Bottom-up forecasting: Applications and limitations in load forecasting using smart-meter data

Abstract Reliable short-term load forecasting is vital for the planning and operation of electric power systems. Short-term load forecasting is a critical component used in purchasing and generating electric power, dispatching, and load switching, which is essential for balancing supply and demand and mitigating the risk of power shortages. This is becoming even more critical given the transition to carbon-neutral technologies in the energy sector. Specifically, since renewable sources are inherently uncertain, a distributed energy system with renewable generation units is more heavily dependent on accurate load forecasts for demand-response management than traditional energy sectors. Despite extensive literature on forecasting electricity demand, most studies focus on predicting the total demand solely based on the previous-step observations of aggregate demand. With advances in smart-metering technology and the availability of high-resolution consumption data, harnessing fine-resolution smart-meter data in load forecasting has attracted increasing attention. Studies using smart-meter data mainly involve a “bottom-up” approach that develops separate forecast models at sub-aggregate levels and aggregates the forecasts to estimate the total demand. While this approach is conducive to incorporating fine-resolution data for load forecasting, it has several shortcomings that can result in sub-optimal forecasts. However, these shortcomings are hardly acknowledged in the load forecasting literature. This work demonstrates how limitations imposed by such a bottom-up load forecasting approach can lead to misleading results, which could hamper efficient load management within a carbon-neutral grid.