An empirical comparison of alternate schemes for combining electricity spot price forecasts

Jakub Nowotarski, Eran Raviv, Stefan Trueck () and Rafał Weron

No HSC/13/07, HSC Research Reports from Hugo Steinhaus Center, Wroclaw University of Science and Technology

Abstract: In this paper we investigate the use of forecast averaging for electricity spot prices. While there is an increasing body of literature on the use of forecast combinations, there is only a small number of applications of these techniques in the area of electricity markets. In this comprehensive empirical study we apply seven averaging and one selection scheme and perform a backtesting analysis on day-ahead electricity prices in three major European and US markets. Our findings support the additional benefit of combining forecasts for deriving more accurate predictions, however, the performance is not uniform across the considered markets. Interestingly, equally weighted pooling of forecasts emerges as a viable robust alternative compared with other schemes that rely on estimated combination weights. Overall, we provide empirical evidence that also for the extremely volatile electricity markets, it is beneficial to combine forecasts from various models for the prediction of day-ahead electricity prices. In addition, we empirically demonstrate that not all forecast combination schemes are recommended.

Keywords: Electricity price forecasting; Forecasts combination; ARX model; Day-ahead market (search for similar items in EconPapers)
JEL-codes: C22 C24 C53 Q47 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-08-21
New Economics Papers: this item is included in nep-ene, nep-for and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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http://www.im.pwr.wroc.pl/~hugo/RePEc/wuu/wpaper/HSC_13_07.pdf Original version, 2013; Final version published in Energy Economics (2014; doi: 10.1016/j.eneco.2014.07.014) (application/pdf)
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Related works:
Journal Article: An empirical comparison of alternative schemes for combining electricity spot price forecasts (2014)
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