Annals of Operations Research

https://doi.org/10.1007/s10479-021-04089-x

ORIGINAL RESEARCH

Sparse regression modeling for short‑ and long‐term

natural gas demand prediction

Ayşe Özmen1

Received: 15 October 2020 / Accepted: 23 April 2021

© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2021

Abstract
The multivariate adaptive regression splines (MARS) model is a flexible non-parametric
sparse regression algorithm and provides an excellent promise to data fitting through non-
linear basis functions. During the last decades, it is employed in many fields of control
design, finance, technology, and science. It can be regarded as an extension of linear mod-
els that automatically model interactions and nonlinearities. The least absolute shrinkage
and selection operator (LASSO) analysis is a variable selection and shrinkage method
to linear regression models. It proposes to construct the subset of explanatory variables
which minimizes estimation error to a quantitative dependent variable. LASSO is applied
to choose the variables and perform the regularization to improve the interpretability and
robustness of the model. In this paper, we examine MARS and LASSO to generate nat-
ural gas demand forecasts of residential users for the distribution system operators who
need both short- and long-term forecasts. We also compare the performance of MARS and
LASSO with a simple multiple-linear regression (LR) commonly used in practice. Our
analysis reveals that MARS outperforms LASSO and LR in both the average measures and
in the worst-case analysis. For 1 day-ahead forecast, MARS provides a MAPE of around
4.8% while the same figure under LASSO and LR reaches 8.3 and 8.5% respectively. How-
ever, as the forecasting horizon increases, we observe that the performance of these pro-
posed methods gets worse and for 1 year-ahead forecast, the MAPE values for MARS,
LASSO, and LR are 13.4%, 24.8% and 26.3% respectively.

Keywords Sparse regression · LR · LASSO · MARS · Energy and commodity markets ·

Short-term and long-term forecasting

1 Introduction

Distribution System Operators (DSOs), additionally named as Local Distribution Compa-

nies (LDCs), are the carrier providers of residential natural gas buyers inside of a given
transportation structure. When DSOs motive an unbalanced gas consumption from Trans-
mission System Operator (TSO) pipelines, the related rules and regulations implement to

* Ayşe Özmen
ayseozmen19@gmail.com
1
Institute of Applied Mathematics, METU, Ankara, Turkey

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 Annals of Operations Research

them a quite top cost of penalties. So, the forecast is important right here as the call for
DSOs is provided through spot markets, and a majority of the entire call is arranged with
international contracts on delivery, addressing pipelines or LNG (Liquefied Natural Gas).
In fact, system operation margins, demand, and deviations over time need to be aligned.
Operations have to be slightly versatile for compensating demand fluctuations. Moreover,
fluctuations adjustment of energy consumption for under the system operation restrictions
must be realized via prediction models prepared for specific kinds of customers, such as
Residential End Users (Özmen et al., 2018). For the DSO’s and TSO’s, a precise 1-day,
1-week, and 1-year ahead forecasting allows a reduction of cost operations and eliminat-
ing penalties that will occur on account of unbalanced supply-demand amounts. Therefore,
DSOs need prediction, especially, in wintry weather instances, when the amount consumed
by residential end-users may reach its maximum for extremely chilly temperatures. In this
paper, using multiple regression (LR), the least absolute shrinkage and selection operator
(LASSO) and multivariate adaptive regression splines (MARS), sparse regression models,
we generate natural gas forecasts for 1 day, 1 week, and 1 year ahead for a DSO based on
real-world time series data.
Regression analysis is a simple and powerful method, commonly applied in practice
to determine the relationship between response and explanatory variables. MARS and
LASSO models are machine learning methods that may capture patterns in large datasets
while abstaining from over-fitting (Hastie et al., 2001; Tibshirani, 1996). By using these
methods, prediction and variable selection can be fulfilled at the same time. Therefore,
nowadays, they are widely applied in many areas with large numbers of independent vari-
ables to lower the variable space. LASSO is a variable selection and shrinkage method to
linear regression models. MARS is a flexible regression method that automatically models
nonlinearities and complex interactions in the data. In our case, the DSOs need daily fore-
casts with forecasting horizons ranging from 1 day to 1 year for managing different kinds
of risks. Using real-world daily natural gas data between 2004 and 2013 from the Baskent-
gaz, we develop and compare three forecasting methods based on LR, LASSO, and MARS.
The forecasting horizon of the DSO typically includes many special days, such as
national days, and holidays, during which the demand behavior significantly diverges from
the regular pattern. These special days introduce additional complexities to the problem,
which are not fully explored in the literature. To capture the complex nature of demand
during these days it is reasonable to ask whether more-complex methods such as MARS
might perform better compared to simpler methods such as regression. Another creative
approach for this study is the choice of the different types of ambient temperature together
as explanatory variables in the model. In literature, gas demand models employed two
kinds of day-to-day temperature. In the primary staff of research, the maximum and min-
imum temperatures are applied as original values in the type formation phase (Musilek
et al., 2006), while in the second staff of studies, the Heating Degree Day (HDD) values
of the average temperature of the projected day are used (Brown et al., 1994). However,
in this project, our models are applied for datasets including daily minimum temperature,
daily maximum temperature, and HDD as different input variables.
In the literature, MARS and LASSO have been successfully employed in many fields
of science, technology, finance, and control design (Chen et al., 2018; Huang et al., 2020;
Samui & Kurup, 2012; Tsai et al., 2005; Uniejewski et al., 2019; Yang et al., 2003; Wei
et al., 2015). For example, Lee and Chen (2005) and De Andrés et al. (2011) employ
MARS modeling to forecast bankruptcy and credit scoring. Lee et al. (2006) compare
MARS and regression for customer credit scoring. Lu et al. (2012) and Miguéis et al.
(2013) provide applications of MARS in the retail industry. However, except Özmen et al.

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(2018) based on MARS and CMARS for a short-term forecast, the natural gas demand pre-
diction literature on MARS and LASSO is mute. Our contribution to the literature can be
summarized as the following:

• We develop sparse models for short- and long-term natural gas demand forecasting
using LR, LASSO, and MARS for 1 day, 1 week, and 1 year ahead with daily forecast-
ing intervals.
• We consider the maximum and minimum temperatures and HDD together as different
input variables.
• We show that for 1-day ahead forecasts, MARS performs clearly better than LR and
LASSO. The MAPE value of MARS is only 4.6% for 1-day ahead forecasts while the
same figure reaches 8.3 and 8.5% for LASSO and LR, respectively. Hence, using com-
plex methods such as MARS is clearly justified for short-term forecasts.
• For longer forecasting horizons MARS still outperforms LR and LASSO. However,
the performance gap between MARS and the other two methods in terms of MAPE
increases. For 1-year ahead forecasts, the MAPE values for LR, LASSO, and MARS
are about 26%, 25% and 13% respectively.
• In terms of maxAPE, although MARS still outperforms the other methods, the per-
formance of the LR and LASSO methods is close to each other for all the forecasting
horizons.

The rest of the paper is constructed as follows. We present a brief review of the related
literature in Sect. 1. We provide our mathematical models in Sect. 2. The numerical results
of the model are represented and discussed in Sect. 3. We conclude with comments and
further research directions in Sect. 4.

