Professional Documents
Culture Documents
School of Engineering
Department of Mechanical and Manufacturing Engineering
Submitted to:
Dr. Lanndon Ocampo, PhD.
Submitted by:
De Guzman, Johannes Bruce L.
Roma, Allcris
Saut, Bonifacio R.
March 2017
1
Table of Contents
ABSTRACT........................................................................................................................4
CHAPTER 1.......................................................................................................................5
THE PROBLEM AND ITS SCOPE.................................................................................5
INTRODUCTION.........................................................................................................5
RATIONALE.............................................................................................................5
THEORETICAL BACKGROUND.............................................................................8
Regression Analysis.............................................................................................8
Simple Linear Regression Model.........................................................................8
Multiple Linear Regression Model........................................................................9
Coefficient of Determination.................................................................................9
Interpreting p-Values..........................................................................................10
REVIEW OF RELATED LITERATURE..................................................................11
Forecasting Electricity Demand.........................................................................13
Regression Analysis...........................................................................................14
THE PROBLEM........................................................................................................16
STATEMENT OF THE PROBLEM.........................................................................16
SIGNIFICANCE OF THE STUDY..........................................................................17
RESEARCH METHODOLOGY.................................................................................18
Research Design...................................................................................................18
Research Environment..........................................................................................18
Research Participants............................................................................................19
Research Procedures............................................................................................19
DEFINITION OF TERMS..........................................................................................20
CHAPTER 2.....................................................................................................................22
PRESENTATION, INTERPETATION AND ANALYSIS OF DATA................................22
CHAPTER 3.....................................................................................................................30
SUMMARY OF FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS..............30
SUMMARY OF FINDINGS........................................................................................30
CONCLUSIONS........................................................................................................30
RECOMMENDATIONS.............................................................................................31
REFERENCES................................................................................................................32
2
3
ABSTRACT
In this study, the annual gross electricity demand of the Philippines was modeled
using multiple linear regression with the aid of Microsoft Excel as a function of three
chosen socio-economic factors namely, population, gross domestic product and inflation
rate. Among these three socio-economic factors, the inflation rate was found to be the
least statistically significant variable with a confidence interval of 72.8 percent while
population was found out to be the most statistically significant descriptor variable with a
confidence interval of 98.9 percent affecting the electricity demand for future
predictions. Next, the future values of the three chosen socio-economic factors were
predicted using the GMDH Shell DS software to forecast the future annual electricity
demand up to the year 2025. It was found that the electricity demand will increase up to
4
CHAPTER 1
INTRODUCTION
RATIONALE
Electricity surrounds us, running technology like the cellphones we are using,
computers, lights and any other devices that needs electricity in order for it to function.
Electricity plays a vital role to the advancement of technology and to the betterment of
generators, primarily driven by heat engines fuelled by combustion or nuclear fission but
also by other means such as kinetic energy of flowing water and wind. Other energy
sources include solar photovoltaic and geothermal power. The electricity that we use is
energy such as coal, natural gas, nuclear energy solar energy and wind energy into
electrical power. It also referred to as energy carrier which means it can be converted to
other forms of energy such as mechanical energy or heat. Humans have an intimate
relationship with electricity to the point that it's virtually impossible to separate their lives
from it. As the world is evolving humans tend to nurture this intimate relationship thereby
increasing the amount of electricity demand for the following years to come.
This study can be a great help to the Philippines because the researchers want
to foresee on what will happen to the electricity demand in the Philippines for the
following years to come until 2025. The researchers also want to know what will be the
5
worst case scenario or best case scenario that will happen to the electricity
consumption on the said years to come. The aims of the researchers on forecasting the
electricity demand will be done by establishing a model using multiple linear regression
analysis with the consideration of the socio-economic factors that affect the electricity
demand namely the population, gross domestic product and inflation rate.
6
THEORETICAL BACKGROUND
Regression Analysis
or a model connecting the response or dependent variable and one or more explanatory
or predictor variables. The response variable is denoted by Y and the set of predictor
approximation. It accounts for the failure of the model to fit the data exactly. The function
Xp .
