PCA Forecast Averaging—Predicting Day-Ahead and Intraday Electricity Prices

Katarzyna Maciejowska (), Bartosz Uniejewski and Tomasz Serafin

Energies, 2020, vol. 13, issue 14, 1-19

Abstract: Recently, the development in combining point forecasts of electricity prices obtained with different length of calibration windows have provided an extremely efficient and simple tool for improving predictive accuracy. However, the proposed methods are strongly dependent on expert knowledge and may not be directly transferred from one to another model or market. Hence, we consider a novel extension and propose to use principal component analysis (PCA) to automate the procedure of averaging over a rich pool of predictions. We apply PCA to a panel of over 650 point forecasts obtained for different calibration windows length. The robustness of the approach is evaluated with three different forecasting tasks, i.e., forecasting day-ahead prices, forecasting intraday ID3 prices one day in advance, and finally very short term forecasting of ID3 prices (i.e., six hours before delivery). The empirical results are compared using the Mean Absolute Error measure and Giacomini and White test for conditional predictive ability (CPA). The results indicate that PCA averaging not only yields significantly more accurate forecasts than individual predictions but also outperforms other forecast averaging schemes.

Keywords: electricity price forecasting; EPF; day-ahead market; intraday market; forecast averaging; principal component analysis; decision-making (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Working Paper: PCA forecast averaging - predicting day-ahead and intraday electricity prices (2020)
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