Forecasting electricity prices: The impact of fundamentals and time-varying coefficients
AbstractThis paper investigates the day-ahead forecasting performance of fundamental price models for electricity spot prices, intended to capture: (i) the impacts of economic, technical, strategic and risk factors on intra-day prices; and (ii) the dynamics of these effects over time. A time-varying parameter (TVP) regression model allows for a continuously adaptive price structure, due to agent learning, regulatory and market structure changes. A regime-switching regression model allows for discontinuities in pricing due to temporal irregularities and scarcity effects. The models that invoke market fundamentals and time-varying coefficients exhibit the best predictive performance among various alternatives, in the British market.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Forecasting.
Volume (Year): 24 (2008)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/ijforecast
Electricity prices Forecasting Time-varying effects Regime-switching;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- von der Fehr, Nils-Henrik Morch & Harbord, David, 1993.
"Spot Market Competition in the UK Electricity Industry,"
Royal Economic Society, vol. 103(418), pages 531-46, May.
- Von der Fehr, N.H.M. & Harbord, D., 1992. "Spot Market Competition in the UK Electricity Industry," Memorandum 09/1992, Oslo University, Department of Economics.
- Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
- Borenstein, Severin & Bushnell, James & Knittel, Chris, 1999.
"Market Power in Electricity Markets: Beyond Concentration Measures,"
Staff General Research Papers
31548, Iowa State University, Department of Economics.
- Severin Borenstein & James Bushnell & Christopher R. Knittel, 1999. "Market Power in Electricity Markets: Beyond Concentration Measures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 65-88.
- Conejo, Antonio J. & Contreras, Javier & Espinola, Rosa & Plazas, Miguel A., 2005. "Forecasting electricity prices for a day-ahead pool-based electric energy market," International Journal of Forecasting, Elsevier, vol. 21(3), pages 435-462.
- repec:ner:dauphi:urn:hdl:123456789/1433 is not listed on IDEAS
- Frank Wolak, 2000. "An Empirical Analysis of the Impact of Hedge Contracts on Bidding Behavior in a Competitive Electricity Market," International Economic Journal, Taylor & Francis Journals, vol. 14(2), pages 1-39.
- Mount, Timothy D. & Ning, Yumei & Cai, Xiaobin, 2006. "Predicting price spikes in electricity markets using a regime-switching model with time-varying parameters," Energy Economics, Elsevier, vol. 28(1), pages 62-80, January.
- Roques, F. & Newbery, D.M. & Nuttall, W.J., 2004. "Generation Adequacy and Investment Incentives in Britain: from the Pool to NETA," Cambridge Working Papers in Economics 0459, Faculty of Economics, University of Cambridge.
- Green, Richard J & Joanne Evans, 2003.
"Why did British electricity prices fall after 1998?,"
Royal Economic Society Annual Conference 2003
92, Royal Economic Society.
- Joanne Evans and Richard Green, 2005. "Why Did British Electricity Prices Fall after 1998?," Discussion Papers 05-13, Department of Economics, University of Birmingham.
- Evans, J. & Green, R., 2003. "Why did British Electricity Prices Fall after 1998?," Cambridge Working Papers in Economics 0326, Faculty of Economics, University of Cambridge.
- Joanne Evans & Richard Green, 2003. "Why did British electricity prices fall after 1998?," Working Papers 0307, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Donald W.K. Andrews, 1990.
"Tests for Parameter Instability and Structural Change with Unknown Change Point,"
Cowles Foundation Discussion Papers
943, Cowles Foundation for Research in Economics, Yale University.
- Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
- Fabra, Natalia & Toro, Juan, .
"The Fall in British Electricity Prices: Market Rules, Market Structure, or Both?,"
Open Access publications from Universidad Carlos III de Madrid
info:hdl:10016/5016, Universidad Carlos III de Madrid.
- Natalia Fabra & Juan Toro, 2003. "The Fall in British Electricity Prices: Market Rules, Market Structure, or Both?," Industrial Organization 0309001, EconWPA.
- Geman, Hélyette & Roncoroni, Andréa, 2006. "Understanding the Fine Structure of Electricity Prices," Economics Papers from University Paris Dauphine 123456789/1433, Paris Dauphine University.
- Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
- Guthrie, Graeme & Videbeck, Steen, 2007. "Electricity spot price dynamics: Beyond financial models," Energy Policy, Elsevier, vol. 35(11), pages 5614-5621, November.
- Yin-Wong Cheung & Ulf G. Erlandsson, 2004.
"Exchange Rates and Markov Switching Dynamics,"
CESifo Working Paper Series
1348, CESifo Group Munich.
- H�lyette Geman & Andrea Roncoroni, 2006. "Understanding the Fine Structure of Electricity Prices," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1225-1262, May.
- B. Ricky Rambharat & Anthony E. Brockwell & Duane J. Seppi, 2005. "A threshold autoregressive model for wholesale electricity prices," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 54(2), pages 287-299.
- Bower, John & Bunn, Derek, 2001. "Experimental analysis of the efficiency of uniform-price versus discriminatory auctions in the England and Wales electricity market," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 561-592, March.
- Kosater, Peter, 2006. "On the impact of weather on German hourly power prices," Discussion Papers in Statistics and Econometrics 1/06, University of Cologne, Department for Economic and Social Statistics.
- Green, Richard & Newbery, David M G, 1991.
"Competition in the British Electricity Spot Market,"
CEPR Discussion Papers
557, C.E.P.R. Discussion Papers.
- Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-53, October.
- J. A. Hausman, 1976.
"Specification Tests in Econometrics,"
185, Massachusetts Institute of Technology (MIT), Department of Economics.
- Huisman, R. & Huurman, C. & Mahieu, R.J., 2007.
"Hourly Electricity Prices in Day-Ahead Markets,"
ERS-2007-002-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
- Jónsson, Tryggvi & Pinson, Pierre & Madsen, Henrik, 2010. "On the market impact of wind energy forecasts," Energy Economics, Elsevier, vol. 32(2), pages 313-320, March.
- Weron, Rafal & Misiorek, Adam, 2008.
"Forecasting spot electricity prices: A comparison of parametric and semiparametric time series models,"
International Journal of Forecasting,
Elsevier, vol. 24(4), pages 744-763.
- Weron, Rafal & Misiorek, Adam, 2008. "Forecasting spot electricity prices: A comparison of parametric and semiparametric time series models," MPRA Paper 10428, University Library of Munich, Germany.
- Janczura, Joanna & Weron, Rafal, 2010.
"Goodness-of-fit testing for regime-switching models,"
22871, University Library of Munich, Germany.
- Janczura, Joanna & Weron, Rafal, 2011. "Goodness-of-fit testing for the marginal distribution of regime-switching models," MPRA Paper 32532, University Library of Munich, Germany.
- Kalantzis, Fotis & Sakellaris, Kostis, 2012. "Investigating the Impact of the Greek Electricity Market Reforms on its Day-Ahead Market Prices," MPRA Paper 37794, University Library of Munich, Germany.
- Angelica Gianfreda & Luigi Grossi, 2011.
"Forecasting Italian Electricity Zonal Prices with Exogenous Variables,"
01/2011, University of Verona, Department of Economics.
- Gianfreda, Angelica & Grossi, Luigi, 2012. "Forecasting Italian electricity zonal prices with exogenous variables," Energy Economics, Elsevier, vol. 34(6), pages 2228-2239.
- Lazarczyk, Ewa, 2013. "Market Specific News and Its Impact on Electricity Prices – Forward Premia," Working Paper Series 953, Research Institute of Industrial Economics, revised 20 Aug 2013.
- Katarzyna Maciejowska & Rafal Weron, 2013. "Forecasting of daily electricity spot prices by incorporating intra-day relationships: Evidence form the UK power market," HSC Research Reports HSC/13/01, Hugo Steinhaus Center, Wroclaw University of Technology.
- Liebl, Dominik, 2013. "Modeling and Forecasting Electricity Spot Prices: A Functional Data Perspective," MPRA Paper 50881, University Library of Munich, Germany.
- Furió, Dolores, 2011. "A Survey on the Spanish Electricity Intraday Market/El mercado de electricidad español: el mercado intradiario," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 29, pages 657 (20 pag, Agosto.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If references are entirely missing, you can add them using this form.