IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Short- to Mid-term Day-Ahead Electricity Price Forecasting Using Futures

Due to the liberalization of markets, the change in the energy mix and the surrounding energy laws, electricity research is a dynamically altering field with steadily changing challenges. One challenge especially for investment decisions is to provide reliable short to mid-term forecasts despite high variation in the time series of electricity prices. This paper tackles this issue in a promising and novel approach. By combining the precision of econometric autoregressive models in the short-run with the expectations of market participants reflected in future prices for the short- and mid-run we show that the forecasting performance can be vastly increased while maintaining hourly precision. We investigate the day-ahead electricity price of the EPEX Spot for Germany and Austria and setup a model which incorporates the Phelix future of the EEX for Germany and Austria. The model can be considered as an AR24-X model with one distinct model for each hour of the day. We are able to show that future data contains relevant price information for future time periods of the day-ahead electricity price. We show that relying only on deterministic external regressors can provide stability for forecast horizons of multiple weeks. By implementing a fast and efficient lasso estimation approach we demonstrate that our model can outperform several other models in the literature.

Download Executive Summary Purchase ( $25 )

Keywords: Electricity price, Mid-term, Future Data, Forecasting, AR, Lasso

DOI: 10.5547/01956574.40.1.rste

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 40, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2021 International Association for Energy Economics | Privacy Policy | Return Policy