The Government of Saudi Arabia asked the World Bank for advice on electricity demand forecasting methods and regulatory approaches to resolve mismatches between actual and requested load.
DHInfrastructure conducted a literature review on frequently used demand forecasting methods and regulatory approaches to managing network expansion. For the review of demand forecasting methods, we covered a range of linear, econometric, and end-use models. We provided an overview of commonly used model specifications, implementation considerations, and international examples of where and how they are used. We then developed a taxonomy of demand forecasting methods that was differentiated by the length of the forecast horizon (for example, hour-ahead, day-ahead, and long-term forecasts) and their analytical applications (for example, supporting economic dispatch and long-term system planning). Finally, we compared each method’s forecast horizon, predictive power, analytical insights, limitations, data and software needs, and cost and complexity associated with its implementation.
For the review of regulatory approaches to managing network expansion, we covered commonly used approaches of risk sharing between system operators and customers including capital contributions, economic or regulatory tests, system-use tariffs, and security fees. For each mechanism we provided international examples of how they are used by regulators. We then outlined preventive and corrective measures that the Government of Saudi Arabia could take to ensure economic system expansion and manage financial losses associated with underutilized assets.