1.1 Literature review

MARS, originally offered by Friedman (1991), is an adaptive method as the selection

of foundation purposes is specific to the issue. Nowadays, MARS is applied in various
fields of technology, science, control design, and finance and gives an excellent promise
to data fitting through nonlinear basis functions. MARS, a sparse regression model, is
used to select the variables and creates a flexible high-dimensional nonparametric regres-
sion model. Furthermore, it also searches for the interaction among explanatory variables,
ensuring any degree of interaction to be met as long as the model may better approximate
the data.
MARS has been extended and applied to many other academic fields including dynamic
programming, inventory management, and Markov decision processes. Xu et al. (2003)
develop a two-stage multivariate adaptive regression splines method (TMARS), where a
linear model is used in the first stage, and splines are added in the second stage if the
model shows a lack of fit. They found that TMARS improves over both linear regression
and MARS modeling. Martinez et al. (2015) develop a convex MARS modeling algorithm,
which can be used to manage the curse of dimensionality problem in stochastic dynamic
programs. Crino & Brown (2007) integrate MARS with a response surface methodology
to develop a global optimization technique that is computationally more efficient compared
to neural networks and other additive models. Tsai and Chen (2005) develop flexible and
robust versions of MARS to be used in stochastic dynamic programming models. Com-
putational results demonstrate the success of these approaches. Pilla et al. (2012) suggest

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MARS in order to generate cutting planes to solve two-stage stochastic dynamic programs
as an alternative to the well-known L-shaped method. The authors show a significant
reduction in computational time compared to the L-shaped method. Taylan et al. (2010)
and Weber et al. (2012b) extend MARS based on the Tikhonov regularization approach.
More recently, Özmen (2016), Özmen and Weber (2014), Özmen et al. (2011, 2012, 2014a,
b, 2017) develop robust (conic) MARS (R(C)MARS) by incorporating data uncertainty
with help of Robust Optimization (Ben-Tal & Nemirovski, 2002; El-Ghaoui, 2003). The
authors find that the new robust methods produce more accurate and robust models com-
pared to MARS.
In the literature, MARS has been successfully applied to various fields of technology,
science, control design, and finance (Samui & Kurup, 2012; Tsai & Chen, 2005; Yang
et al., 2003). During the last two decades, MARS has also found vast venues of applica-
tion in practice. For instance, Lee and Chen (2005) and De Andres et al. (2011) employ
MARS modeling to forecast bankruptcy and credit scoring. Lee et al. (2006) compare
MARS and regression for customer credit scoring. Lu et al. (2012), Miguéis et al. (2013)
provide applications of MARS in the retail industry. Leathwick et al. (2005) use MARS to
forecast the distributions of freshwater diadromous fish in New Zealand. Chou et al. (2004)
compare artificial neural networks and MARS or diagnosing breast cancer. Other interest-
ing applications of MARS and its variations include but not limited to software quality
management (Briand et al., 2004; Zhou & Leung, 2007), pesticide control (Yang et al.,
2003), consumer preferences analysis (Xiong & Meullenet, 2004), default probabilities
in emerging markets (Weber et al., 2012a; Özmen et al., 2013a), multi-model regulatory
networks (Özmen et al., 2014b, 2017), fuel consumption (Chen et al., 2017), solar radia-
tion prediction (Balalla et al., 2021) and the atmospheric effects on satellite images (Kuter
et al., 2014, 2015). When the wider energy sector is taken under consideration, MARS has
been applied in some fields like gas turbines predictive repairs scheduling (Yılmaz et al.,
2015) and energy demand and price modeling (Nalcaci et al., 2014; Özmen et al., 2018;
Sigauke & Chikobvu, 2010; Yıldırım et al., 2011; Zareipour et al., 2006).
LASSO is a recent improvement that shrinks the regression coefficients as well as
shrinks the least significant variable coefficients to zero, accordingly concurrently perform-
ing coefficient penalization and model selection. Since LASSO more directly decreases
the variance in the regression coefficients whilst protecting the interpretability of covariate
effects, it is considered as a more suitable candidate than partial least squares and princi-
pal components regression in order to tackle collinearity in local spatial regression models
(Tibshirani, 1996; Wheeler, 2009). Nowadays, as a machine learning method that can cap-
ture patterns in large datasets, LASSO has been used in many areas to reduce the variable
space. For instance, Yang (2018) proposes a preselection algorithm for lasso-type spatio-
temporal solar forecasting. Sermpinis et al. (2018) study on modeling market-implied rat-
ings using LASSO. Zhang et al. (2019) use elastic net and LASSO for predicting crude oil
prices with a large set of explanatory variables. Uniejewski et al. (2019) apply LASSO to
understand intraday electricity markets and to earn statistically sound insights on variable
selection. Huang et al. (2020) present a comparison study LR, LASSO, tree-based ensem-
ble machine learning models, and support vector regression (SVR) to predict blood pres-
sure during hemodialysis treatment. Chen et al. (2018) represent LASSO type models for
real-time prediction of endemic infectious diseases.
Although there is a vast literature on natural gas demand forecasting (Qiao et al., 2020;
Sailor & Munoz, 1997; Soldo, 2012; Sarak & Satman, 2003), the value of using complex
methods such as MARS and LASSO relative to simple methods, such as multiple linear
regression (LR), is not fully explored yet. In particular, the literature’s view on the value

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of these complex methods is mixed. On one hand, Liu and Lin (1991) and (Thaler et al.,
2005), claim that time-series-based methods are effective in natural gas demand forecast-
ing. On the other hand, Brabec et al. (2008) and Gascon and Sanchez-Ubeda (2018) argue
that natural gas demand has a complex nature and it is necessary to use advanced and com-
plicated techniques for natural gas forecasting. Also, (Bai & Li, 2016) propose a structure-
calibrated SVR approach to predict the daily natural gas consumption. Moreover, Nonlin-
ear Regression Model (Karadede et al., 2017; Vondracek et al., 2008; Sen et al., 2019) and
Artificial Neural Network (ANN) (Aydınalp-Köksal & Uğursal, 2008; Brown et al., 1994;
Hribar et al., 2019; Kızılaslan & Karlık, 2008; Rui et al., 2009; Soldo, 2012; Tonkovic
et al., 2009) have been applied in modeling. These divergent views on the value of complex
methods are in part related to the forecasting horizon of the decision- maker. In particular,
as the forecasting horizon increases, it is more likely that the dataset will include special
days, such as holidays and bridge days during which the demand pattern significantly devi-
ates from the regular days. Turkey’s case is also studied in some earlier works. The annual
consumption of Turkey is modeled with the Simulated Annealing Method (Karadede et al.,
2017; Toksarı, 2010). Sen et al. (2019) apply multiple nonlinear regression to predict
the natural gas consumption of Turkey. At the town stage, Turkey’s situation is searched
in many studies. For instance, daily intake is calculated using Multivariate Time Series
Methods and Neural Network for the town of Istanbul (Demirel et al., 2012). Then, the
ARIMA model is applied to estimate the daily consumption of Sakarya (Akpınar & Yumu-
sak, 2013). Beyca et al. (2019) compare three machine learning tools based on LR, ANN,
and SVR to forecast natural gas demand in the province of Istanbul. Moreover, ANN was
employed in other researches for Istanbul (Görücü, 2004; Kızılaslan & Karlık, 2008). For
the town of Ankara, Multivariable Linear Regression Analysis and ANN method were per-
formed to forecast the day-to-day consumption (Görücü, 2004; Gümrah et al., 2001). How-
ever, except Özmen et al. (2018) based on MARS and CMARS for short-term prediction,
the natural gas demand forecasting literature on MARS and LASSO is mute.

