Forecasting electricity prices: The impact of fundamentals and time-varying coefficients

Nektaria V. Karakatsani and Derek W. Bunn

International Journal of Forecasting, 2008, vol. 24, issue 4, 764-785

Abstract: This paper investigates the day-ahead forecasting performance of fundamental price models for electricity spot prices, intended to capture: (i) the impacts of economic, technical, strategic and risk factors on intra-day prices; and (ii) the dynamics of these effects over time. A time-varying parameter (TVP) regression model allows for a continuously adaptive price structure, due to agent learning, regulatory and market structure changes. A regime-switching regression model allows for discontinuities in pricing due to temporal irregularities and scarcity effects. The models that invoke market fundamentals and time-varying coefficients exhibit the best predictive performance among various alternatives, in the British market.

Keywords: Electricity; prices; Forecasting; Time-varying; effects; Regime-switching (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (142)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:24:y:2008:i:4:p:764-785

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