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A generalized exponential time series regression model for electricity prices

Author

Listed:
  • Niels Haldrup

    () (Aarhus University and CREATES)

  • Oskar Knapik

    () (Aarhus University and CREATES)

  • Tommaso Proietti

    () (University of Rome “Tor Vergata” and Creates)

Abstract

We consider the issue of modeling and forecasting daily electricity spot prices on the Nord Pool Elspot power market. We propose a method that can handle seasonal and non-seasonal persistence by modelling the price series as a generalized exponential process. As the presence of spikes can distort the estimation of the dynamic structure of the series we consider an iterative estimation strategy which, conditional on a set of parameter estimates, clears the spikes using a data cleaning algorithm, and reestimates the parameters using the cleaned data so as to robustify the estimates. Conditional on the estimated model, the best linear predictor is constructed. Our modeling approach provides good fit within sample and outperforms competing benchmark predictors in terms of forecasting accuracy. We also find that building separate models for each hour of the day and averaging the forecasts is a better strategy than forecasting the daily average directly.

Suggested Citation

  • Niels Haldrup & Oskar Knapik & Tommaso Proietti, 2016. "A generalized exponential time series regression model for electricity prices," CREATES Research Papers 2016-08, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:create:2016-08
    as

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    File URL: ftp://ftp.econ.au.dk/creates/rp/16/rp16_08.pdf
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    References listed on IDEAS

    as
    1. Serati, Massimiliano & Manera, Matteo & Plotegher, Michele, 2008. "Modeling Electricity Prices: From the State of the Art to a Draft of a New Proposal," International Energy Markets Working Papers 44426, Fondazione Eni Enrico Mattei (FEEM).
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    Citations

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    Cited by:

    1. Luigi Grossi & Fany Nan, 2017. "Forecasting electricity prices through robust nonlinear models," Working Papers 06/2017, University of Verona, Department of Economics.

    More about this item

    Keywords

    Robust estimation; long-memory; seasonality; electricity spot prices; Nord Pool power market; forecasting; robust Kalman lter; generalized exponential model;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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