2 Methodology

In this section, we first briefly explain the forecasting methods that will be used in this
study.

2.1 Multiple linear regressions

Regression analysis is a statistical and mathematical methodology that is very beneficial

for many varieties of issues in science and engineering. It principally analyses and tries to
model the connection between the response variable and one or more independent vari-
ables (Montgomery & Runger, 2007). In linear regression models, it is assumed that the
observations, Y, may be defined by the model

Y = 𝛼0 + 𝜶 T X + 𝜀 (1)
where 𝜀 is a random error with unknown variance, 𝜎 and zero mean. Maximum Likelihood
2

Estimation and Least-Squares Estimation are used to estimate unknown parameters. Here,
the easiest one is the least-squares method (Montgomery & Runger, 2007). We can clearly
determine the N observations in the sample as

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Yi = 𝛼0 + 𝜶 T Xi + 𝜀i ,

where Xi ∶= (Xi,1 , Xi,2 , … , Xi,n )T (i = 1, 2, … , N), and the deviation of the ith value of y
from ith predicted value is equal to

Yi − (𝛼0 + 𝜶 T Xi ).

2.2 Least absolute shrinkage and selection operator

The subset selection strategies contain the usage of least squares to suit a linear model
that includes a subset of the explanatory variables. As a substitute for subset selection,
we can obtain a model involving all independent variables by applying a technique that
regularizes and constrains the coefficient estimates. It could not be in an instant evident
why this kind of restriction must toughen the fit, however, it seems that coefficient penali-
zation may significantly scale back their variance (James et al., 2013; Tibshirani, 1996).
The two best-known ways to force the regression coefficients towards zero are the LASSO
and ridge regression. LASSO and ridge regression, also called regularization methods, are
extensively applied in inverse problems that provide extra information to solve ill-posed
problems. The regularization reduces the risk of overfitting and the shrinkage of coeffi-
cients declines the complexity of the model (Hastie et al., 2001). Furthermore, they may be
called robust models since regularization is a kind of robustification.
LASSO aims to construct the subset of predictors which minimizes estimation error
for a quantitative dependent variable. LASSO performs 𝓁1 regularization and this kind of
regularization results in sparse models with few coefficients. This means that on one hand,
some coefficients can be removed from the model and on the other hand, independent vari-
ables with non-zero regression coefficients are most strongly connected with the dependent
variable. The LASSO coefficients minimize the quantity
n ( )2
∑ ∑p ∑p | |
yi − 𝛼0 −
j=1
𝛼j xij + 𝜙 |𝛼 |.
j=1 | j |
(2)
i=1

Here, if the tuning parameter 𝜙 is adequately large, the 𝓁1 penalty has the effect of shrink-
ing some of the coefficient estimates to be equal to zero. The 𝓁1 norm of a coefficient vector
∑p � �
is defined as ‖𝜶‖1 = j=1 �𝛼j �. Consequently, the LASSO performs variable selection and
� �
can yield sparse models (James et al., 2013; Tibshirani, 1996). Since it can obtain more
interpretable and simpler models that include only a subset of the independent variables,
the LASSO has a major benefit over ridge regression. Moreover, LASSO can be less sensi-
tive to outliers than ridge regression since it uses 𝓁1 norm regularization. However, the
variance of the LASSO can be higher than the variance of ridge regression.

2.3 Multivariate adaptive regressions splines

Multivariate adaptive regression splines (MARS) (Friedman, 1991), applied in many

areas of technology, science, and finance nowadays, is a modern methodology of estima-
tion theory, statistical learning, and data mining. It is a non-parametric regression model
that requires no specific precondition on the underlying functional relationship among
the response and explanatory variables. It can be represented as an extension of linear

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models which automatically models interactions and nonlinearities (Özmen, 2016; Özmen
& Weber, 2014). It obtains a continuous model that makes possible a more effective way
to model nonlinearities by using piecewise linear functions (Özmen et al., 2014b). MARS
creates a multivariate-additive model in two steps that comprise the forward step and back-
ward step.
In the forward step, by a fast-searching algorithm, MARS firstly searches basis func-
tions (BFs) which are added to the model, and then obtains the largest model that overfits
the dataset. This process finishes if the model received the maximum number of BFs, Mmax
but, the model constructed may contain BFs that contribute least or most to the overall
performance. Thus, it is quite complex and contains many incorrect terms at the end of
this stage. So, in the backward step, this overfit model is pruned to decrease model com-
plexity while preventing the overall performance by taking into account the fit to the data
and, finally, an optimally predicted model is established (Kriner, 2007; Özmen and Weber
2014).
MARS applies expansions of piecewise linear basis functions (BFs) generated by a
dataset and these BFs, (x − 𝜉)+ and (x − 𝜉)− , present a two-side shape called a reflected
pair. The BFs have the following form (Hastie et al., 2001; Kriner, 2007):
{ {
x − 𝜉, if x > 𝜉 x − 𝜉, if x > 𝜉
(x − 𝜉)+ =
0, otherwise,
, (x − 𝜉)− =
0, otherwise, (3)

Here, 𝜉 is a univariate knot constructed from the dataset. These two mirror functions
are called truncated linear functions and each function is presented as piecewise linear
with a knot at the value 𝜉 . Here, the purpose is to obtain reflected pairs for each input
xj (j = 1, 2, … , r) with r-dimensional knots 𝝃 i = (𝜉i,1 , 𝜉i,2 , … , 𝜉i,r )T (i = 1, 2, … , N) at each
observed value xij of that input (i = 1, 2, … , N). Hence, the collection of BFs is written by
a set S determined as
S ∶= {(xj − 𝜉)+ , (𝜉 − xj )+ |𝜉 ∈ {x1j , x2j , … , xNj }, j = 1, 2, 3, … , r},

where r is the dimension of the input space, and N is the number of observations. So,
there exist 2Nr BFs when all of the input values are distinct. In the forward step of MARS,
the model is generated by using BFs from the set S and their products. Consequently, the
model is
M
∑
Y = 𝛼0 + 𝛼m Tm (xm ) + 𝜀, (4)
m=1

with a vector x = (x1 , x2 , … , xr )T . Here, M is the set of BFs and 𝜀 is an uncorrelated ran-
dom error term supposed to have a normal distribution with finite variance and zero mean.
Furthermore, Tm (xm ) is a BF from the set S in Eq. (4) or a product of more than two such
functions; xm is a subvector of x that contributes to the function Tm; 𝛼0 is intercept; 𝛼 are
the unknown coefficients for the constant 1 or for the mth BF that has the following form
(Hastie et al., 2001; Kriner, 2007; Özmen, 2010, 2016):
Km
∏
Tm (xm ) = [skm .(xv(k,m) − 𝜉km )]+ , (5)
k=1

