Nonlinear ARIMAX model for long –term sectoral demand forecasting

Abstract

With the rapid increase of energy demand, it is becoming increasingly important to obtain accurate energy demand forecasts. To incorporate long time causal relationships, autoregressive with exogenous regression components models have received increasing attention from many researchers in this field. These are linear models applied through hybrid methodology of time series and econometrics, however, some recent studies find evidences that nonlinear models outperform over linear ones in long term peak demand forecasting. This paper proposed a nonlinear Auto Regressive Integrated Moving Average with Exogenous Inputs (N-ARIMAX) model to forecast sectoral peak demand using a case study of Iran. The results indicate that significant improvements in forecasting accuracy are obtained with the proposed models compared to the existing models.