The predictor or explanatory variables are also called by other names such as
(2)
independent variables, covariates, regressors, factors, and carriers. The name
The simple linear regression model is a module with a simple regressor x that has a
relationship with a response y that is a straight line. The simple linear regression model
where the intercept 0 and the slope 1 are known constants with is a
random error component. The errors are assumed to have mean zero and unknown
2
variance . Additionally the errors are assumed to be uncorrelated. This means that
the value of one error does not depend on the value of any other error. The parameters
simple and often useful interpretation. The slope 1 is the change in the mean of the
A regression model that involves more than one regressor variable is called a multiple
regression model. The multiple linear regression model is (Montgomery et. al. 2013)
Y = 0 + 1 X 1+ 2 X 2 ++ p X p + , (3)
where y denotes the dependent variable, denotes the regression coefficients and
is the random error component. The term linear is used because equation 3 is a
Coefficient of Determination
SS R SS
R2= =1 E (4 )
SST SS T
8
been considered, R2 is often called the proportion of variation explained by the
regressor x. Values of R2 that are close to 1 imply that most of the variability in y is
explained by the regression model. The magnitude of R2 also depends on the range
of variability in the regressor variable. Generally R2 will increase as the spread of the
xs increases and decrease as the spread of the xs decreases provided the assumed
Interpreting p-Values
observing a value of the computed statistic. In some research areas, it has become
traditional to adopt a fixed significance level when examining p-values. The most
common choice for is 0.05. Acceptreject rules like this are generally unnecessary for
reasonable scientific inquiry. Simply reporting p-values and allowing readers to decide
9
REVIEW OF RELATED LITERATURE
According to Suhono and Sarjiya (2015) energy has significant role in the human
life. All of human actions need energy. Based on the fuel type, electricity has been the
most used after the oil. One of many reasons because of the electricity does not
produce emission when it used. Other advantages of electricity are easy to transmit,
easy to use and a lot of devices on earth need electricity as power source. Electricity
power, as a clean and efficient energy, is essential in our daily life. Compared with
traditional energy, electricity power is more suitable for the requirement of environment
friendly society. The electricity power system has played a key role in the economy
sector of a country (Wang et al. 2017). According to Vilar et al. (2009), nowadays, in
many countries all over the world, the production and sale of electricity is traded under
competitive rules in free markets. The agents involved in this market: system operators,
regulatory agencies, producers and consumers have a great interest in the study of
electricity load and price. Since electricity cannot be stored, the demand must be
overproduction. Good forecasting of electricity demand is then very important for the
According to Gnay (2016) the world electricity demand has increased extremely
in the recent years as the world has become more populated and as the electricity
consuming devices and appliances have become more common in the daily lives of
people. It is vital for a country to be able to supply the electricity exactly equal to the
demand. If the electricity generation capacity of a country is lower than the gross
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the other hand, a higher electricity generation capacity than the demand leads for the
power plants to work with idle capacity, which is a waste in economic resources. Hence,
accurate prediction of the electricity demand for the future is very important to correctly
plan and develop new electricity generation investments for maintaining the electricity
precision, one must correctly determine the variables which may influence the electricity
demand in that country. Population is one of the key factors that are highly correlated
with the electricity demand (more people consume more electricity). However,
population alone is not sufficient to explain the changes in the electricity demand
correlation with the electricity demand (Askarzadeh, 2014); one factor that can be used
for this purpose is the gross domestic product (GDP) per capita, which is an indicator of
the wealth of the people living in a country (Kucukali and Baris, 2010). As the GDP per
capita increases the living standards of people get better and their lifestyles become
more dependent on energy consuming devices and appliances. In addition to GDP per
capita, employment and the inflation rates are two other economic factors that may
affect the electricity demand (Zehadi et al. 2013). However, in this study only three
selected socio economic factors that affect electricity demand were considered namely
the population, gross domestic product and inflation rate. According to Chang et. al
(2016) several methods have been used to forecast electricity consumption over the last
few decades. These forecasting methods can be approximately classified into three
categories: causal models, time series analysis, and artificial intelligence approaches.
Causal models probe the relationships among multiple variables and assume that the
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variations in dependent variables can be explained by independent variables;
specifically, historical data are used to establish a multivariate model for dependent
variable forecasting (Hair, 2010). The forecasting accuracy of a causal model depends
produced.
