
φ ( B) X t = θ ( B) Z t . (3)
where
φ (.) and θ (.) are the pth and qth degree polynomials
φ ( z ) = 1 − φ1 z − ... − φ p z p
θ ( z ) = 1 + θ 1 z + ... + θ q z q
B is the backward shift operator
(B j X t = X t− j , B j Z t = Z t− j , j = 0,±1,...) .
The time series { X t } is said to be an auto-regressive process
φ ( z ) = 1 and a moving average
of order p (or AR (p)) if
process of order q (or MA (q)) if θ ( z ) = 1 [1].
4 Methodology
This section describes the procedures of establishing an
appropriate ARIMA model for load forecasting. The
procedures include: data plotting, data transformation, model
selection, parameter estimation, validation tests, and
forecasting. Analysis is done using ITSM (Interactive Time
Series Modelling). ITSM is a totally windows-based
computer package for univariate and multivariate time series
modelling and forecasting.
The load data used in this paper is actually a Power Load
Profile for a utility company. It represents the monthly mean
maximum demand measured in megawatts (MW) in 52
months from September 2000 to December 2004. The time
series plot of the monthly mean maximum demand is given in
Figure 1. It appears from the graph that the maximum
demand has an upward linear trend with a considerable
constant variability. There is a seasonal pattern with a few
troughs occurring in between November to February each
year. This may be due to holidays, namely school holidays,
Hari Raya and Chinese New Year. These patterns reveal that
7
 ORGANIZED BY UNIVERSITI TENAGA NASIONAL, BANGI, SELANGOR, MALAYSIA; 28-30 AUGUST 2006

the series is not stationary and hence need to be transformed
before attempting to fit a stationary model.
11000.
10500.
10000.
9500.
9000.
8500.
8000.
0 10
Figure 1: The monthly maximum demand
Transformations are applied in order to produce data that can
be successfully modelled as stationary time series. Since the
series come from a monthly data with an annual seasonal
pattern, it shows a seasonality of period 12. Thus, there is
need to use a method of differencing at lag 12 and then
followed by a differencing at lag 1, in order to remove the
linear trend. Figure 2 shows the differenced series derived
from the monthly mean maximum demand with no apparent
deviations from stationarity.
The graphs of the sample ACF and PACF shown in Figure 3
can suggest an appropriate ARMA model for the data. The
Series
horizontal lines on the graph display the bounds ± 1.96 / n ,
which are approximate 95 % bounds for the autocorrelations
of a white noise sequence [1]. The ACF will represent a pure
MA (q) model and the PACF will represent a pure AR (p)
model. Since the ACF of { X t } vanishes for lags greater than
1 and the PACF of { X t } vanishes for lags greater than 2, MA
(1) model and AR (2) models are feasible. However, other
models such as AR (1) and a combined model of ARMA
20 30 40 50
(2, 1) might also be considered as the potential models.
Even if the sample ACF or PACF does suggest an appropriate
ARMA model for the data, it is still advisable to explore other
models. The AICC criterion provides a rational criterion for
choosing between competing models and it is an
asymptotically biased estimate of the fitted model relative to
the true model [1]. AICC statistic is given by
⎡ 2n( p + q + 1) ⎤
AICC = −2 ln Likelihood (φˆ,θˆ,σˆ 2 ) + ⎢ ⎥ (4)
⎣ n − ( p + q) − 2 ⎦
where φˆ = a class of AR parameters,
Series

1000.

800.
θˆ = a class of MA parameters,
600.

400.
σˆ 2 = estimated variance of white noise,
200. n = number of observations,
0.

-200.
p = order of AR component,
-400. q = order of MA component.
-600.

-800.

-1000.

-1200.
‘Likelihood ( φˆ , θˆ , σˆ 2 )’ is a measure of the plausibility of the
observed series given the parameter values of φˆ , θˆ , σˆ 2 [1,4].
15 20 25 30 35 40 45 50

Figure 2: The differenced series after a lag 12 and 1.

