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Electricity price forecasting using sale and purchase curves: The X-Model

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  • Ziel, Florian
  • Steinert, Rick

Abstract

Our paper aims to model and forecast the electricity price by taking a completely new perspective on the data. It will be the first approach which is able to combine the insights of market structure models with extensive and modern econometric analysis. Instead of directly modeling the electricity price as it is usually done in time series or data mining approaches, we model and utilize its true source: the sale and purchase curves of the electricity exchange. We will refer to this new model as X-Model, as almost every deregulated electricity price is simply the result of the intersection of the electricity supply and demand curve at a certain auction. Therefore we show an approach to deal with a tremendous amount of auction data, using a subtle data processing technique as well as dimension reduction and lasso based estimation methods. We incorporate not only several known features, such as seasonal behavior or the impact of other processes like renewable energy, but also completely new elaborated stylized facts of the bidding structure. Our model is able to capture the non-linear behavior of the electricity price, which is especially useful for predicting huge price spikes. Using simulation methods we show how to derive prediction intervals for probabilistic forecasting. We describe and show the proposed methods for the day-ahead EPEX spot price of Germany and Austria.

Suggested Citation

  • Ziel, Florian & Steinert, Rick, 2016. "Electricity price forecasting using sale and purchase curves: The X-Model," Energy Economics, Elsevier, vol. 59(C), pages 435-454.
  • Handle: RePEc:eee:eneeco:v:59:y:2016:i:c:p:435-454
    DOI: 10.1016/j.eneco.2016.08.008
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    References listed on IDEAS

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    More about this item

    Keywords

    Electricity price forecasting; Supply and demand curves; Price spikes; Auction data; Bidding behavior; Probabilistic forecasting;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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