According to Bisgaard et. al (2011) time series models include linear regression
and autoregressive integrated moving average analysis, time series models require only
trends and are commonly used in forecasting energy demand. However, they require
high quantities of samples for accurate forecasting. For many years, many different
forecasting tools based on data mining were applied to predict the future electricity or
energy demand. Multiple linear regressions (MLR), methodologies based on fuzzy logic,
neural network (ANN) based models have been widely applied for these purposes. On
the other hand only one approach was considered in this study which is only the
purposes. It is particularly more important for deregulated power systems, where the
12
owners, and market participants. Forecasting demand is both a science and an art.
be described as the science and art of specification, estimation, testing and evaluation
of models of economic processes that drive the demand for fuels. The need and
issue in the recent past. This has led to the development of various new tools and
planning in electricity markets is assuring that there will be sufficient resources to meet
future demand. Building capacity is costly and takes time. However, the economic
targets the regulator must balance the cost of excess capacity against the cost of
shortage. The question we address here is how we can get an accurate prediction of
Regression Analysis
convenient and easy to implement have been applied widely for electricity demand
forecasting. Since the early 1970s, several studies on energy demand have been
performed using various estimation methods. Many studies have aimed to evaluate the
impact of economic activity and energy planning on energy demand. In recent years,
because predictive models are of vital importance for policymakers, they have used
these models to forecast and model energy consumption and demand (Tutun et al.
13
2015). According to Fan et al. (2017) multiple studies have highlighted the key role of
modeling and hence forecasts of future electricity demand, and particularly peak
demand play in grid planning and generation investment. A subset of this work focuses
on modeling and forecasting residential peak demand, and a related area of forecasting
involves assessing the potential impact of different types of interventions on this peak.
However, much of this work has been forced to utilize less than ideal approaches due to
the limitations of available data, particularly temporal and geographical data resolution.
In turn, this has limited the work assessing possible peak demand interventions and
interval metering and survey data to simulate different possible interventions. There are
demand forecasting is the key to generation and network operation, whilst longer-term
fore-casts serve various planning roles. Geographically limited forecasts primarily serve
network decision making whilst system-wide fore-casts have both network and
generation adequacy roles. Finally, there are sectorial studies focused on peak demand
study long-term forecasting electricity demand will be the one to be focused on since it
is essential to know what will happen to the future electricity demand in order to be
prepared for what will be the best case scenario and worst case scenario that might
happen.
14
15
THE PROBLEM
STATEMENT OF THE PROBLEM
This study aims to predict the electricity demand in the Philippines several years
from now.
1 In the over-all electricity demand, how much comes from the industrial and the
private sectors?
3 What possible actions can be done to address the increasing electricity demand
4 With the forecasting models presented, what should be the course of policy
16
SIGNIFICANCE OF THE STUDY
The results of this research study will greatly contribute to address the issue of
increasing electricity demand in the Philippines. Forecasting the electricity demand will
not just simply show results, but will also give us an implication on what course of action
should be taken up to meet the increasing demands. Given the limited studies with
regards to electricity demand forecasting, this study will give the possible best and worst
case scenarios particularly in the energy crisis that we might experience in the future.
useful tool in devising specific strategies to counter the adverse effects increasing
producing electricity.
The results of this study will also be an important asset to the Philippine
government particularly the department of energy as they should also know the
prospect of electricity demand here in the Philippines in order to ensure stability in the
industry since electricity is known vital key to industry operation. The number of
17
RESEARCH METHODOLOGY
Research Design
predict the electricity demand with a good precision, one must correctly determine the
key variables which may give a significant impact on the electricity demand in the
country. Since this paper focuses on predicting the electricity demand in the Philippine
one of the key factors that is highly correlated with electricity demand, by the simple fact
that the more people living in a country, the more the consumption of electricity.
