For energy supply companies operating in fully competitive markets, demand forecasting is a key business skill that has an impact on the bottom line. The regimes underpinning the operation of competitive markets divide responsibility for energy balancing: network operators retain the physical responsibility and suppliers acquire a new commercial responsibility. Accurate demand forecasting is motivated by the strong financial incentives for suppliers to balance supply and demand. These incentives and the costs of getting it wrong can be particularly extreme in the period following start-up of a new market regime.
Speed, accuracy and quality matter as much for demand forecasting as for the trading function it services. When planning new demand forecasting systems companies preparing for market liberalisation should bear in mind that it is forecasting accuracy that matters. Sound data management and comprehensive monitoring are also vital elements that are too easily overlooked.
All suppliers should consider how demand forecasting fits with their strategy. For large customers, predictability of demand now matters as well as volume and this has implications for pricing and customer relationships. In volume markets, demand forecasting methods contribute to efficient mitigation of weather risk.
Experience shows that liberalised energy markets can be made to work and are here to stay. But, unless they pay attention to accurate demand forecasting, the same will not be true for all those eagerly competing supply companies.
The attendees will learn about:
- The business benefits of accurate demand forecasting in the energy sector
- Managing the issues associated with sourcing high quality data
- Approaches for short and long term forecasting
- Setting up and maintaining a successful demand forecasting operation
- The “Top 10” mistakes of a demand forecaster.
About Nigel Lewis
Nigel Lewis is a Business Consultant within Cap Gemini Ernst & Young’s Global Trading & Risk Management Centre of Excellence and is the European market lead in the area of Demand Forecasting. He has over 8 years experience advising on the use of business modelling techniques and their application to solve problems for both UK based and European clients. Before joining CGE&Y Nigel worked for 8 years as an Operational Research consultant within British Gas. Nigel has extensive experience of successfully managing complex projects, these have ranged from designing an electricity trading business game, setting up an new national gas escape emergency service, to delivering complex demand forecasting solutions.
