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Forecasting volatility of wind power production

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  • Zhiwei Shen
  • Matthias Ritter

Abstract

The increasing share of wind energy in the portfolio of energy sources highlights its uncertainties due to changing weather conditions. To account for the uncertainty in predicting wind power production, this article examines the volatility forecasting abilities of different GARCH-type models for wind power production. Moreover, due to characteristic features of the wind power process, such as heteroscedasticity and nonlinearity, we also investigate the use of a Markov regime-switching GARCH (MRS-GARCH) model on forecasting volatility of wind power. The realized volatility, which is derived from lower-scale data, serves as a benchmark for the latent volatility. We find that the MRS-GARCH model significantly outperforms traditional GARCH models in predicting the volatility of wind power, while the exponential GARCH model is superior among traditional GARCH models.

Suggested Citation

  • Zhiwei Shen & Matthias Ritter, 2015. "Forecasting volatility of wind power production," SFB 649 Discussion Papers SFB649DP2015-026, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2015-026
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    2. Ahmed, Adil & Khalid, Muhammad, 2018. "An intelligent framework for short-term multi-step wind speed forecasting based on Functional Networks," Applied Energy, Elsevier, vol. 225(C), pages 902-911.
    3. Ahmed, Adil & Khalid, Muhammad, 2019. "A review on the selected applications of forecasting models in renewable power systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 100(C), pages 9-21.
    4. Lucheroni, Carlo & Boland, John & Ragno, Costantino, 2019. "Scenario generation and probabilistic forecasting analysis of spatio-temporal wind speed series with multivariate autoregressive volatility models," Applied Energy, Elsevier, vol. 239(C), pages 1226-1241.
    5. Sherzod N. Tashpulatov, 2021. "Modeling and Estimating Volatility of Day-Ahead Electricity Prices," Mathematics, MDPI, vol. 9(7), pages 1-11, March.
    6. Fu, Yang & Zheng, Zeyu, 2020. "Volatility modeling and the asymmetric effect for China’s carbon trading pilot market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 542(C).
    7. Fu, Wenlong & Zhang, Kai & Wang, Kai & Wen, Bin & Fang, Ping & Zou, Feng, 2021. "A hybrid approach for multi-step wind speed forecasting based on two-layer decomposition, improved hybrid DE-HHO optimization and KELM," Renewable Energy, Elsevier, vol. 164(C), pages 211-229.
    8. Dokur, Emrah & Erdogan, Nuh & Salari, Mahdi Ebrahimi & Karakuzu, Cihan & Murphy, Jimmy, 2022. "Offshore wind speed short-term forecasting based on a hybrid method: Swarm decomposition and meta-extreme learning machine," Energy, Elsevier, vol. 248(C).
    9. Gong, Xu & Wen, Fenghua & Xia, X.H. & Huang, Jianbai & Pan, Bin, 2017. "Investigating the risk-return trade-off for crude oil futures using high-frequency data," Applied Energy, Elsevier, vol. 196(C), pages 152-161.
    10. Erick López & Carlos Valle & Héctor Allende & Esteban Gil & Henrik Madsen, 2018. "Wind Power Forecasting Based on Echo State Networks and Long Short-Term Memory," Energies, MDPI, vol. 11(3), pages 1-22, February.
    11. Li, Dan & Jiang, Fuxin & Chen, Min & Qian, Tao, 2022. "Multi-step-ahead wind speed forecasting based on a hybrid decomposition method and temporal convolutional networks," Energy, Elsevier, vol. 238(PC).
    12. Ren, Guorui & Wan, Jie & Liu, Jinfu & Yu, Daren, 2020. "Spatial and temporal correlation analysis of wind power between different provinces in China," Energy, Elsevier, vol. 191(C).
    13. Zonggui Yao & Chen Wang, 2018. "A Hybrid Model Based on A Modified Optimization Algorithm and An Artificial Intelligence Algorithm for Short-Term Wind Speed Multi-Step Ahead Forecasting," Sustainability, MDPI, vol. 10(5), pages 1-33, May.
    14. Bonou, Alexandra & Laurent, Alexis & Olsen, Stig I., 2016. "Life cycle assessment of onshore and offshore wind energy-from theory to application," Applied Energy, Elsevier, vol. 180(C), pages 327-337.
    15. Akbal, Yıldırım & Ünlü, Kamil Demirberk, 2022. "A univariate time series methodology based on sequence-to-sequence learning for short to midterm wind power production," Renewable Energy, Elsevier, vol. 200(C), pages 832-844.
    16. Wasilewski, J. & Baczynski, D., 2017. "Short-term electric energy production forecasting at wind power plants in pareto-optimality context," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 177-187.
    17. Sherzod N. Tashpulatov, 2021. "The Impact of Regulatory Reforms on Demand Weighted Average Prices," Mathematics, MDPI, vol. 9(10), pages 1-15, May.
    18. Liu, Liuchen & Zhu, Tong & Pan, Yu & Wang, Hai, 2017. "Multiple energy complementation based on distributed energy systems – Case study of Chongming county, China," Applied Energy, Elsevier, vol. 192(C), pages 329-336.
    19. Danyan Wen & Mengxi He & Yaojie Zhang & Yudong Wang, 2022. "Forecasting realized volatility of Chinese stock market: A simple but efficient truncated approach," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(2), pages 230-251, March.

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    More about this item

    Keywords

    Wind energy; volatility forecasting; GARCH models; Markov regime-switching; realized volatility;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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