Electricity Consumption In China: Analysis Based On Stochastic Diffusion Model

As is known to all, a steady development in any economy depends on sustanable and economical supply of electricity. But it is not capable of being stored and its supply and usage should be made simultaneously. Thus, exactly forecasting the electricity comsuption is a core step to achieve Energy Conservation and Emission Reduction. However, due to the uncertainty is not considered, the traditional forecasting models may not work well on the electricity consumption. On the one hand, the demand of the electricity is influenced by the economic policy and complicated factors; on the other hand, the project on power generation has chaoticcharacter and vagueness, leading to the uncertainty of electricity supply.In order to promote sound and rapid economic growth, starting with the aim of co-ordination of supply and demand, this paper propose a new forecasting method, stochastic diffusion model, to forecast the electricity more exactly.This paper summarizes the present theories and models forecasting electricity consumption and makes analysis on the market of the electricity consumption in China. Given the characteristic of the electricity consumption, this paper forecast it by the diffusion model for the first time. Besides, the paper defines the random phenomenon during the diffusion process and proposes the stochastic diffusion model. Considering the stochastic factors, the time-homogeneous Gompertz Diffusion Process (HGDP) and the time-non-homogeneous Gompertz Diffusion Process (NHGDP) are proposed. The methodology proposed is based on the analysis of the trend function and conditional trend function; the parameters are obtained from the mean value of the process and the maximum likelihood estimators (MLE) of the parameters of the model. Last, we forecast the electricity consumption in China by the time-non-homogeneous Gompertz Diffusion Process model. The results show that the stochastic diffusion model provides more adequate fit on forecasting the electricity consumption in our countries. This paper deepens and expands the technological diffusion model and it is instructive for the decision-makers to fix price and manage the industry.