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where skm ∈ {±1}, Km being the interaction degree of the mth BF, xv(k,m) being the inde-
pendent variable of the kth truncated linear function in the mth BF. The corresponding knot
value for the variable xv(k,m) is given by 𝜉km.
To produce the model, the forward stepwise of MARS begins with the constant func-
tion T0 (x0 ) = 1 to predict 𝛼0, and all functions in S are considered as candidate func-
tions. The forms of BFs Tm (xm ) can be presented as 1, xn, [xn − 𝜉i ]+, xn xl , [xn − 𝜉i ]+ xl and
[xn − 𝜉i ]+ [xl − 𝜉j ]+ (Özmen, 2016). Here, a lack of fit (LOF) criterion is applied to compare
the possible BFs and, at the end of the forward step, the largest model is constructed. Since
this model typically overfits the data and includes incorrect terms, a backward stepwise
algorithm is employed to remove just the BFs which gives the smallest increase in the
residual squared error from the model at each stage. This iterative procedure proceeds until
an optimal number of effective terms are represented in the final model (Özmen & Weber,
2014). Therefore, a predicted best model f̂𝛽 of each number of terms 𝛽 is generated at the
end of this process. Here, to receive the optimal number of terms 𝛽 , generalized cross-
validation (GCV) is used and it also presents the lack of fit in the MARS model. The GCV
criterion by Friedman (1991) is determined as follows:
∑N
(y − f̂𝛽 (xi ))2
i=1 i
LOF(f̂𝛽 ) = GCV(𝛼) : = ; (6)
(1 − M(𝛽)∕N)2

here, N being the number of observations, i.e., of the data, and M(𝛽) is the effective num-
ber of parameters in the model (Hastie et al., 2001).

3 Numerical results

In this section, we develop forecasting models using the LASSO, MARS, and LR methods
described above and compare their performances in terms of MAPE and maxAPE. Before
we present our numerical results, we first explain our dataset used in this study.

3.1 Description of data set

The data consists of daily natural gas consumption data between 2004 and 2013 from the
Baskentgaz which is the DSO of Ankara. Natural gas is provided to Baskentgaz through
five delivery points from BOTAS, which is the TSO of Turkey. These delivery points are
called Pressure Reduction and Measurement Stations. So, in Ankara, the total daily natural
gas consumptions from these stations are included as inputs to the models for the period
of 2004–2013. This study is obtained for the responsibility field of Baskentgaz with a
real dataset which is given by BOTAS and this DSO. To evaluate the performances of our
models, we carried out the hold-out method as the validation technique. So, the dataset is
divided into two subsamples as training and test sets. However, the dataset was not subdi-
vided randomly as it contains a time series of meteorological variables (such as tempera-
ture, humidity, and wind speed). Instead of this, the first 6 years (from 2004 to 2009) of
each variable taken into account were assigned to be the training dataset whereas the last
4 years of the series (between 2010 and 2013) were assigned to be the test dataset.

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Meteorological data. Our dataset includes three meteorological variables, namely, the
mean temperature (heating degree day (HDD), the daily minimum temperature and daily
maximum temperature of the objected day (Tmin and Tmax), relative humidity (in percent),
and wind speed (in m/s). We obtained the meteorological data used in this study from the
Turkish State Meteorological Service. Consumption of energy, particularly natural gas,
depends on the weather conditions very strongly. Whenever the temperature falls below
some value of the heating threshold, residential users consume more energy owing to
the increased necessity of space heating (Özmen et al., 2018). Consequently, consump-
tion data with corrected temperatures provide the interpretation of energy demand trends.
Here, HDD is a measure of the heat quantity that is necessary for 1 day. HDD is obtained
using the average ambient temperature and presents the consumption of energy to warm a
house. HDD is formulated as 18 °C – T, where T is the average temperature. Here, 18 °C is
defined by Eurostat as the temperature that the consumer heats the house. This formula is
used when the temperature is below 15 °C which is the heating threshold given by Eurostat.
Calendar data: The calendar data we considered include: day of the week, all national
and religious holidays. A dummy 0–1 variable is used to describe the weekend and work-
ing days.
Other data: We also used various lags of natural gas demand (such as daily, weekly, and
monthly) depending on the forecasting horizon. Finally, one of the essential inputs is the
number of residential users. The quantity of customers has an impact on natural gas con-
sumption. Therefore, the natural gas consumptions have been applied into the algorithms
as the ratio of total daily natural gas demand to the number of residential customers for that
year.

3.2 Criteria and measures for performance evaluations

Our main performance measures to evaluate the precision of the models are mean absolute
percentage error (MAPE) and maximum absolute percentage error (maxAPE). Addition-
ally, we also evaluate the models based on adjusted multiple coefficient of determination
( R2adj ), root mean squared error (RMSE), mean absolute error (MAE), and the correlation
coefficient (r). These measures, their interpretations, abbreviations, explanations, and for-
mulas are presented in Table 1.
It should be recalled that the performance criteria above are widely used performance
measures to check the precision of prediction models that are used in energy sectors. Here,
our core performance measure to check the precision of the energy modeling is MAPE.
Moreover, the values closer to 1 provide better results for R2adj and r, while smaller values
closed to 0 gives better results for MAPE, AAE, and RMSE

3.3 Natural gas demand forecasting models

We evaluate performances of LR, LASSO, and MARS models for short-term and long-
term forecasting, namely, 1 day ahead, 1 week ahead, and 1 year ahead by using daily fore-
casting intervals. The independent variables tested in our models are as follows:

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Table 1  Prediction performance criteria and related measures
Abbreviation Measure Explanation Interpretation Formula

MAPE Mean Absolute Percentage Error The average magnitude of Smaller value is better 1
MAPE ∶= N
percentage errors
∑N � (yk −̂yk ) �
�

maxAPE Maximum Absolute Percentage Error The maximum magnitude of Smaller value is better
k=1 �� yk �

percentage errors k
| (y −̂y ) |
maxAPE ∶= max | ky k |

R2adj Multiple Coefficient of Determination Percentage of variation in Values closer to one are better (y −̂y )2 2 )(N−1)
k | |

response explained by the k=1

(N−k−1)
(yk −̄yk )
� ∑N � � �
R2 ∶= 1 − ∑Nk=1 k k 2 .R2adj = 1 − (1−R
model
AAE 1
Average Absolute Error The average magnitude of Smaller value is better AAE ∶= N
errors
∑N �

1 N
k=1 �yk − y
̂ k ��

RMSE Root Mean Square Error The square root of the mean Smaller value is better RMSE ∶= (yk − ŷ k )2
squared error N k=1
� ∑

(y−̄y)(̂y−ȳ̂ )
r Correlation coefficient Linear relation between the Value closer to one is better k=1
∑N

(N−1)
observed and predicted r ∶=
s(y)2 s(̄y)2
√
response

N: number of observations; p: number of terms in the model; yk : kth observed response value; ŷ k : kth predicted (fitted) response value; ȳ : mean of the observed values; ŷ :
predicted response variable; ȳ̂ : mean of the predicted response variable; s(y)2: standard deviation of the observed response variable; s(̂y)2: standard deviation of the predicted
response variable
Annals of Operations Research
Annals of Operations Research

Table 2  Significant variables of LR, LASSO, and MARS models for 1-day-ahead prediction
L1t L2t L3t L4t L5t L6t L7t L14t HDDt Ttmax Ttmin WSt Ht

LR * * * * * *
LASSO * * * *
MARS * * * *

• Lit shows the ith lag of NG demand (in terms of days) for time t.
• Ttmax and Ttmin is used maximum temperature and minimum temperature, respectively.
• HDDt represents the heating degree days for the given day t.
• A dummy 0-1variable is used to describe weekends and working days. Ht is designated
for holidays.
• Finally, WSt is used for average wind speed in Turkey.