These differenced series, which are called residuals, have to
be ‘mean-corrected’ by subtraction of the sample mean, so
that it is appropriate to fit a zero-mean ARMA model to the
adjusted data. This is essential for the model selection. The
selection of the appropriate parameters of ARMA (p, q)
model depends on a variety of tools, which include the
sample ACF (autocorrelation function), the sample PACF
(partial autocorrelation function) and the AICC statistic [1].
1.00
Sample ACF
1.00
.80
.60
.40
.20
Smallness of the AICC value is indicative of a good model
and this can be achieved using the maximum likelihood
estimation, which estimates the parameters iteratively.
Once a model is obtained, it is important to check for the
appropriateness of the model. If the data were truly generated
by the fitted ARMA (p, q) model with white noise
sequence {Z t } , then for large samples the properties of the
residuals should reflect those of {Z t } . Various validation
Sample PACF
tests are performed on the suggested models. These tests are
.80
the McLeod-Li Portmanteau Test, the Turning Point Test, the
.60
Difference Sign Test and the Rank Test. The residuals of the
.40
suggested models have to pass all the tests before it can be
.20

.00 .00
considered as the best model for forecasting [1].
-.20 -.20

-.40 -.40
If there are instances where many models pass the validation
-.60 -.60 tests, the most adequate model can still be assessed by
-.80 -.80 looking into the forecasting accuracy criteria. Table 1
-1.00 -1.00
presents three common errors as the accuracy criteria based
0 5 10 15 20 25 30 35 40 0 5 10 15 20 25 30 35 40
)
Figure 3: The sample ACF and PACF of the differenced on the actual observation, xi and the predicted value x [4].
series The model that has the lowest value found in all three will be
the most appropriate model.

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1 MAE ( Mean n
) and α and β are two smoothing constants varying from 0 to 1
Absolute Error) ∑| x
1
i
−x| [4].

n 5.3 Holt- Winter’s Trend and Seasonality Method

2 RMSE (Root Mean (HW)
n
)
Square Error ∑ (x
1
i − x) 2
The HW method is an extension of Holt’s Linear Method that
n considers series with trend and seasonality. The method is
) based on three smoothing equations – one for the level, one
3 MAPE (Mean n
xi − x
Absolute percentage ∑1 x |
| for trend, and one for seasonality, and it can be either additive
or multiplicative seasonality. Multiplicative seasonality is
Error) i
x100% considered in this paper since it is more common. The basic
n equations are:

Yt
Table 1: Common Errors as the Accuracy Criteria Level: Lt = α + (1 − α )( Lt −1 + m t −1 ) (9)
S t −s
5 Comparison with other forecasting techniques Trend: m t = β ( Lt − Lt −1 ) + (1 − β )m t −1 (10)
Yt
Comparisons are made between the ARMA models with the Seasonal: S t = γ + (1 − γ ) S t − s (11)
other time series models such as Naïve, Holt’s Linear, Holt- Lt
Winter’s Trend and Seasonal, and ARAR forecast. These Forecast: Ft + q = ( Lt + m t q) S t − s + q (12)
methods are briefly described as follows:
where s is the length of seasonality , Lt is the level of the
5.1 Naïve series, mt is the trend , St is the seasonal component, and Ft+q
is the forecast for q periods ahead [4].
Naïve forecasting neglects all past data except for the time
period that occurred last. It may be adequate for dealing with 5.4 ARAR forecast
many of the minimal consequence decisions of daily life and
more effective at short-term applications. The next forecasted ARAR model is suitable for forecasting the series {Yt}
period Ft +1 , is based on the most recent observation Yt , the whereby a memory- shortening transformation sequence has
relation between them is given by the following equation: been applied. The memory-shortened series is

Ft +1 = Yt (5) S t = Yt +ψ 1Yt −1 + ...ψ k Yt − k (13)

If recent observations are given more weight in forecasting where 1,ψ 11 ,...ψ k are the coefficients of the chosen filter and
than the older observations, the method will be called as
Simple Exponential Smoothing. However this method works t = 1, …, T. [1]. Let S denote the sample mean of
best for data, which have no trend, no seasonality, or other S 1 ,..., S T . Thus the fitted model is given by
underlying pattern [4].
X t = φ1 X t −1 + φ l1 X t −l1 + φl 2 X t −l2 + φl 3 Xt − l 3 + Z t , (14)
5.2 Holt’s Linear Method

