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How are Day-ahead Prices Informative for Predicting the Next Day's Consumption of Natural Gas? Evidence from France

Author

Listed:
  • Arthur Thomas

    (IFPEN - IFP Energies nouvelles, LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Nantes Univ - IAE Nantes - Nantes Université - Institut d'Administration des Entreprises - Nantes - Nantes Université - pôle Sociétés - Nantes Univ - Nantes Université)

  • Olivier Massol

    (IFPEN - IFP Energies nouvelles, IFP School, LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay, City University London)

  • Benoît Sévi

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Nantes Univ - IAE Nantes - Nantes Université - Institut d'Administration des Entreprises - Nantes - Nantes Université - pôle Sociétés - Nantes Univ - Nantes Université)

Abstract

The purpose of this paper is to investigate whether the next day's consumption of natural gas can be accurately forecast using a simple model that solely incorporates the information contained in dayahead market data. Hence, unlike standard models that use a number of meteorological variables, we only consider two predictors: the price of natural gas and the spark ratio measuring the relative price of electricity to gas. We develop a suitable modeling approach that captures the essential features of daily gas consumption and in particular the nonlinearities resulting from power dispatching. We use the case of France as an application as this is, as far as is known, the very first attempt to model and predict the country's daily gas demand. Our results document the existence of a long-run relation between demand and spot prices and provide estimates of the own- and cross-price elasticities. We also provide evidence of the pivotal role of the spark ratio which is found to have an asymmetric and highly nonlinear impact on demand variations. Lastly, we show that our simple model is sufficient to generate predictions that are considerably more accurate than the forecasts published by infrastructure operators.

Suggested Citation

  • Arthur Thomas & Olivier Massol & Benoît Sévi, 2022. "How are Day-ahead Prices Informative for Predicting the Next Day's Consumption of Natural Gas? Evidence from France," Post-Print hal-03521140, HAL.
    • Handle: RePEc:hal:journl:hal-03521140
    DOI: 10.5547/01956574.43.5.atho
    Note: View the original document on HAL open archive server: https://ifp.hal.science/hal-03521140
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    Citations

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    Cited by:

    1. Megy, Camille & Massol, Olivier, 2023. "Is Power-to-Gas always beneficial? The implications of ownership structure," Energy Economics, Elsevier, vol. 128(C).
    2. Oliver Ruhnau & Clemens Stiewe & Jarusch Muessel & Lion Hirth, 2023. "Natural gas savings in Germany during the 2022 energy crisis," Nature Energy, Nature, vol. 8(6), pages 621-628, June.

    More about this item

    Keywords

    Natural Gas Markets; Day-Ahead Prices; Demand Price Elasticity; Load Forecasting;
    All these keywords.

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