We first provide the model details and then discuss their performances for each fore-
casting time horizon. Here, Minitab (2017) and MATLAB are applied to construct LR
and LASSO while Salford MARS (2018) is used to obtain MARS models.

3.3.1 Day ahead forecasting

The system operator needs to detect possible supply security problems for the next day.
Therefore, it is necessary to use 1-day ahead forecasting. Among the various meteoro-
logical and calendar variables we tested, Table 2 shows the significant ones for each
model.
In our study, the LR, LASSO, and MARS models for 1-day ahead prediction can be
written as follows:
LR model with 6 inputs after the LR coefficients are evaluated

Ŷ t = 𝛼0 + 𝛼1 L1t + 𝛼2 L2t + 𝛼3 HDDt + 𝛼4 Ttmax + 𝛼5 Ttmin + 𝛼5 WSt

= 0.24 + 0.89L1t − 0.093L2t + 0.089HDDt − 0.027Ttmax + 0.035Ttmin + 0.053WSt .

LASSO model with 4 inputs after the LASSO coefficients are evaluated

Ŷ t = 𝛼0 + 𝛼1 L1t + 𝛼2 L2t + 𝛼3 HDDt + 𝛼4 WSt

= 0 + 0.88L1t − 0.1L2t + 0.09HDDt + 0.05WSt .

MARS model with 4 inputs and 19 BFs after the MARS coefficients are evaluated

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 Annals of Operations Research

Table 3  Significant variables of LR, LASSO, and MARS models for 1-week-ahead prediction
L7t L8t L9t L10t L11t L12t L13t L14t HDDt Ttmax Ttmin WSt Ht

LR * * * * *
LASSO * * * *
MARS * * * * * * * * *

Ŷ t = 𝛼0 + 𝛼1 BF1 + 𝛼2 BF2 + 𝛼3 BF3 + 𝛼4 BF4 + 𝛼5 BF5 + 𝛼6 BF6 + 𝛼7 BF7 + 𝛼8 BF8 + 𝛼9 BF9 + 𝛼10 BF10
+ 𝛼11 BF11 + 𝛼12 BF12 + 𝛼13 BF13 + 𝛼14 BF14 + 𝛼15 BF15 + 𝛼16 BF16 + 𝛼17 BF17 + 𝛼18 BF18 + 𝛼19 BF19
= 5.32 + 0.77 max{0, L1t − 6.249} − 0.61 max{0, 6.249 − L1t } + 0.27 max{0, HDDt − 8}
{ } { }
− 0.09 max{0, 8 − HDDt } + 0.1 max 0, Ttmin − 7.8 + 0.11 max 0, 7.8 − Ttmin
+ 0.19 max{0, L6t − 9.925} − 0.09 max{0, 9.925 − L6t }
+ 0.01 max{0, HDDt − 10.3} ⋅ max{0, 9.925 − L6t }
+ 0.01 max{0, 10.3 − HDDt } ⋅ max{0, 9.925 − L6t }
− 0.02 max{0, 2.5 − L1t } ⋅ max{0, 9.92 − L6t }
− 0.02 max{0, Ttmin − 5.6} ⋅ max{0, 6.249 − L1t }
+ 0.01 max{0, L6t − 7.34} ⋅ max{0, HDDt − 8}
− 0.02 max{0, L1t − 4.685} ⋅ max{0, HDDt − 8}
− 0.02 max{0, 4.685 − L1t } ⋅ max{0, HDDt − 8}
{ }
+ 0.12 max 0, Ttmin − 8.9 ⋅ max{0, HDDt − 8}
{ }
+ 0.002 max 0, 8.9 − Ttmin ⋅ max{0, HDDt − 8}
+ 0.01 max{0, L1t − 8.4} ⋅ max{0, HDDt − 8}
− 0.02 max{0, HDDt − 0} ⋅ max{0, L6t − 9.925}.

Table 2 points out that for the LR model, degree days (HDD), minimum temperature
(T min ), maximum temperature (T max), and wind speed (WS) are significant. We observe that
minimum temperature (T min ) is significant for LR and MARS whereas wind speed (WS)
has a significant impact on the LR and LASSO models. As expected, natural gas demands
for the previous day (L1) are significant in all models. Besides, while the previous day L2 is
significant for LR and LASSO models, L6 is significant for the MARS model.

3.3.2 Week ahead forecasting

One week ahead forecasting is generally used for the production plans of generation units for
the next week. This provides the firms with insights about generation and consumption trends
and helps them for determining their weekly generation schedules. Among the various mete-
orological and calendar data we tested, Table 3 shows the significant ones for each model.
The LR, LASSO, and MARS models for 1-week ahead prediction can be written as
follows:
LR model with 5 inputs

Ŷ t = 𝛼0 + 𝛼1 L7t + 𝛼2 L8t + 𝛼3 L14t + 𝛼4 HDDt + 𝛼5 Ttmax

= 1.40 + 0.041 − 0.011L8t + 0.67L14t + 0.24HDDt − 0.04Ttmax .

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Annals of Operations Research

LASSO model with 4 inputs

Ŷ t = 𝛼0 + 𝛼1 L7t + 𝛼2 L8t + 𝛼3 L10t + 𝛼4 HDDt
= 0.38 + 0.45L7t − 0.17L8t + 0.091L10t + 0.28HDDt .

MARS model with 9 inputs and 21 BFs

Ŷ t = 𝛼0 + 𝛼1 BF1 + 𝛼2 BF2 + 𝛼3 BF3 + 𝛼4 BF4 + 𝛼5 BF5 + 𝛼6 BF6 + 𝛼7 BF7 + 𝛼8 BF8

+ 𝛼9 BF9 + 𝛼10 BF10 + 𝛼11 BF11 + 𝛼12 BF12 + 𝛼13 BF13 + 𝛼14 BF14 + 𝛼15 BF15 + 𝛼16 BF16
+ 𝛼17 BF17 + 𝛼18 BF18 + 𝛼19 BF19 + 𝛼20 BF20 + 𝛼21 BF21
= 5.3 + 0.39 max{0, HDDt − 7} + 0.61 max{0, 7 − HDDt }
+ 0.4 max{0, L7t − 10.22} − 0.21 max{0, Ttmax − 20.8} + 0.087 max{0, 20.8 − Ttmax }
+ 0.039 max{0, Ttmax − 19.2} ⋅ max{0, 10.22 − L7t }
− 0.015 max{0, L7t − 2.217} ⋅ max{0, HDDt − 7}
− 0.067 max{0, L9t − 10.572} ⋅ max{0, 10.22 − L7t }
+ 0.066 max{0, 1.572 − L9t } ⋅ max{0, 10.22 − L7t }
+ 0.039 max{0, L14t − 60.032} ⋅ max{0, 10.22 − L7t }
.
− 0.04 max{0, WSt − 1.6} ⋅ max{0, HDDt − 7}
− 0.017 max{0, Ht − 0} ⋅ max{0, HDDt − 7}
+ 0.036 max{0, WSt − 1.6} ⋅ {0, 20.8 − Ttmax }
+ 00.037 max{0, 10.6 − WSt } ⋅ {0, 20.8 − Ttmax }
− 0.16 max{0, L9t − 100.94} − 0.4 max{0, 100.94 − L9t }
+ 0.036 max{0, L7t − 10.73} ⋅ max{0, 100.94 − L9t }
− 00.13 max{0, 10.73 − L7t } ⋅ max{0, 100.94 − L9t }
+ 00.023 max{0, 6.29 − L12t } ⋅ max{0, HDDt − 7}
− 00.07 max{0, 3.52 − L13t } ⋅ max{0, HDDt − 7}
− 0.022 max{0, Ttmax − 7.4} ⋅ max{0, 7 − HDDt }

