SHORT RUN WATER LEVEL FORECASTING OF

INDRAVATI RESERVOIR THROUGH ARIMA-

GARCH MODELING

Ankan Kumar Bandyopadhyaya

Session IIIC &
Mahuya Basu
 BACKGROUND
– Emphasis on hydroelectricity power development as a
national policy.

– Increased concern on carbon emission.

– Increase in private participation in power sector

– Need for better risk management in electricity sector

– Power as a product cannot be stored.

– The demand for power is random.

– The generation of hydroelectricity is weather dependant.

RESERVOIR LEVEL & ENERGY AVAILABILITY

Weather affect the reservoir

level which act as energy
content for
hydroelectricity & in turn
affect the generation
capacity of the plant.
 OBJECTIVE

The aim of the study is to develop a model & predict the daily
water level from the information contained in its own past
values and current and past values of the error term –
through ARIMA-GARCH
 DATA & METHODOLOGY

• In sample data: July 1st 2001 to

June 30th 2008
Daily res ervoir level of Indravati
Level

644.0 • Out of sample data: July 1st 2008

642.0
640.0
to June 30th 2009
638.0
636.0
634.0 • No structural change in the
632.0
630.0
reservoir during the period & no
628.0 capacity enhancement.
626.0
624.0
0 500 1000 1500 2000 2500 3000 • In the first seven years there
days(1st J uly 2001 to 30th J une 2008) were 2557 data value for daily
water level (including 366 daily
data of two lip-years 2004 &
2008)
 SEASONAL CHARACTER OF DATA
average daily level

642.00 The data depicts a strong seasonal

640.00

638.00 cycle reaching maximum level

reservoir level

636.00
634.00 during September- October &
632.00

630.00 steadily decline afterwards till

628.00
626.00 May & again starts rising from the
9-Feb 20-May 28-Aug 6-Dec 15-Mar 23-Jun
date second week of June.

SD of daily level
the standard deviation of the value
6.00

5.00
changes over time period. The SD is
4.00 maximum during July-September &
minimum during January-March. The
SD

3.00

2.00

1.00 period of high SD is normally followed by

0.00
9-Feb 20-May 28-Aug 6-Dec 15-Mar 23-Jun
high SD & period of low SD is normally
date followed by low SD
 REMOVING SEASONALITY & TREND
D es eas onalis ed res ervoir level d ata

15.000
• An average year is considered by taking the
10.000 eight years average for each day
des eas onal level

5.000

0.000

-5.000
0 500 1000 1500 2000 2500 3000 • This average year is used to smooth out the
-10.000
seasonality by taking the difference of the
da ys daily water level from long term average

F irs t D ifferenc e of de-s eas onal level

• Dicky Fuller unit root test is used to
values

8.000
6.000
check the stationary condition which
4.000 indicates that the series is not stationary
2.000
0.000
-2.000 0 500 1000 1500 2000 2500 3000
-4.000
-6.000
• first difference is taken to remove the
-8.000 non stationary character present
da ys
 ARIMA ORDER DETERMINATION
• Both ACF & PACF is significant till three period lag with no
other significant spike

• Akaike’s information criteria is used as the main measure

for selecting the AR & MA order

• all possible ARIMA combination is considered from ARIMA

(1,1,1) to ARIMA ( 4,1,4)

• Considering the result an ARIMA (4, 1, 3) model is selected

 TEST OF HETEROSCEDASTICITY
• An ARCH-LM test is conducted & a significant presence of
heteroscedasticity is identified.

• Including the ARCH effect, the study fits ARIMA( 4,1,3) GARCH
(1,1) model

• The coefficient of MA(2) , MA(3) & AR(3) & AR(4) become

statistically insignificant

• The study drops those terms from the equation & fit an
ARIMA ( 2,1,1 ) GARCH(1,1) model.
 FORECASTING RESULT
• For all forecasted result the ARIMA
(2, 1, 1) with GARCH (1, 1) model
ARIMA( 4,1,3) Forecast Result works better as compare to the
July- Jan- simple ARIMA model
Jul-08 Sept 08 Jan-09 Mar 09

MAE 0.117 0.175 0.022 0.057 • the model work better in short run
Theil Inequality duration of one month as compare
Coeff 0.802 0.867 0.71 0.79 to three months duration

ARIMA(2,1,1) with GARCH(1,1) Forecast result

• the model work better during Jan-
MAE 0.09 0.146 0.02 0.056 March period when daily SD of the
Theil Inequality
water level is lower as compare to
Co-eff 0.5 0.52 0.69 0.77 July-September when daily SD of
the reservoir level is the maximum.
Forecasted v/s Actual level data using ARIMA & ARIMA-GAARCH
model during high variance Period
July Forecast ARIMA Actual July Forecast with GARCH Effect Actual
Fitted
Fitted
628.0
631.0
630.0 627.5
629.0
627.0
628.0
Level

level
627.0 626.5
626.0
625.0 626.0

624.0 625.5
1 4 7 10 13 16 19 22 25 28 31 1 4 7 10 13 16 19 22 25 28 31

day day

July-Sept Forecast Actual July-Sept Forecast with GARCH Effect

Fitted
645.0
645.0
640.0
640.0
635.0
635.0
Actual
level
Level

630.0
630.0 Fitted
625.0
625.0
620.0
620.0
615.0
615.0
1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91
1 8 15 22 29 36 43 50 57 64 71 78 85 92
days
day
Forecasted v/s Actual level data using ARIMA & ARIMA-GARCH
model during low variance Period
Jan Forecast ARIMA Actual Jan Forecast with GARCH Effect Actual

Fitted Fitted
637.00 637.00

636.50 636.50

636.00 636.00

level
level

635.50 635.50

635.00 635.00

634.50 634.50

634.00 634.00
1 4 7 10 13 16 19 22 25 28 31 1 4 7 10 13 16 19 22 25 28 31
day day

Jan-Mar Forecast with GARCH Effect Actual

Jan-March Forecast Actual
Fitted
Fitted
638.00
638.00

636.00 636.00

634.00
634.00

632.00 632.00
level
level

630.00
630.00

628.00 628.00

626.00
626.00

624.00 624.00
1 8 15 22 29 36 43 50 57 64 71 78 85 1 8 15 22 29 36 43 50 57 64 71 78 85
days day
 CONCLUSIONS

• The model may act as a short run production planning tool for
hydro generation

• The model may indicate the exposure of the firm to weather

risk &necessity of using proper risk management tool.

• The model may work as a basis on which the firm can decide
its trading position in the spot & future energy and/or carbon
market.
Thanks