Saroj Dhital

Department of Business and Economics

University of Wisconsin-Superior

FORECASTING COAL CONSUMPTION IN THE UNITED STATES

INTRODUCTION

• Coal is the most exclusively used and most abundant fossil fuel in the United States

• Coal Accounts for about 30% of World’s total energy production and consumption

• Coal is the only fuel capable of offsetting any shortage of energy created by petroleum

• Most Coal producing countries will soon be reaching Peak Coal

• Hence, Necessity arises to account for total coal production and consumption

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Historical Data

Historical Data

METHODOLOGY

• Collect Data

• Develop Model

• Combine selected Models

• Test for Significance and Errors

• Developing Final Forecast

DATA

• Coal Consumption in the US (Million Btu) - CC

• Electricity Generation by Coal (million Kilowatt Hours) - EG

• Total Inventory of Petroleum and Coal Products (Million USD) - TI

• Cost of Coal Receipts at Electric Plants (USD per Btu) - Cost

• Unemployment Rate - UR

• Decomposed Seasonality Index - DS

DATA STUDIED BUT NOT USED

• Electricity End Use Consumption

• Price Index for Purchasing Fuel

• Gross Domestic Products

• Elasticity Coefficient for Coal Consumption

• Coal Consumption as a percentage of total energy used

• Average Temperatures in various Months in US

• Average Price of Petroleum Products

MODEL

• Winter’s Multiplicative Method

• Ft = αAt + (1-α)Ft-1

• 10% Trend, 10% Seasonality, 10% Cyclical Patterns and 12 Seasonal Cycles

• Multiple Regression• 5 Independent Variables

• CC=β0 + β1*EG + β2*TI + β3*Cost + β4*UR + β5*DS

• Combined Model• Multiples Regression of two above mentioned models, forced through the origin

• Forecast = β1*Regression + β2*Winter’s

OTHER MODEL CONSIDERED

• ARIMA

• Box-Jenkins

• Linear Exponential Smoothing Model

TEST OF SIGNIFICANCEModel F-Stat Significant F DW

Multiple Regression296.2293 1.45E-63 1.699334046

Winter’s Model -- --

Combined Model812.1991 2.49E-69

Electricity Total Inventory Cost of CoalUnemployment

rate Seasonality

Index

Electricity 1

Total Inventory 0.371811949 1

Cost of Coal 0.024545714 0.771339499 1

Unemployment Rate -0.34639723 0.153368528 0.665052144 1

Seasonality Index 0.526544261 0.020218988 -0.0359247 -0.02990803 1

ANOVA TABLE FOR REGRESSIONS

Summary output and ANOVA table for Multiple Regression

Summary Output and ANOVA table for Combined Regression

ERROR ANALYSIS

Error Multiple Regression

Winter’s Method Combined Model

MAD 1504.72 2387.48 1659.93

MPE -0.05% 2.20% -0.05%

FINAL FORECASTDECEMBER 2010: 84234.43 MILLION BTU

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Historical DataFinal Forecast

THANK YOU

ANY QUESTIONS?