For this forecasting horizon, NG consumption for the previous hour of the previous
week (L7) and heating degree days are significant in all of the models. The week before the
previous week (L14) and maximum temperature (T max) are significant in LR and MARS
while yesterday before the previous week (L8) is significant in LR and LASSO. We observe
that the 3rd day before the previous week (L10) is significant in only the LASSO model.
Here, only the MARS model finds to be significant the days before the previous week (L9,
L12, L13), wind speed (WS), and Ht.

3.3.3 Year ahead forecasting

One year ahead forecasting is one of the most important forecasting horizons for market par-
ticipants. Companies prefer to cover their short positions (both for base- and peak-consump-
tion exposures) by using bilateral agreements and the majority of these agreements are fixed 1
year in advance. This enables them to better hedge their risks for the coming year and assesses
the value of the future investment and operating plans. Among the various meteorological and
calendar data we tested, Table 4 shows the significant ones for each model. Here, for exposi-
tional simplicity, Lit shows the 1 year plus ith lag of natural gas demand based on time t. For
instance, L0t represents the previous year while L1t shows the 1 year plus the previous day.

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Table 4  Significant variables of LR, LASSO, and MARS models for 1-year-ahead prediction
L0t L1t L2t L3t L4t L5t L6t L7t L14t HDDt Ttmax Ttmin WSt Ht

LR * * * * * *
LASSO * * * *
MARS * * * * * * * * *

Table 4 points out that the previous year (L0), the previous week (L7), the week before the
previous week (L14), heating degree days have a significant impact on all models whereas the
maximum and minimum temperatures are significant in LR, and MARS. Unlike 1-week ahead
prediction models, the week before the previous week becomes significant in all models. Here,
only the MARS model finds to be significant the days before the previous year (L2, L3).
The LR, LASSO, and MARS models can be written as follows:
LR model with 6 inputs

Ŷ t = 𝛼0 + 𝛼1 L0t + 𝛼2 L7t + 𝛼3 L14t + 𝛼4 HDDt + 𝛼5 Ttmax + 𝛼6 Ttmin

= 1.49 + 0.17L0t + 0.08L7t + 0.06L14t + 0.25HDDt − 0.02Ttmax − 0.03Ttmin .

LASSO model with 4 inputs

Ŷ t = 𝛼0 + 𝛼1 L0t + 𝛼2 L7t + 𝛼3 L14t + 𝛼4 HDDt

= 0.42 + 0.18L0t − 0.08L7t + 0.06L14t + 0.29HDDt .

MARS model with 8 inputs and 21 BFs

Ŷ t = 𝛼0 + 𝛼1 BF1 + 𝛼2 BF2 + 𝛼3 BF3 + 𝛼4 BF4 + 𝛼5 BF5 + 𝛼6 BF6 + 𝛼7 BF7 + 𝛼8 BF8

+ 𝛼9 BF9 + 𝛼10 BF10 + 𝛼11 BF11 + 𝛼12 BF12 + 𝛼13 BF13 + 𝛼14 BF14 + 𝛼15 BF15 + 𝛼16 BF16
+ 𝛼17 BF17 + 𝛼18 BF18 + 𝛼19 BF19 + 𝛼20 BF20 + 𝛼21 BF21
= 3.98 + 0.36max{0, HDDt − 7} + 0.2max{0, L0t − 7.71} − 0.19max{0, 7.71 − L0t }
− 0.058max{0, HDDt − 260.5} ⋅ max{0, L0t − 7.71}
+ 0.013max{0, 260.5 − HDDt } ⋅ max{0, L0t − 7.71}
− 0.06max{0, 7.66 − L7t } − 0.11max{0, Ttmax − 17} + 0.13max{0, 17 − Ttmax }
− 0.079max{0, Ttmin − 11.4} − 0.004max{0, L3t − 2.35} ⋅ max{0, HDDt − 7}
− 0.23max{0, 2.35 − L3t } ⋅ max{0, HDDt − 7}
− 0.102max{0, L14t − 90.3} ⋅ max{0, L0t − 7.71}
− 0.077max{0, Ttmax − 160.2} ⋅ max{0, L0t − 7.71}
− 0.026max{0, L2t − 1.97} ⋅ max{0, 7.66 − L7t }
− 0.035max{0, 1.97 − L2t } ⋅ max{0, 7.66 − L7t }
+ 00.054max{0, 4.25 − L7t } ⋅ max{0, HDDt − 7}
− 0.013max{0, L14t − 2.13} ⋅ max{0, HDDt − 7}
− 00.073max{0, 2.13 − L14t } ⋅ max{0, HDDt − 7}
+ 0.52max{0, L14t − 100.9} − 0.33max{0, 100.9 − L14t }
+ 0.01max{0, Ttmax + 70.4} ⋅ max{0, 100.9 − L14t }.

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Table 5  Performance metrics LR LASSO MARS

of LR, LASSO, and MARS for
1-day-ahead prediction Train Test Train Test Train Test

R^2 0.989 0.991 0.988 0.990 0.994 0.994

AAE 0.282 0.255 0.284 0.262 0.195 0.18
RMSE 0.409 0.335 0.420 0.353 0.313 0.264
r 0.995 0.996 0.994 0.995 0.997 0.997
MAPE 0.094 0.085 0.086 0.083 0.046 0.048
maxAPE 1.187 0.555 0.73 0.462 0.607 0.467

Table 6  Performance metrics LR LASSO MARS

of LR, LASSO, and MARS for
1-week-ahead prediction Train Test Train Test Train Test

R^2 0.954 0.96 0.952 0.958 0.977 0.977

AAE 0.625 0.577 0.629 0.582 0.382 0.366
RMSE 0.843 0.706 0.854 0.72 0.595 0.535
r 0.977 0.982 0.976 0.98 0.988 0.989
MAPE 0.238 0.237 0.227 0.228 0.089 0.097
maxAPE 2.958 1.442 2.919 1.409 1.507 0.696

Table 7  Performance metrics LR LASSO MARS

of LR, LASSO, and MARS for
1-year-ahead prediction Train Test Train Test Train Test

R^2 0.943 0.938 0.941 0.937 0.972 0.961

AAE 0.7 0.707 0.702 0.7 0.426 0.49
RMSE 0.937 0.874 0.946 0.881 0.657 0.693
r 0.971 0.971 0.97 0.97 0.986 0.982
MAPE 0.257 0.263 0.244 0.248 0.105 0.134
maxAPE 3.162 1.644 3.12 1.659 1.45 1.115

