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Foreseeing the worst: Forecasting electricity DART spikes

Author

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  • Galarneau-Vincent, Rémi
  • Gauthier, Geneviève
  • Godin, Frédéric

Abstract

Statistical learning models are proposed for the prediction of the probability of a spike in the electricity DART (day-ahead minus real-time price) spread. Assessing the likelihood of DART spikes is of paramount importance for virtual bidders, among others. The model’s performance is evaluated on historical data for the Long Island zone of the New York Independent System Operator (NYISO). A tailored feature set encompassing novel engineered features is designed. Such a set of features makes it possible to achieve excellent predictive performance and discriminatory power. Results are shown to be robust to the choice of the predictive algorithm. Lastly, the benefits of forecasting the spikes are illustrated through a trading exercise, confirming that trading strategies employing the model predicted probabilities as a signal generate consistent profits.

Suggested Citation

  • Galarneau-Vincent, Rémi & Gauthier, Geneviève & Godin, Frédéric, 2023. "Foreseeing the worst: Forecasting electricity DART spikes," Energy Economics, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:eneeco:v:119:y:2023:i:c:s0140988323000191
    DOI: 10.1016/j.eneco.2023.106521
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    References listed on IDEAS

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    Cited by:

    1. Sheybanivaziri, Samaneh & Le Dréau, Jérôme & Kazmi, Hussain, 2024. "Forecasting price spikes in day-ahead electricity markets: techniques, challenges, and the road ahead," Discussion Papers 2024/1, Norwegian School of Economics, Department of Business and Management Science.

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    More about this item

    Keywords

    Power markets; Spikes prediction; DART spreads; NYISO; Predictive analytics; Statistical learning;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-

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