However, population alone is inadequate to provide and explain the changes in the
electricity demand through the years. Due to this, other factors are to be considered. As
for this research paper, socio-economic key indicators are correlated with the electricity
demand. One factor that was used for the purpose of predicting electricity demand is
the Gross Domestic Product (GDP) per capita, which is an indicator of fortune of the
people living in a country. Another factor, the inflation rate, defined as the
percentage rate of change of a price index over time which might also influence the
Research Environment
18
Research Participants
The people within Philippine territory was the participants. Data of the past
electricity demand, population, GDP and the inflation were acquired from World Bank
Open Data, an online database giving free access to information such as those that
were aforementioned.
Research Procedures
After obtaining past data from the online database (World Bank Open Data),
GMDH Shell DS version 3.8.6, a software used for predicting the future values of the
inflation rate was utilized. Afterwards, the data acquired was employed for the multiple
regression analysis, creating a correlation of the three socio-economic key factors to the
electricity demand. Microsoft Excel spreadsheet was used to analyze the data acquired
(Data Analysis tool). A model equation was attained after the multiple regression
analysis and by using this equation, a prediction of the electricity demand was
19
DEFINITION OF TERMS
induction.
6 Forecasting process of making predictions of the future based on past and
investments and exports minus imports that occur within a defined territory.
9 Independent Variable - is a variable that is being manipulated in an experiment in
level.
20
12 Population - is the number of all the organisms of the same group or species,
development in a society.
21
CHAPTER 2
PRESENTATION, INTERPETATION AND ANALYSIS OF DATA
Electricity Demand
Year Residenti Commerci Industri Other
Total
al al al s
200 3914
13,547 10,098 14,452 1,042
1 0
200 3862
13,715 10,109 13,628 1,172
2 4
200 4272
15357 11,106 15,188 1,069
3 0
200 4407
15920 11,785 15,012 1,359
4 6
200 4515
16,031 12,245 15,705 1,177
5 9
200 4567
15,830 12,679 15,888 1,275
6 2
200 4800
16,376 13,470 16,522 1,641
7 9
200 4920
16,644 14,136 17,031 1,395
8 6
200 5086
17,504 14,756 17,084 1,523
9 8
201 5526
18,833 16,261 18,576 1,596
0 6
201 5609
18,694 16,624 19,334 1,446
1 8
22
201 5921
19,695 17,777 20,071 1,668
2 1
201 6156
20,614 18,304 20,677 1,971
3 6
201 6334
20,969 18,761 21,429 2,186
4 5
Description
Year Populati GDP per Inflation (%)
on Capita
796045
2001 41 958.01 5.35
812943
2002 78 1000.78 2.72
23
34
845962
2004 49 1080.09 4.83
861413
2005 73 1196.54 6.52
875928
2006 99 1395.21 5.49
889655
2007 08 1678.85 2.90
902971
2008 15 1929.13 8.26
916418
2009 81 1836.87 4.22
930389
2010 02 2145.24 3.79
945012
2011 33 2371.85 4.65
960173
2012 22 2604.66 3.17
975716
2013 76 2786.01 3.00
991386
2014 90 2873.09 4.10
24
Figure 2. Actual data of gross domestic product (GDP) per capita in the Philippines.
25
Figure 3. Actual data of inflation rate in percentage.
Variables Value
Multiple R -29778.87
2
R 0.983762564
Adjusted R2 0.978891333
Standard Error 1171.006542
Observations 14
2
coefficient of determination R obtained after the regression analysis is 0.983762564.
26
The value of coefficient of determination which is close to 1 implies that the percentage
Standard t p
Variables
Error Value Value
-
19465.75446
Intercept 29764.7548 -1.529 0.157
7
8
0.00081677
Population 0.000264 3.095 0.011
5
GDP per 4.27367114
2.344909 1.823 0.098
Capita 7
-
Inflation 233.900720 201.234507 -1.162 0.272
7
The data between the years 2001 and 2014 were used for multiple regression
while population , gross domestic product (GDP) per capita and inflation rate were the
independent variables. The regression coefficients are shown in table 4 which is used in
demand. The equation obtained using the collected data through multiple regression is
given in equation 5.
where:
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y = electricity demand
x 1 = population
x 3 = Inflation rate
By examining the regression coefficients in table 2, the results show that population and
the gross domestic product (GDP) is directly proportional with electricity demand since
the coefficients are positive while the inflation rate is inversely proportional with the
respective p values. It is evident by examining the p values of each variable that the
electricity demand is the inflation rate with a confidence interval of 72.8 percent while
the most statistically significant variable is the population with a confidence interval of
98.9 percent.
