Forecasting Hourly Prices in Indian Spot Electricity Market

Mukherjee, Paramita and Coondoo, Dipankor and Lahiri, Poulomi (2019): Forecasting Hourly Prices in Indian Spot Electricity Market.

Abstract

In this paper, an attempt has been made to forecast the hourly electricity spot prices in India as this is very important for the bidders in the energy exchange for participating in the day-ahead market. Forecasting high frequency data is a challenging task. In forecasting, different variants of ARMA, ARMA-GARCH models are applied in different contexts, but no unequivocal dominance of a particular model exists. In this paper, based on hourly data for several years for all the regions in India, several variants of ARMAX models are estimated, by combining static and dynamic forecasts. Along with ARMA, intra-day, inter-day and hourly variations in prices as well as seasonalities on weekdays, holidays and festive days are incorporated. ARMAX models in this context performed quite well for forecasting horizons of hourly prices of upto 5 days. Interestingly, the ARMAX models provide reasonably good forecasts for day-ahead-market and the simple structure can be quite easily implemented. Such forecasts are not only essential for the players in the spot market, but also provides insights for policymakers as it reveals several aspects of Indian electricity market including the different dimensions of seasonality in demand.

• Item Type: MPRA Paper
• Language: English
• Keywords: Forecasting, electricity, hourly data, energy, spot price, ARMAX model, day-ahead market
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q47 - Energy Forecasting

References

Aggarwal, S. K., Mohan, S. L., Kumar, A. (2009), Electricity price forecasting in deregulated markets: A review and evaluation. Electrical Power and Energy Systems, 31(1), 13-22.

Central Electricity Regulatory Commission (2017), Growth of Electricity Sector in India from 1947- 2017, Ministry of Power, Governement of India

Cuaresma, J. C., Hlouskova, J., Kossmeier, S., Obersteiner, M. (2004), Forecasting electricity spot-prices using linear univariate time-series models. Applied Energy, 77(1), 87-106.

Girish G. P. (2016), Spot electricity price forecasting in Indian electricity market using autoregressive-GARCH models, Energy Strategy Reviews, 11-12, pp.52-57

International Energy Exchange (2020), Country Report on India, January.

Kanjilal, Kakali and Sajal Ghosh (2014), Modelling and Forecasting day ahead electricity price in Indian Energy Exchange: Evidence from MSARIMA-EGARCH model, International Journal of Indian Culture and Business Management, January, pp. 413-423.

Knittel , C.R. and M.R. Roberts (2005), An empirical examination of restructured electricity prices, Energy Economics 27, pp. 791-817.

Kristiansen, T. (2012), Forecasting NordPool day ahead prices with an autoregressive model. Energy Policy, 49, 328–332

Longstaff, F.A., and A.W. Wang (2004): Electricity forward prices: A high-frequency empirical analysis, Journal of Finance, 59, 1877-1900.

Meng, Xiangli (2010), Modeling and Forecasting Hourly Wind Power Production in Sweden with Time Series Models, School of Economics and Social Sciences, Högskolan Dalarna, Sweden, May, mimeo

Murthy, Girish G. P., V. Sedidi, A. K. Panda and B. N. Rath (2014), Forecasting Electricity Prices in Deregulated Wholesale Spot Electricity Market: A Review, International Journal of Energy Economics and Policy, Vol. 4, No. 1, 2014, pp.32-42

Raviv, Eran, Kees E. Bouwman1 and Dick van Dijk.(2012), Forecasting Day-ahead Electricity Prices: Utilizing Hourly Prices, Energy Economics, Elsevier, vol. 50(C), pp. 227-239.

Taylor, James W. , Lilian M. de Menezes and Patrick E. McSharry (2006), A Comparison of Univariate Methods for Forecasting Electricity Demand Up to a Day Ahead, International Journal of Forecasting, 2006, Vol. 22, pp. 1-16

Weron, Rafal (2014), Electricity price forecasting: A review of the state-of-the-art with a look into the future, International Journal of Forecasting, Volume 30, Issue 4, October–December 2014, Pages 1030-1081