3.4 Results and discussion

For the prediction of the daily natural gas consumption, the LR, LASSO, and MARS mod-
els defined in Sect. 3 are evaluated in terms of the performance criteria by using the for-
mulas presented in Table 1. Tables 5, 6 and 7 show the performance matrices based on
training and testing cases of LR, LASSO, and MARS models for 1-day, 1-week, and 1 year
ahead forecasting, respectively. Absolute Percentage Errors (APEs) of our proposed mod-
els are also shown in Figs. 1, 2, 3, 4, 5 and 6 for training and test data based on short- and
long-term predictions.
Table 5 provides performances of LR, LASSO, and MARS models for training and test
based on 1-day ahead prediction. The LASSO model achieves slightly better MAPE and

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Absolute Percentage Error(APE) for training data-- one-day ahead

1.4
1.2
1
0.8
0.6
0.4
0.2
0
1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009

APE_LR APE_LASSO APE_MARS

Fig. 1  Absolute percentage error of LR, LASSO, and MARS models for training data based on 1-day ahead
forecasting

Absolute Percentage Error(APE) for test data--one-day ahead

0.6
0.5
0.4
0.3
0.2
0.1
0
9/1/2010

9/1/2011

3/1/2013

11/1/2013
1/1/2010
3/1/2010
5/1/2010
7/1/2010

11/1/2010
1/1/2011
3/1/2011
5/1/2011
7/1/2011

11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012
9/1/2012
11/1/2012
1/1/2013

5/1/2013
7/1/2013
9/1/2013
APE_LR APE_LASSO APE_MARS

Fig. 2  Absolute percentage error of LR, LASSO, and MARS models for test data based on 1-day ahead
forecasting

Absolute Percentage Error(APE) for training data-- one-week ahead

3.5
3
2.5
2
1.5
1
0.5
0
1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009

APE_LR APE_LASSO APE_MARS

Fig. 3  Absolute percentage error of LR, LASSO, and MARS models for training data based on 1-week
ahead forecasting

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Annals of Operations Research

Absolute Percentage Error(APE) for test data--one-week ahead

1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

3/1/2011
1/1/2010
3/1/2010
5/1/2010
7/1/2010
9/1/2010
11/1/2010
1/1/2011

5/1/2011
7/1/2011
9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012
9/1/2012
11/1/2012
1/1/2013
3/1/2013
5/1/2013
7/1/2013
9/1/2013
11/1/2013
APE_LR APE_LASSO APE_MARS

Fig. 4  Absolute percentage error of LR, LASSO, and MARS models for test data based on 1-week ahead
forecasting

Absolute Percentage Error(APE) for training data-- one-year ahead

3.5
3
2.5
2
1.5
1
0.5
0
1/1/2004 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009

APE_LR APE_LASSO APE_MARS

Fig. 5  Absolute percentage error of LR, LASSO, and MARS models for training data based on 1-year
ahead forecasting

Absolute Percentage Error(APE) for test data--one-year ahead

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1/1/2010
3/1/2010
5/1/2010
7/1/2010
9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011
7/1/2011
9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012
9/1/2012
11/1/2012
1/1/2013
3/1/2013
5/1/2013
7/1/2013
9/1/2013
11/1/2013

APE_LR APE_LASSO APE_MARS

Fig. 6  Absolute percentage error of LR, LASSO, and MARS models for test data based on 1-year ahead
forecasting

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Actual and LRapproximaon of natural gas demand for one day ahead forecasng
16
14
12
10
8
6
4
2
0
1/1/2010
3/1/2010
5/1/2010
7/1/2010
9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011
7/1/2011
9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012
9/1/2012
11/1/2012
1/1/2013
3/1/2013
5/1/2013
7/1/2013
9/1/2013
11/1/2013
Actual values LRapproximaon

Fig. 7  Actual and predicted natural gas values of LR model for test data based on 1-day ahead forecasting1-
day ahead forecasting

maxAPE results than the LR model. According to the results in Table 5, the MARS model
outperformed the other models in all of the criteria for both training and test data.
Based on the 1-week ahead prediction, the performances of LR, LASSO, and MARS
models are presented in Table 6 for training and test cases. LASSO model achieves better
MAPE and maxAPE results than LR. According to the results in Table 6, the MARS model
still outperformed the other models in all of the criteria for both training and test cases.
For 1-year ahead prediction, Table 7 provides the performances of LR, LASSO, and
MARS models for training and test cases. According to the results in Table 7, the LASSO
model achieves better MAPE and maxAPE results than LR for training and the test. The
performance gap is not too large based on train data but, the model generated from LASSO
is much easier to interpret than the model produced by LR. However, the MARS model
still outperformed the other models in all of the criteria and the performance gap is also too
large, in the case of MAPE and maxAPE.
In this study, all deterministic components such as trend and seasonality are aimed to
model directly rather than removing the effect of these elements by prior using transforma-
tions. For the prediction, proposed models can capture the trend and the seasonal pattern
of the natural gas consumption as seen from Figs. 7, 8, 9, 10, 11, 12, 13 , 14 and 15. Here,
three specific forecasting methods have been tested for prediction accuracy on real-time
series data. For the proposed natural gas consumption modeling of residential users, the
most significant factors are based on temperature. During cold weather, when temperature
inclines, natural gas consumption declines in a nearly linear way because a large amount
of natural gas is consumed for space heating in Ankara. This event also obtains a big dif-
ference between summer and winter periods of the residential user consumption. Indeed,
as we can see from Figs. 7, 8, 9, 10, 11, 12, 13, 14 and 15 natural gas demand in summer
periods is balanced and close to 0, while the demand in winter periods is high and presents
a fluctuation.
As a consequence, when the forecasting horizon increases, the MAPE performance
is getting worse. However, among the considered models, the MARS model outper-
forms the other models in terms of all performance criteria represented in Table 1 for
training and test cases based on short- and long-term forecasting. Therefore, based on
these sparse regression models, MARS should be the selected model in this particular

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Annals of Operations Research

Actual and LASSOapproxima on of natural gas demand for one day ahead forecas ng
16
14
12
10
8
6
4
2
0
11/1/2010

9/1/2012
1/1/2010
3/1/2010
5/1/2010
7/1/2010
9/1/2010

1/1/2011
3/1/2011
5/1/2011
7/1/2011
9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012

11/1/2012
1/1/2013
3/1/2013
5/1/2013
7/1/2013
9/1/2013
11/1/2013
Actual values LASSOapproximaon

Fig. 8  Actual and predicted natural gas values of LASSO model for test data based on 1-day ahead fore-
casting

Actual and MARSapproxima on of natural gas demand for one day ahead forecas ng
16
14
12
10
8
6
4
2
0
1/1/2010
3/1/2010
5/1/2010
7/1/2010
9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011
7/1/2011
9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012
9/1/2012
11/1/2012
1/1/2013
3/1/2013
5/1/2013
7/1/2013
9/1/2013
11/1/2013

Actual values MARSapproximaon

Fig. 9  Actual and predicted natural gas values of MARS model for test data based on 1-day ahead forecast-
ing

problem for short- and long-term forecasting. In fact, when we consider that the pre-
diction research is very carefully associated with meteorological inputs and forecasts,
the outcomes extraordinarily depend on the accuracy of the meteorological prediction.
Therefore, the analyst who uses estimation model outcomes on consumption forecast
has to replace the consumption outcomes with amended meteorological inputs.