Description
Year Population GDP per Inflation Electricity
Capita (%) Demand
10072124
2015 6 3045.60 4.01 66441.78
10231657
68432.64
2016 2 3238.93 3.42
10392212
70799.79
2017 1 3472.09 3.67
10553261
73458.29
2018 4 3758.69 4.18
10873632
76335.03
2020 8 3824.24 4.09
11032100
78641.36
2021 7 4066.12 4.00
11190255
80980.13
2022 8 4339.88 3.47
11349605
83447.07
2023 7 4626.47 3.22
11511842
86547.04
2024 9 4861.97 6.51
11678465
90805.39
2025 3 5708.54 3.42
29
Figure 5. Predicted values of inflation for the years 2015-2025.
30
Figure 7. Predicted electricity demand based on selected descriptor variables.
The future values of population, GDP per capita and inflation rate were predicted
by GMDH Shell DS software. The plot of predicted values of population, GDP per capita
and inflation rate through years is shown in Figures 5, 6, 7 and 8. These figures
indicates that the population is expected to reach over 116 million in the year 2025,
while the GDP per capita is predicted to reach over $5700 in the same year. In addition
to these, the inflation is expected to decrease even though it was observed that it was
fluctuating on the previous predicted years. These values were used in order to
determine the trend of future electricity demand in the Philippines through multiple
electricity demand are shown in Table 5. It is evident in figure 8 that there will be a
continuous increase of electricity demand for the next years. In the year 2025 the
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electricity demand as a function of the three selected socio-economic factors will reach
32
CHAPTER 3
SUMMARY OF FINDINGS
Table 1, shows the electricity demand in the Philippines, from each sectors dating
from 2001 to 2014 while Table 2 shows the values of the selected socio-economic
indicators in the Philippines for the same range of year (2001 to 2014). The data
gathered for the socio-economic indicators was used in obtaining the predicted values
of each until the year 2025. A correlation was then established using multiple regression
From Figure 8, it can be clearly seen that trend of the graph continues to
increase, the population being the greatest contributor to the increase of electricity
demand, having a p value of 0.011, followed by the GDP with a p value of 0.098, then
followed by the inflation rate being the lowest factor to the increase in electricity demand
CONCLUSIONS
In this paper, the electricity demand of Philippines was modeled using multiple
regression analysis using population, GDP per capita, and inflation rate as the
descriptor variables. Population and GDP per capita were found to be the major factors
that influence the demand while the inflation percentage indicates to be of minor
influence. With the increasing population every year, human needs particularly the
33
technological needs also increases. It would then consequently correspond to an
increase in electricity demand. In this study the electricity demand of the Philippines
from 2001 up to 2014 was modeled by multiple regression in Microsoft excel using the
socio-economic indicators that affect the electricity demand in the Philippines namely
the, population, gross domestic product per capita and inflation rate. The generated
equation for the multiple regression model was then used to predict the electricity
demand from 2015 up to 2025 and was found out that population being the key factor to
demand until year 2025, can be used to maintain the balance between electricity
RECOMMENDATIONS
2. Philippines, being situated in the tropical zone, factors like average summer
34
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Chang, C., Lin, J., and Chang, M. (2016). Extended modeling procedure based on the
Chatterjee, S. and Hadi A. (2006). Regression Analysis by Example. John Wiley &
Demand. 1-19.
https://www.doe.gov.ph/philippine-power-statistics.
Fan, H., MacGill, I.F., and Sproul, A. B. (2017). Statistical analysis of drivers of
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Hair, J.F. (2010). Multivariate Data Analysis: A Global Perspective. Pearson Education.
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Tutun, S., Chuo, C., and Canylmaz, E. (2015). A new forecasting framework for
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Wang, D., Luo, H., Grunder, O., Lin., Y., and Guo, H. (2017). Multi-step ahead
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Yukseltan, E., Yucekaya, A., and Bilge, A. H. (2017). Forecasting electricity demand for
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