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Robust estimation and forecasting of the long-term seasonal component of electricity spot prices

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  • Nowotarski, Jakub
  • Tomczyk, Jakub
  • Weron, Rafał

Abstract

We present the results of an extensive study on estimation and forecasting of the long-term seasonal component (LTSC) of electricity spot prices. We consider a battery of over 300 models, including monthly dummies and models based on Fourier or wavelet decomposition combined with linear or exponential decay. We find that the considered wavelet-based models are significantly better in terms of forecasting spot prices up to a year ahead than the commonly used monthly dummies and sine-based models. This result questions the validity and usefulness of stochastic models of spot electricity prices built on the latter two types of LTSC models.

Suggested Citation

  • Nowotarski, Jakub & Tomczyk, Jakub & Weron, Rafał, 2013. "Robust estimation and forecasting of the long-term seasonal component of electricity spot prices," Energy Economics, Elsevier, vol. 39(C), pages 13-27.
  • Handle: RePEc:eee:eneeco:v:39:y:2013:i:c:p:13-27
    DOI: 10.1016/j.eneco.2013.04.004
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    More about this item

    Keywords

    Electricity spot price; Long-term seasonal component; Robust modeling; Forecasting; Wavelets;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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