NCN 2011/01/B/HS4/01077

Modeling and forecasting wholesale electricity prices using regime-switching models

Grant no.: NCN 2011/01/B/HS4/01077
Funding agency: National Science Centre (NCN), Poland
Funding scheme: OPUS
Funding period: 01.12.2011-30.11.2014 (36 months)
Budget: 329 600 PLN
Title in Polish: Modelowanie i prognozowanie hurtowych cen energii elektrycznej z wykorzystaniem modeli przełącznikowych

Research team:

Principal Investigator (Kierownik):

Senior Investigators (Główni wykonawcy):

Investigator (Wykonawca):

Collaborators (Współpracownicy):

– Ph.D. / M.Sc. / B.Sc. student

Aims and scope:

The project aims at developing effective tools for forecasting and modeling electricity spot prices. It covers three extremely important areas:

  • forecasting of the day-ahead hourly prices for optimization of scheduling and dispatching generation units and power exchange bidding,
  • identification and day- to week-ahead forecasting of the appearance and severity of spikes in spot prices,
  • medium-term modeling of spot prices for derivatives pricing and risk management.

The understanding and skilful modeling of the dynamics of spot electricity prices is the key factor to the construction of accurate forecasting methods for spot prices and effective derivatives pricing and risk management techniques. This in turn will contribute to improving the financial stability of the firms operating in the power market and the national energy security.

Tasks:

  1. Application of regime-switching vector autoregression models to obtain accurate forecasts of hourly day-ahead prices.
  2. Identification of spikes in empirical data and application of fundamental data to forecast the appearance and severity of spot price spikes.
  3. Construction of effective and innovative electricity spot price models in liberalized markets for derivatives pricing and risk management purposes.

Publications:

Peer-reviewed articles in JCR-listed journals

2015 (4), 2014 (5), 2013 (3), 2012 (2)

  1. K. Maciejowska, J. Nowotarski, R. Weron (2016) Probabilistic forecasting of electricity spot prices using Factor Quantile Regression Averaging, International Journal of Forecasting 32, 957-965 (doi: 10.1016/j.ijforecast.2014.12.004).
  2. K. Maciejowska, R. Weron (2015) Forecasting of daily electricity prices with factor models: Utilizing intra-day and inter-zone relationships, Computational Statistics 30(3), 805-819 (doi:10.1007/s00180-014-0531-0).
  3. J. Nowotarski, R. Weron (2015) Computing electricity spot price prediction intervals using quantile regression and forecast averaging, Computational Statistics 30(3), 791-803 (doi: 10.1007/s00180-014-0523-0).
  4. R. Weron, M. Zator (2015) A note on using the Hodrick-Prescott filter in electricity markets, Energy Economics 48, 1-6 (doi: 10.1016/j.eneco.2014.11.014).
  5. J. Janczura (2014) Pricing electricity derivatives within a Markov regime-switching model: A risk premium approach, Mathematical Methods of Operations Research 79(1), 1-30 (doi:10.1007/s00186-013-0451-8).
  6. A. Kowalska-Pyzalska, K. Maciejowska, K. Suszczyński, K. Sznajd-Weron, R.Weron (2014) Turning green: Agent-based modeling of the adoption of dynamic electricity tariffs, Energy Policy 72, 164-174 (doi:10.1016/j.enpol.2014.04.021).
  7. J. Nowotarski, E. Raviv, S. Trück, R. Weron (2014) An empirical comparison of alternate schemes for combining electricity spot price forecasts, Energy Economics 46, 395-412 (doi: 10.1016/j.eneco.2014.07.014).
  8. R. Weron (2014) Electricity price forecasting: A review of the state-of-the-art with a look into the future, International Journal of Forecasting 30(4), 1030-1081 (Invited Paper; doi: 10.1016/j.ijforecast.2014.08.008).
  9. R. Weron, M. Zator (2014) Revisiting the relationship between spot and futures prices in the Nord Pool electricity market, Energy Economics 44, 178-190 (doi:10.1016/j.eneco.2014.03.007).
  10. J. Nowotarski, J. Tomczyk, R. Weron (2013) Robust estimation and forecasting of the long-term seasonal component of electricity spot prices, Energy Economics 39, 13-27 (doi:10.1016/j.eneco.2013.04.004).
  11. J. Janczura, S. Trück, R. Weron, R. Wolff (2013) Identifying spikes and seasonal components in electricity spot price data: A guide to robust modeling, Energy Economics 38, 96-110 (doi:10.1016/j.eneco.2013.03.013).
  12. J. Janczura, R. Weron (2013) Goodness-of-fit testing for the marginal distribution of regime-switching models with an application to electricity spot prices, AStA – Advances in Statistical Analysis 97(3), 239-270 (doi:10.1007/s10182-012-0202-9).
  13. J. Janczura, R. Weron (2012) Efficient estimation of Markov regime-switching models: An application to electricity spot prices, AStA – Advances in Statistical Analysis 96(3), 385-407 (doi:10.1007/s10182-011-0181-2).
  14. J. Janczura, R. Weron (2012) Black swans or dragon kings? A simple test for deviations from the power law, European Physical Journal – Special Topics (EPJ ST) 205, 79-93 (doi: 10.1140/epjst/e2012-01563-9).

Book chapters

  1. R. Handika, C. Truong, S. Trück, R. Weron (2014) Modelling price spikes in electricity markets – the impact of load, weather and capacity, in “Energy Pricing Models: Recent Advances, Methods, and Tools”, ed. M. Prokopczuk, Palgrave Macmillan, 195-221.
  2. J. Janczura, R. Weron (2014) Inference for Markov-regime switching models of electricity spot prices, in: “Quantitative Energy Finance”, eds. F.E. Benth, P. Laurence, V. Kholodnyi, Springer, 137-155 (doi: 10.1007/978-1-4614-7248-3_5).

Conference papers

  1. K. Maciejowska (2015) Fundamental and speculative shocks – structural analysis of electricity market, in “Stochastic Models, Statistics and Their Applications”, eds. A. Steland, E. Rafajłowicz, K. Szajowski, Springer Proceedings in Mathematics & Statistics, 407-414, DOI 10.1007/978-3-319-13881-7_45.
  2. K. Maciejowska (2014) Fundamental and speculative shocks, what drives electricity prices?, IEEE Conference Proceedings, 11th International Conference on the European Energy Market (EEM’14), 28-30 May 2014, Kraków, Poland, DOI 10.1109/EEM.2014.6861289.
  3. J. Nowotarski, R. Weron (2014) Merging quantile regression with forecast averaging to obtain more accurate interval forecasts of Nord Pool spot prices, IEEE Conference Proceedings, 11th International Conference on the European Energy Market (EEM’14), 28-30 May 2014, Kraków, Poland, DOI 10.1109/EEM.2014.6861285.
  4. K. Maciejowska, R. Weron (2013) Forecasting of daily electricity spot prices by incorporating intra-day relationships: Evidence form the UK power market, IEEE Conference Proceedings, 10th International Conference on the European Energy Market (EEM’13), 28-30 May 2013, Stockholm, Sweden, DOI 10.1109/EEM.2013.6607314.
  5. J. Nowotarski, J. Tomczyk, R. Weron (2013) Modeling and forecasting of the long-term seasonal component of the EEX and Nord Pool spot prices, IEEE Conference Proceedings, 10th International Conference on the European Energy Market (EEM’13), 28-30 May 2013, Stockholm, Sweden, DOI 10.1109/EEM.2013.6607301.

Developed software components