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.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Forecasting.
Volume (Year): 24 (2008)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/ijforecast
Electricity prices Forecasting Time-varying effects Regime-switching;
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