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Distributional modeling and short-term forecasting of electricity prices by Generalized Additive Models for Location, Scale and Shape

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  • Serinaldi, Francesco
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    Abstract

    In the context of the liberalized and deregulated electricity markets, price forecasting has become increasingly important for energy company's plans and market strategies. Within the class of the time series models that are used to perform price forecasting, the subclasses of methods based on stochastic time series and causal models commonly provide point forecasts, whereas the corresponding uncertainty is quantified by approximate or simulation-based confidence intervals. Aiming to improve the uncertainty assessment, this study introduces the Generalized Additive Models for Location, Scale and Shape (GAMLSS) to model the dynamically varying distribution of prices. The GAMLSS allow fitting a variety of distributions whose parameters change according to covariates via a number of linear and nonlinear relationships. In this way, price periodicities, trends and abrupt changes characterizing both the position parameter (linked to the expected value of prices), and the scale and shape parameters (related to price volatility, skewness, and kurtosis) can be explicitly incorporated in the model setup. Relying on the past behavior of the prices and exogenous variables, the GAMLSS enable the short-term (one-day ahead) forecast of the entire distribution of prices. The approach was tested on two datasets from the widely studied California Power Exchange (CalPX) market, and the less mature Italian Power Exchange (IPEX). CalPX data allow comparing the GAMLSS forecasting performance with published results obtained by different models. The study points out that the GAMLSS framework can be a flexible alternative to several linear and nonlinear stochastic models.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 33 (2011)
    Issue (Month): 6 ()
    Pages: 1216-1226

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    Handle: RePEc:eee:eneeco:v:33:y:2011:i:6:p:1216-1226

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    Web page: http://www.elsevier.com/locate/eneco

    Related research

    Keywords: Electricity market price; Point forecasting; Interval forecasting; GAMLSS models; Liberalized energy markets;

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    Cited by:
    1. Serinaldi, Francesco & Kilsby, Chris G., 2013. "On the sampling distribution of Allan factor estimator for a homogeneous Poisson process and its use to test inhomogeneities at multiple scales," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(5), pages 1080-1089.

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