Question

Forecasting can be classified into four basic types: Qualitative, Time series, Causal relationship, and simulation.

Determine which one or two styles best fits an electrical distribution companies forecast needs. Why?

Answer 1

The TIme-series and Causal models will be well applicable for this purpose. Note that the electrical distribution companies will have a huge pool of historical data (electricity consumption) that can be used for time-series forecasting. Causal models are also viable options because there exist various meaningful causal variables such as the population, industrialization, locality type (e.g. urban/ rural) based on which the consumption of electricity is known to be depending on.

The qualitative models are used for a variable having no historical data or when the data is not reliable or the future is expected to be too much different from the present. Neither is the case for electricity consumption. So, qualitative models will have a limited scope of use in this case. Simulation is also not really required because the future state variables are not really too much probabilistic in nature in the causal models. So, deterministic models will be enough to develop a reliable forecast in this case.