Every year at National Grid, the National Transmission System (NTS) team provides the Network Strategy team with the year-ahead annual gas demand forecasts. These forecasts are used to book gas supply capacity to meet the UK’s year-ahead gas demand. Understanding the accuracy and robustness of these demand forecasts is critical to the Network Strategy team’s business.

The Challenge

The Smith Institute was asked by National Grid to conduct an independent review of the technical basis of the 1 in 20 peak demand forecasting. This would enable the Network Strategy team to confidently book year-ahead capacity in line with requirement.

The Process

After conducting an in-depth assessment applying bespoke mathematical and statistical models, we found the methodology used to generate the 1 in 20 peak demand forecast fit for purpose and to improve its performance, suggested some further enhancements.

The analysis comprised of the following key stages:

• Closely reviewing and scrutinising each stage of the current forecasting methodology
• Developing models to make effective use of historical data
• Testing relationships between variables in the existing methodology
• Validating existing data-related and operational assumptions
• Developing an understanding of why recent demand forecasts from NTS have been perceived to be high by the Network Strategy team

Concluded by a workshop held by the Smith Institute at National Grid to present key findings, both the NTS and Network Strategy teams found the investigation valuable in evaluating and further developing the forecasting processes used.

The suggested enhancements to the methodology were as follows:

• Strategic improvements to the modelling of the peak demand distribution
• Amendments to the modelling of the random error term in the demand versus Composite Weather Variable (CWV) model
• A novel formulation of the demand versus CWV relationship based on support vector regression

Discovering great benefit and in preparation for creating next year’s year-ahead gas demand strategy, National Grid has implemented the suggested improvements into the demand forecasting methodology following the Smith Institute’s independent analysis.