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- Title
Forecasting of daily electricity prices with factor models: utilizing intra-day and inter-zone relationships.
- Authors
Maciejowska, Katarzyna; Weron, Rafał
- Abstract
This paper investigates whether using hourly and/or zonal prices can improve the accuracy of short- and medium-term forecasts of average daily electricity prices. We consider a 6 years period (2008-2013) of hourly day-ahead prices from 19 zones of the Pennsylvania-New Jersey-Maryland (PJM) interconnection and the PJM Dominion Hub in Virginia, U.S. The predictive performance of four multivariate models calibrated to hourly and/or zonal day-ahead prices is evaluated and compared with that of a univariate model, which uses only average daily data for the Dominion Hub. The multivariate competitors include a restricted vector autoregressive model and three factor models with the common and idiosyncratic components estimated using principal components in a semiparametric setup. The results indicate that there are statistically significant forecast improvements from incorporating the additional information, essentially for all considered forecast horizons ranging from 1 day to 2 months, but only when the correlation structure of prices across locations and/or hours is modeled using factor models.
- Subjects
MATHEMATICAL models; ELECTRIC utility costs; FACTOR analysis; MATHEMATICAL models of economic forecasting; PERFORMANCE evaluation; STATISTICAL correlation
- Publication
Computational Statistics, 2015, Vol 30, Issue 3, p805
- ISSN
0943-4062
- Publication type
Article
- DOI
10.1007/s00180-014-0531-0