ELECTRICITY LOAD AND TEMPERATURE - ISSUES IN DYNAMIC SPECIFICATION

This paper considers the dynamic specification of the relationship bet ween electricity load and air temperature. It is shown that this relat ionship has an important dynamic component and that ignoring this appe ars to bias the estimated effects of temperature on load. It is also s hown that forms of autoregressive specification may give a good explan ation of present load even if there are no dynamics in the causal rela tion. The assumptions underlying effective temperature and its empiric al validity are investigated. Dynamic specification of the temperature response is shown to be conditional on the time of day, which brings into question the use of the effective temperature concept.