Holt’s Linear Method is an extension to simple exponential
smoothing to allow data forecasting that has trends. The
forecast is based on two components – level and trend. The
level denoted by Lt is a smoothed estimate of the series and
the trend denoted by mt is a smoothed estimate of the average
growth at time t. Thus, the forecast of q periods ahead, Ft + q
is given by
Ft + q = L t + m t q
where
Lt = αYt + (1 − α )( Lt +1 + m t −1 )
m t = β ( Lt − Lt −1 ) + (1 − β )m t −1
where X t = S t − S , {Zt} ∼ WN (0,σ2), and for given lags l1,
l2, and l3 , the coefficients φj and ,σ2 are from Yule-Walker
estimation [1].
6 Results and Discussion
In this section, the results of the study are presented. The
estimated models for forecasting the maximum demand of
electricity with their corresponding AICC values are given in
(6)
Table 2. Clearly AR (2) has the minimum AICC value and
can be considered as the most appropriate model if compared
(7) among the other models under ARMA. The equation for the
model is given by
(8)
X(t) = - .9381 X(t-1) - .4508 X(t-2) + Z(t) (15)

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where Z(t) ∼ WN( 0, 61556.9 ).
Model Equation
1 AR(1)X(t) = - .6427 X(t-1) + Z(t)
X(t) = - .9381 X(t-1) -
2 AR(2) .4508 X(t-2) + Z(t)
Based on Equation (15), the forecasted values and the 95 %
prediction bounds are computed and presented in Table 4.
The percentage difference of each forecast value compared to
AICC the actual value is less than 1 %. Figure 4 shows the
forecasts for 8 months as given by Table 4.
555.08
548.44 11800.

3 MA(1) X(t) = Z(t) - .7520 Z(t-1) 552.25 11600.

X(t) = - .8565 X(t-1) - 11400.

ARMA(2, .4005 X(t-2) + Z(t) - .1066 11200.

4 1) Z(t-1) 550.78 11000.

10800.

Table 2: Estimated Model Based on the maximum

10600.

Likelihood
10400.
53 54 55 56 57 58 59 60 61

Validation tests are performed on AR (2) model. Table 3 Figure 4: Forecast of 8 months based on AR (2)
shows the result whereby the model passes all the tests with
p-values greater than 5 % and the order of Minimum AICC is AR (2) model is also compared with other time series models.
0 indicating that it is indeed an appropriate model. Post Sample Accuracy Criteria of each time series model are
summarized in Table 5. From Table 5, AR (2) records the
Ljung - Box statistic = 13.020 Chi-Square ( 20 ), lowest MAPE, followed by ARMA (2,1) and then ARAR
p-value = .87652 forecast.
McLeod - Li statistic = 18.835 Chi-Square ( 22 ),
p-value = .65549 Time Series
# Turning points = 24.000~AN(24.667,sd = Model MAE RMSE MAPE
2.5712), p-value = .79542 1 AR (2) 83.5 92.12 0.736
# Diff sign points = 17.000~AN(19.000,sd = 2 Naïve 108.63 124.5 0.954
1.8257), p-value = .27332
3 ARMA (2,1) 83.75 94.7 0.737
Rank test statistic =
.32100E+03~AN(.37050E+03,sd = 41.333), p- 4 Holt's Linear 469.13 522.6 4.093
value = .23108 Holt-Winter's
Jarque-Bera test statistic (for normality) = 2.0607 Trend and
Chi-Square (2), p-value = .35688 5 Seasonal 148.63 162 1.309
Order of Min AICC YW Model for Residuals = 0 6 ARAR Forecast 96 110.4 0.844

Table 3: AR (2) Model Table 5: Post Sample Accuracy Criteria

7 Conclusion
95%
AR(2) Prediction This paper presents an attempt to forecast the maximum
demand of electricity by finding an appropriate time series
Bounds
model. Various classes of time series models, namely
Month Actual Forecast Lower Upper ARIMA, Naïve, Holt’s Linear, Holt-Winters, and ARAR
Jan 10817 10720 10234 11206 forecast have been considered.
Feb 10976 10927 10439 11414
AR (2) emerged as the best model for forecasting due to
March 11591 11514 10971 12056
AICC, MAE, and RMSE and with a 0.74 % of MAPE value.
April 11483 11598 11001 12195 Based on the AR (2) model, the forecast is likely to increase
May 11410 11495 10880 12109 over the coming months and it is expected to be in the vicinity
June 11555 11704 11045 12363 of 10659 MW to 14072 MW at 95 % confidence for the
month of December 2006.
July 11338 11424 10737 12112
Aug 11507 11497 10782 12211 References

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 ORGANIZED BY UNIVERSITI TENAGA NASIONAL, BANGI, SELANGOR, MALAYSIA; 28-30 AUGUST 2006

[2] Z.A. Izham, Uniten Masters in Engineering Power

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