Forecasting the distributions of hourly electricity spot prices
Christian Pape (),
Arne Vogler (),
Oliver Woll () and
Christoph Weber ()
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Christoph Weber: Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen)
EWL Working Papers from University of Duisburg-Essen, Chair for Management Science and Energy Economics
We present a stochastic modelling approach to describe the dynamics of hourly electricity prices. The suggested methodology is a stepwise combination of several mathematical operations to adequately characterize the distribution of electricity spot prices. The basic idea is to analyze day-ahead prices as panel of 24 cross-sectional hours and to identify principal components of hourly prices to account for the cross correlation between hours. Moreover, non-normality of residuals is addressed by performing a normal quantile transformation and specifying appropriate stochastic processes for time series before fit. We highlight the importance of adequate distributional forecasts and present a framework to evaluate the distribution forecast accuracy. The application for German electricity prices 2015 reveal that: (i) An autoregressive specification of the stochastic component delivers the best distribution but not always the best point forecasting results. (ii) Only a complete evaluation of point, interval and density forecast, including formal statistical tests, can ensure a correct model choice.
Keywords: Distribution forecasts; Electricity; Price forecasting; Panel data; Statistical tests (search for similar items in EconPapers)
JEL-codes: Q47 N74 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ene, nep-for and nep-reg
Date: 2017-05, Revised 2017-05
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Persistent link: https://EconPapers.repec.org/RePEc:dui:wpaper:1705
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