Forecasting triads: the negative feedback problem
industrial collaborators: British Energy
academic collaborators: ESGI56
initiated : 2007/04/13
last updated: 2010/05/25

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Study group report 2006: forecasting triads (British Energy)
This is the final report on forecasting triads in electricity markets, brought to ESGI56 by British Energy. Click on the link at the bottom to download the full report as a pdf document.

Report authors
Robert Hunt (University of Cambridge)
Liam Clarke (London School of Economics)
John Byatt-Smith (University of Edinburgh)
John Billingham (University of Nottingham)

Introduction

At the end of the winter season (November 1st to February 28th), National Grid identifies the three half-hour periods of highest consumption of electricity, subject to a separation of at least 10 calendar days. These three periods are called Triads. Thus, the half-hour in which national demand was highest is the first Triad; the second highest half-hour, excluding a period of 21 days centred on the first Triad, is the second Triad; and the third highest half-hour, excluding two periods of 21 days centred on the first and second Triads, is the third Triad. Historically, Triads always occur on Mondays to Thursdays between 16:30 and 18:00 hours, and not close to Christmas (which is a period of relatively low consumption). Figure 1 shows the typical pattern over a winter.

Figure 1: National electricity consumption figures from the winter of 2003/04. Diamonds indicate daily levels; squares indicate dates on which British Energy issued Triad warnings; and circles indicate those dates on which a Triad was, at the end of the winter, declared to have occurred.

British Energy supplies electricity to large industrial and commercial customers. Charges are based on the Transmission Network Use of System (TNUoS) Charges which are levied by National Grid and passed through to British Energy’s customers. TNUoS includes a substantial surcharge based on each customer’s usage during the Triad periods: the higher a customer’s usage during Triads, the higher their overall electricity supply costs.

British Energy, in common with other large commercial electricity suppliers, aims to reduce National Grid charges for some of its customers by issuing a “Triad warning” on days when it seems possible that a Triad might later be found to have occurred. Industrial customers are often encouraged by their contract with British Energy to reduce their consumption on those warning days. British Energy are restricted by the contract to issuing a limited number of calls over the entire winter period, anything up to 23.

A customer who receives a Triad warning may, or may not, take action (e.g. shutting down their factory early that day). Some – but not all – customers are contractually required to inform British Energy whether or not they are reducing their consumption. Therefore British Energy cannot be sure by how much overall consumption will drop if a warning is issued. Furthermore, the national consumption is also affected by suppliers other than British Energy who may also have issued a Triad warning.

It is thought that this system may suffer from “negative feedback”. That is, on a day that is likely to include a Triad period because it has high predicted consumption, many suppliers will issue warnings, resulting in many customers reducing their actual consumption, ensuring that the total national demand is actually much lower than predicted: sufficiently low, in fact, that no Triad occurs, and no warning was actually necessary. It is expensive for customers to take action when it is not actually required.

British Energy currently uses the deterministic half-hourly consumption forecast issued by National Grid and the recent and forecast temperatures at hourly intervals at 7 locations around the country to decide on a daily basis whether to issue a Triad warning. The decision-making tool, called TriFoS, does not currently take into account the possible problem of negative feedback.

The Study Group was asked to consider ways of compensating for negative feedback. Section 2 confirms that feedback is a statistically significant phenomenon. Sections 3 and 4 then use the so-called ‘Full-Information Secretary Problem’ to motivate the derivation of possible triad-calling strategies. Section 5 examines the possibilities for issuing triad warnings from analysing historical data.

Click on the link below to view the full report.

 

   

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  Forecasting triads: the negative feedback problem
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