Electricity Pool Prices: Long-Term Uncertainty Characterization for Futures-Market Trading and Risk Management

28 Pages Posted: 20 May 2007 Last revised: 12 Oct 2008

See all articles by Antonio J. Conejo

Antonio J. Conejo

University of Castilla-La Mancha - Department of Electrical Engineering

Francisco J. Nogales

Universidad Carlos III de Madrid - Department of Statistics; Institute of Financial Big Data UC3M-BS

Miguel Carrión

University of Castilla-La Mancha

Juan M. Morales

University of Castilla-La Mancha

Date Written: May 18, 2007

Abstract

This paper provides a procedure to forecast electricity pool prices one year ahead. A technique to generate pool price scenarios spanning one year into the future is also provided. The information obtained through the above methodology is crucial to make informed decisions in financial markets by electricity producers, retailers and consumers. The proposed forecasting procedure is based on classical time series models and in a novel manner uses as explicative variables the prices of financial market products. A realistic case study is analyzed and results are reported to show the efficaciousness of the methodology proposed. Finally, several relevant conclusions are duly drawn.

Keywords: Electricity pool prices, year-ahead forecasting, forward trading, futures prices, scenarios

JEL Classification: Q40, G12, C53, E37

Suggested Citation

Conejo, Antonio J. and Nogales, Francisco J. and Carrión, Miguel and Morales, Juan M., Electricity Pool Prices: Long-Term Uncertainty Characterization for Futures-Market Trading and Risk Management (May 18, 2007). Available at SSRN: https://ssrn.com/abstract=987477 or http://dx.doi.org/10.2139/ssrn.987477

Antonio J. Conejo

University of Castilla-La Mancha - Department of Electrical Engineering ( email )

Campus Universitario
Ciudad Real, Ciudad Real 28003
Spain

Francisco J. Nogales (Contact Author)

Universidad Carlos III de Madrid - Department of Statistics ( email )

Avda. de la Universidad, 30
Leganes, Madrid 28911
Spain
+34 916248773 (Phone)

HOME PAGE: http://www.est.uc3m.es/Nogales

Institute of Financial Big Data UC3M-BS ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Miguel Carrión

University of Castilla-La Mancha ( email )

Plaza Universidad, 1
02071 Albacete, Ciudad Real 13071
Spain

Juan M. Morales

University of Castilla-La Mancha ( email )

Plaza Universidad, 1
02071 Albacete, Ciudad Real 13071
Spain

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