Changing energy markets and an influx of data from the smart grid are providing more opportunities to reap value from energy forecasting. Improving energy forecasts can not only positively impact corporate financial metrics; the benefits are spreading to other customer-facing programs.

From a financial perspective, the benefits are clear. Utilities can save as much as $10 million a year for every one percent improvement in forecast accuracy by optimizing asset utilization and trading strategies. With pressure on margins increasing, the topic of forecasting is certainly heating up in the utility industry.

Forecasting creates winners and losers

Accurate forecasts are essential, especially when crucial corporate decisions hang in the balance.  Long term forecasting quantifies the needs and risks for future capital expenditures. On the flip side, optimizing the returns from energy contracts significantly improves profitability. For short and mid-term power contracting, if you can lock in a favorable rate today, then you maintain a healthy profit. That’s the traditional value calculator. But what’s next?

In Australia, Origin Energy has improved their energy supply planning and forecasting process so significantly they now offer customers unlimited energy consumption at a flat rate. The “predictable plan” is the first of its kind in Australia, a country known for a high penetration of customer-owned solar. The flat rate offer is made possible by detailed energy forecasts, customized based on the usage profile. No matter how much electricity the customer uses, there is no reconciliation at the end of the year. That's right, use as much as you want for one price.

Get ready for what's next

Innovations in customer products, such as the one offered by Origin Energy, are possible because of increased granular data for forecasting, improved forecasting methodologies, and a high performance computing environment. These modernizations to the age-old forecasting practice allows analysts to scale forecasts across larger customer populations and tackle more diverse and complex business opportunities.

 "In the very near future, the industry is going to move more gigabytes than gigawatts," says Dr. Tao Hong, a professor at University of North Carolina at Charlotte. "That means utilities are moving towards data analytics in a big way." Hong was recently named the Education Leader of the Year by Charlotte Business Journal (CBJ) at the Energy Inc. Summit.

If Hong's prediction is correct, then it’s time to go beyond the classic business case and explore more opportunities to reap value from improved energy forecasts.  These are just a few ideas that come to mind:

  • Could you use granular forecasts to personalize energy efficiency programs? Or offer white label energy products at personalized prices for specific lifestyle segments?
  • What about forecasting electric vehicle density and its impact on distribution assets?
  • Could you properly site microgrids and other distributed energy resources to meet localized forecasted growth? Or optimize asset utilization?
  • Would you hedge more energy trades for profit? Or expand into new markets?

If you could improve load forecasting and free up resources for other projects, what else could be accomplished?  Send me your ideas on Twitter @alyssa_farrell!

Learn about forecasting and the smart grid.
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About Author

Alyssa Farrell

Product Marketing Manager, Energy and Sustainability

Alyssa Farrell leads global industry marketing for SAS’ business within the energy sector, including Utilities, Oil and Gas. In this role, she focuses on the SAS solutions that help optimize our energy infrastructure by applying predictive analytics to complex data. She currently serves on the Advisory Committee of the Research Triangle Cleantech Council and co-leads the Program and Communications Action Committee, as well as a Working Group of the Utility Analytics Institute. She is a member of the Society of Petroleum Engineers (SPE). Farrell regularly speaks with trade associations, analysts, and the press about the opportunities organizations have to effectively manage a sustainable energy analytics strategy and drive healthy economic growth. Prior to joining SAS, Farrell was a senior consultant in the Deloitte Public Sector practice. In this capacity, she was a project manager for state-wide and county-wide systems implementations and was responsible for user acceptance testing, change management and training, and middleware technology selection. She is a graduate of the Eller College of Management at the University of Arizona, where she earned her MBA degree with a concentration in Management Information Systems. She also holds a Bachelor of Arts degree from Duke University.

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