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Point and interval forecasting of wholesale electricity prices: Evidence from the Nord Pool market

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  • Weron, Rafal
  • Misiorek, Adam

Abstract

In this paper we assess the short-term forecasting power of different time series models in the Nord Pool electricity spot market. We evaluate the accuracy of both point and interval predictions; the latter are specifically important for risk management purposes where one is more interested in predicting intervals for future price movements than simply point estimates. We find evidence that non-linear regime-switching models outperform their linear counterparts and that the interval forecasts of all models are overestimated in the relatively non-volatile periods.

Suggested Citation

  • Weron, Rafal & Misiorek, Adam, 2006. "Point and interval forecasting of wholesale electricity prices: Evidence from the Nord Pool market," MPRA Paper 1363, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:1363
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    File URL: https://mpra.ub.uni-muenchen.de/1363/1/MPRA_paper_1363.pdf
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    References listed on IDEAS

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    1. Misiorek Adam & Trueck Stefan & Weron Rafal, 2006. "Point and Interval Forecasting of Spot Electricity Prices: Linear vs. Non-Linear Time Series Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(3), pages 1-36, September.
    2. Conejo, Antonio J. & Contreras, Javier & Espinola, Rosa & Plazas, Miguel A., 2005. "Forecasting electricity prices for a day-ahead pool-based electric energy market," International Journal of Forecasting, Elsevier, vol. 21(3), pages 435-462.
    3. Peter F. Christoffersen & Francis X. Diebold, 2000. "How Relevant is Volatility Forecasting for Financial Risk Management?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 12-22, February.
    4. Adam Misiorek & Rafal Weron, 2006. "Interval forecasting of spot electricity prices," HSC Research Reports HSC/06/05, Hugo Steinhaus Center, Wroclaw University of Technology.
    5. Rafal Weron, 2006. "Modeling and Forecasting Electricity Loads and Prices: A Statistical Approach," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0601.
    6. Rafal Weron & Adam Misiorek, 2006. "Short-term electricity price forecasting with time series models: A review and evaluation," HSC Research Reports HSC/06/01, Hugo Steinhaus Center, Wroclaw University of Technology.
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    Citations

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    Cited by:

    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).
    2. Lago, Jesus & De Ridder, Fjo & Vrancx, Peter & De Schutter, Bart, 2018. "Forecasting day-ahead electricity prices in Europe: The importance of considering market integration," Applied Energy, Elsevier, vol. 211(C), pages 890-903.
    3. Jakub Nowotarski, 2013. "Short-term forecasting of electricity spot prices using model averaging (Krótkoterminowe prognozowanie spotowych cen energii elektrycznej z wykorzystaniem uśredniania modeli)," HSC Research Reports HSC/13/17, Hugo Steinhaus Center, Wroclaw University of Technology.
    4. Nowotarski, Jakub & Weron, Rafał, 2016. "On the importance of the long-term seasonal component in day-ahead electricity price forecasting," Energy Economics, Elsevier, vol. 57(C), pages 228-235.
    5. Gianfreda, Angelica & Ravazzolo, Francesco & Rossini, Luca, 2020. "Comparing the forecasting performances of linear models for electricity prices with high RES penetration," International Journal of Forecasting, Elsevier, vol. 36(3), pages 974-986.
    6. Uniejewski, Bartosz & Weron, Rafał, 2021. "Regularized quantile regression averaging for probabilistic electricity price forecasting," Energy Economics, Elsevier, vol. 95(C).

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    More about this item

    Keywords

    Wholesale electricity price; Point forecast; Interval forecast; AR model; Threshold AR model;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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