Electricity price forecasting in deregulated markets

Electricity Journal

Volumn 14, Issue 3, 2001, Pages 32-41

  Angelus, Alexandar ^a  

^a Strategic Decisions Group   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

COSTS; DEREGULATION; FORECASTING; POWER MARKETS;

CONCEPTUAL FRAMEWORKS; DECISIONS MAKINGS; DEREGULATED MARKETS; ELECTRICITY PRICES FORECASTING; FORECASTING MODELS; MARKET PRICE; PRICE FORECASTING;

DECISION MAKING;

EID: 0012504232     PISSN: 10406190     EISSN: None     Source Type: Journal    
DOI: 10.1016/S1040-6190(01)00184-1     Document Type: Article

References (7)

1. Department of Market Analysis, California Independent System Operator, Report on California Energy Market Issues and Performance: May-June 2000, Aug. 2000.
2. Severin Borenstein, Understanding Competitive Pricing and Market Power in Wholesale Electricity Markets, ELEC. J., July 2000, at 49-57.
3. Timothy Considine, Economies of Scale and Asset Values in Power Production, ELEC. J., Dec. 1999, at 37-42.
4. This article is devoted to the forecasting of electricity prices and their volatility. It is just as important to capture uncertainties in future spark spreads, asset values, return on investment, etc. While the uncertainties of these economic and financial variables depend on many fundamental market uncertainties, the largest of these tends to be future electricity prices. Consequently, reliable forecasts of electricity prices and their volatility will go a long way toward capturing the uncertainty in those higher-level economic and financial parameters.
5. This, for example, is what supports the existence of futures markets: The fact that some people think the price of a commodity will go up while others think that it will go down and that they are willing to bet on their visions of price evolution. More generally, it is this amalgamation of everyone acting according to his or her view of the future that eventually determines the unfolding of future prices in competitive markets.
6. k = maximum flows across interface K in forward and backward directions.
7. The results and charts shown in Figures 3 and 4 were generated using Risk Detective, an Excel add-on software package available from Rhythm Technology, Cincinnati.