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The power of weather

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  • Huurman, Christian
  • Ravazzolo, Francesco
  • Zhou, Chen

Abstract

Weather information demonstrates predictive power in forecasting electricity prices in day-ahead markets in real time. In particular, next-day weather forecasts improve the forecast accuracy of Scandinavian day-ahead electricity prices in terms of point and density forecasts. This suggests that weather forecasts can price the weather premium on electricity prices. By augmenting with weather forecasts, GARCH-type time-varying volatility models statistically outperform specifications which ignore this information in density forecasting.

Suggested Citation

  • Huurman, Christian & Ravazzolo, Francesco & Zhou, Chen, 2012. "The power of weather," Computational Statistics & Data Analysis, Elsevier, vol. 56(11), pages 3793-3807.
    • Handle: RePEc:eee:csdana:v:56:y:2012:i:11:p:3793-3807
    DOI: 10.1016/j.csda.2010.06.021
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    References listed on IDEAS

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