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
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: Suggested Citation