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Modeling spike occurrences in electricity spot prices for forecasting

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Author Info

  • Eichler Michael
  • Grothe Oliver
  • Tuerk Dennis
  • Manner Hans

    (METEOR)

Abstract

Predicting the occurrence of extreme prices, so-called spikes, is one of the greatest challengeswhen modeling electricity spot prices. Despite the fact that recently new insights have beenachieved, the contemporaneous literature seems to be still at its beginning of understanding thedi fferentmechanisms that drive spike probabilities. We therefore reconsider the problem offorecasting the occurrence of spikes, in the Australian electricity market. For this purpose, we first discuss properties of the price data with a focus on the occurrence of spikes. We thenpropose simple models for the probability of spikes which take these properties into account. Themodels compare favorably for in- and out-of-sample forecasts to a competing approach based on theautoregressive conditional hazard model.

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Bibliographic Info

Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 029.

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Date of creation: 2012
Date of revision:
Handle: RePEc:dgr:umamet:2012029

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Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm

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Keywords: econometrics;

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References

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  1. Timothy Christensen & Stan Hurn & Kenneth Lindsay, 2009. "It Never Rains but it Pours: Modeling the Persistence of Spikes in Electricity Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-48.
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  8. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
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Citations

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Cited by:
  1. Eichler Michael & Tuerk Dennis, 2012. "Fitting semiparametric Markov regime-switching models to electricity spot prices," Research Memoranda 036, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  2. Volodymyr Korniichuk, 2012. "Forecasting extreme electricity spot prices," Cologne Graduate School Working Paper Series 03-14, Cologne Graduate School in Management, Economics and Social Sciences.

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