Estimation of Electricity Consumption Amount with Autoregressive Conditional Heteroscedasticity Model
Chapter from the book:
Alpağut,
S.
(ed.)
2023.
Economics and Finance Studies.
Synopsis
Electricity is a type of energy that plays an essential role in sustainable life and has a very high added value in various sectors. Electricity is one of the most critical actors in economic prosperity and growth, as it has strategic importance in socio-economic development. This type of energy, which cannot be stored due to its nature and must be consumed as soon as it is produced, has always been up to date in electricity demand forecasting studies since it is integrated with all aspects of economic development. At the same time, a single model does not always give accurate forecasts. In the study, the volatility of the electricity consumption amount for the period 2007:01 - 2020:12 was tried to be determined with the Autoregressive Conditional Heteroscedasticity Model. The ARCH effect determines the electricity demand variable during the study period. This result caused the error term to lose its constant variance feature due to the significant increase or decrease in the electricity demand series. Therefore, this result shows a symmetrical effect on electricity demand. In other words, the ARCH (1) model shows that positive and negative shocks are related to the squares of prior period shocks, and volatility is affected by this relationship similarly. The study model calculated the ARCH coefficient as (0.55). Due to seasonal effects, it has been concluded that the duration of the volatility will not be very long, but it causes volatility.