Forecasting wholesale electricity prices: A review of time series models

Weron, Rafal (2009): Forecasting wholesale electricity prices: A review of time series models. Published in: Financial Markets: Principles of Modelling, Forecasting and Decision-Making , Vol. FindEcon Monograph Series, WUŁ, Łódź, (2009): pp. 71-82.

Abstract

In this paper we assess the short-term forecasting power of different time series models in the electricity spot market. We calibrate autoregression (AR) models, including specifications with a fundamental (exogenous) variable - system load, to California Power Exchange (CalPX) system spot prices. Then we evaluate their point and interval forecasting performance in relatively calm and extremely volatile periods preceding the market crash in winter 2000/2001. In particular, we test which innovations distributions/processes - Gaussian, GARCH, heavy-tailed (NIG, alpha-stable) or non-parametric - lead to best predictions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Electricity price forecasting; heavy tailed distribution; autoregression model; GARCH model; non-parametric noise; system load
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Other Model Applications; C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C46 - Specific Distributions; Specific Statistics; Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q47 - Energy Forecasting; C - Mathematical and Quantitative Methods > C2 - Econometric Methods: Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions

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