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Forecasting Model
Introduction
Contents
Data Cleansing
Running the Regressions
Analysing the Output
Constructing a Model
Testing for Accuracy
Limitations
Opportunities for Further Model Development
Questions
Data Cleansing
DATA CLEANSING
Data Sets Provided: Composite Weather Variable & Gas Demand Data
Can you just assume that the data you receive is useable as is?
DATA CLEANSING CONT. Data Cleansing
Regression Criteria:
Descriptive Statistics
Included R Change
Casewise Diagnostics
Removing outliers outside 3
95% Confidence Intervals.
ANALYSING THE OUTPUT Analysing Output
Step 1: Assumptions
1). Normal Distribution
2). Linearity
3). Homoscedasticity
Variance along the
regression line seems
the same
3). ANOVA
According to this model, for every 1 point increase in the average UK CWV value,
Gas Demand is expected to fall by roughly 162 million units.
CONSTRUCTING A MODEL
Constructing a Model
3). Compare the predicted value against the actual value (see overleaf).
CONSTRUCTING A MODEL CONT. Constructing a Model
Represented in a graph:
In-Sample (2015) Out of Sample (2016)
Predicted Gas Demand vs Actual Demand Predicted Gas Demand vs Actual Demand
3,000,000
3,000,000
Thousands
Thousands
2,750,000
2,750,000
2,500,000
2,500,000
2,250,000
2,250,000
2,000,000
2,000,000
1,750,000 1,750,000
1,500,000 1,500,000
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th
Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan
In Sample Period Actual Data (2015) In Sample Period Predicted Data (2015) Out of Sample Predicted Values (2016) Out of Sample Actual Values (2016)
18%
16%
14%
12%
Average
10%
Out of
8%
Sample
6%
(2016)
4%
2% Average
0% In Sample
1st Jan 2nd Jan 3rd Jan 4th Jan 5th Jan 6th Jan 7th Jan 8th Jan 9th Jan 10th Jan 11th Jan 12th Jan 13th Jan 14th Jan 15th Jan 16th Jan 17th Jan 18th Jan 19th Jan 20th Jan
(2015)
Percentage Difference Between Middle and Actual In Sample Percentage Difference Between Middle and Actual Out of Sample
* % difference for model under-predictions were made positive for the sake of providing an accurate average.
Thousands
500,000
Out of Sample Predicted Values (Aug 2017) Out of Sample Actual Values (Aug 2017)
Data for this model, provided by the National Grid, does not measure all gas demand for the UK.
Some demand may be serviced by providers that fall outside of NG distribution networks.
The data only covers residential and small business consumption. Heavy industry/other consumer
categories are not accounted for in these predictions.
The demand data is provided via non-daily-metered readings. This may lead to inaccuracies, which
may be avoided through the use of smart metering technology/automated meter readers.
OPPORTUNITIES TO IMPROVE Model Improvements
Gather data and incorporate these factors into a multiple regression to increase predictive accuracy.
At points where the accuracy of the predictions deviated significantly, try to identify extraneous
events that may have impacted gas demand.