4 Conclusion and comments

This study represents two inventive approaches to short and long-term natural gas demand
prediction problems in the energy industry and gives a comparison of them with an exist-
ing model that is already used in natural gas forecasting. We consider daily, weekly, yearly
natural gas consumption forecasting with daily intervals for DSOs based on residential

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 Annals of Operations Research

Actual and LRapproximation of natural gas demand for one week ahead forecasting
16
14
12
10
8
6
4
2
0
1/1/2010

7/1/2011

5/1/2012
3/1/2010
5/1/2010
7/1/2010
9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011

9/1/2011
11/1/2011
1/1/2012
3/1/2012

7/1/2012
9/1/2012
11/1/2012
1/1/2013
3/1/2013
5/1/2013
7/1/2013
9/1/2013
11/1/2013
Actual values LRapproximaon

Fig. 10  Actual and predicted natural gas values of LR model for test data based on 1-week ahead forecast-
ing

Actual and LASSOapproximation of natural gas demand for one week ahead forecasting
16
14
12
10
8
6
4
2
0
1/1/2010
3/1/2010
5/1/2010
7/1/2010
9/1/2010

1/1/2011
3/1/2011
5/1/2011
7/1/2011
9/1/2011

1/1/2012
3/1/2012
5/1/2012
7/1/2012
9/1/2012

1/1/2013
3/1/2013
5/1/2013
7/1/2013
9/1/2013
11/1/2010

11/1/2011

11/1/2012

11/1/2013

Actual values LASSOapproximaon

Fig. 11  Actual and predicted natural gas values of LASSO model for test data based on 1-week ahead fore-
casting

users. We solve the high-dimensionality problem of daily datasets by using supposing

sparse constructions of principal indicators successful of correctly explaining the dynam-
ics of the analyzed data. We make out-of-sample forecasts and compare with data observed
based on test datasets to check the prediction accuracy of the models. As seen from Figs. 7,
8, 9, 10, 11, 12, 13 and 14, proposed models can capture the trend and the seasonal pat-
tern of the natural gas demand for the prediction. Here, for each forecast horizon, predic-
tion accuracy is calculated based on the performance measures by using the formulas pre-
sented in Table 1. We observe that MARS performs superior for 1-day, 1-week, and 1-year
ahead forecasts with MAPE values of 4.6% 9.7% and 13.4% respectively. For 1 week and 1
year ahead forecasts MARS significantly outperforms the other approaches. Regarding the
maxAPE values, MARS still outperforms LASSO and LR for all the forecasting intervals.
Consequently, MARS ought to be the preferred model for this specific problem among the
proposed sparse regression models.

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Annals of Operations Research

Actual and MARSapproxima on of natural gas demand for one week ahead forecas ng
16
14
12
10
8
6
4
2
0

7/1/2011
1/1/2010
3/1/2010
5/1/2010
7/1/2010

9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011

9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012

9/1/2012
11/1/2012
1/1/2013
3/1/2013
5/1/2013
7/1/2013

9/1/2013
11/1/2013
Actual values MARSapproximaon

Fig. 12  Actual and predicted natural gas values of MARS model for test data based on 1-week ahead fore-
casting

Actual and LRapproximaon of natural gas demand for one year ahead forecasng
16
14
12
10
8
6
4
2
0
3/1/2010

7/1/2012

1/1/2013
1/1/2010

5/1/2010
7/1/2010

9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011
7/1/2011

9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012

9/1/2012
11/1/2012

3/1/2013
5/1/2013
7/1/2013

9/1/2013
11/1/2013

Actual values LRapproximaon

Fig. 13  Actual and predicted natural gas values of LR model for test data based on 1-year ahead forecasting

Actual and LASSOapproxima on of natural gas demand for one year ahead forecas ng
16
14
12
10
8
6
4
2
0
9/1/2012

3/1/2013
1/1/2010
3/1/2010
5/1/2010
7/1/2010
9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011
7/1/2011
9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012

11/1/2012
1/1/2013

5/1/2013
7/1/2013
9/1/2013
11/1/2013

Actual values LASSOapproximaon

Fig. 14  Actual and predicted natural gas values of LASSO model for test data based on 1-year ahead fore-
casting

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 Annals of Operations Research

Actual and MARSapproxima on of natural gas demand for one year ahead forecas ng
16
14
12
10
8
6
4
2
0

9/1/2012

3/1/2013
1/1/2010
3/1/2010
5/1/2010
7/1/2010
9/1/2010
11/1/2010
1/1/2011
3/1/2011
5/1/2011
7/1/2011
9/1/2011
11/1/2011
1/1/2012
3/1/2012
5/1/2012
7/1/2012

11/1/2012
1/1/2013

5/1/2013
7/1/2013
9/1/2013
11/1/2013
Actual values MARSapproximaon

Fig. 15  Actual and predicted natural gas values of MARS model for test data based on 1-year ahead fore-
casting

In this study, three specific forecasting methods are tested for prediction accuracy on
time series of natural gas demand. Here, it is shown that MARS can supply valuable results
on modeling the residential gas intake day-to-day forecasts in the short term and long term.
They can allow us to obtain precious knowledge on per 30 days overall natural gas intake
and have a per thirty days reasonable consumption in keeping with day and a peak demand
intake in line with day for every month. These data are relatively essential for DSOs’ ana-
lytic research on short- and long-term planning. However, since the prediction studies very
closely depend on meteorological inputs and forecasts, the results extremely rely on the
accuracy of the meteorological prediction. Consequently, any analyst using estimation
model results on demand prediction should update the demand effects with amended mete-
orological inputs. In this study, the natural gas forecast models are represented through
HDD values and direct measurements of temperatures, and all of them are used to obtain
annual consumption figures in demand for prediction studies of DSOs. Since MARS are
a cautious and balanced model-based approach, it gives decision-makers display schemes
of impacts, relations, and sensitivity factors that facilitate control, problem solution, and
orientation.
Although in this study, MARS outperforms LR and LASSO, in these models, data are
supposed to comprise fixed explanatory variables like other statistical models while the
data include in regression problems include uncertainty. Consequently, those regression
models are not able to cope with data uncertainty. In fact, in inverse problems of data min-
ing and modeling, solutions may present an exceptional sensitivity when it comes to per-
turbations in the parameters based on data, and a computed solution may also be extremely
suboptimal, infeasible, or both. Since environmental and financial crises translated a top
“noise” inside data in the related models with increased volatility and extra uncertainties,
the events of recent years on the earth have allowed extremely untrustworthy representa-
tions of the future. Therefore, nowadays, robustification has begun to draw extra consid-
eration in lots of areas. Thus, we involve the existence of uncertainty regarding future sce-
narios into (C)MARS and robustify them via Robust Optimization (Ben-Tal & Nemirovski,
2002; El-Ghaoui, 2003), offered to deal with data uncertainty MARS (Özmen et al., 2011,
2012, 2013a, b; Özmen, 2010, 2016) is not an applicable model to large data sets because
of computational drawbacks. We seek an alternative polyhedral uncertainty set since a

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Annals of Operations Research

hyper-cube-based polyhedral uncertainty set poses a significant computational challenge.

As a further study, we consider applying R(C)MARS on energy price/demand for short-
and long-term forecasts based on large data sets.

Acknowledgements The author would like to thank the anonymous reviewers for their valuable comments
and advice served for an improvement of this study.

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