This paper presents a new methodology to generate a tree from an ensemble. The reason to generate a tree is to use the ensemble in multistage stochastic programming. A correct tree structure is of critical importance because it strongly affects the performance of the optimization. A tree, in contrast to an ensemble, specifies when its trajectories diverge from each other.
A tree can be generated from the ensemble data by aggregating trajectories over time until the difference between them becomes such that they can no longer be assumed to be similar, at such a point, the tree branches.
The proposed method models the information flow: it takes into account which observations will become available, at which moment, and their level of uncertainty, i.e. their probability distributions (pdf). No conditions are imposed on those distributions.
The method is well suited to trajectories that are close to each other at the beginning of the forecasting horizon and spread out going on in time, as ensemble forecasts typically are. Copyright © 2012 John Wiley & Sons, Ltd.