Forecasting day-ahead price of electricity - a dynamic regression approach Online publication date: Wed, 14-Aug-2013
by Amitava Bandyopadhayay; Soumya Roy; Dipojjwal Ghosh
International Journal of Business Excellence (IJBEX), Vol. 6, No. 5, 2013
Abstract: The electricity market is being deregulated all over the world. Deregulation has brought in a variety of trading systems such as day-ahead trading and has also introduced high volatility of electricity prices. The large variability of price increases the risk for the market participants and forces the business houses to look for a forecasting accuracy of about ± 3%. This paper provides a method to predict next-day electricity prices using dynamic regression methodology where the price was regressed on selected demand, as well as supply side variables available in the public domain, and the error has been modelled using ARIMA/SARIMA models. The results were found to be very encouraging with MAPE lying in the range of ± 3.5% in most cases. In order to reduce the complexity associated with developing many models, a clustering methodology was used to group the different hours of the day so as to reduce the number of forecasting models to be fitted. Agglomerative hierarchical clustering with single linkage was used and models for representative hours had the required level of accuracy.
Online publication date: Wed, 14-Aug-2013
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