Modeling and Forecasting Day-Ahead Hourly Electricity Prices: A Review

Girish G.P.

Abstract


Electricity markets around the world are being transformed from a highly Government regulated and controlled markets into deregulated markets. Today, electricity trading has transformed from primarily being a technical business, to one in which the product is treated in the same way as any other commodity. The main objective of deregulation is to introduce competition in the power industry and provide more choices to market participants in the way they trade electricity and ancillary services. In the framework of competitive electricity markets, power producers and consumers need accurate price forecasting tools because price forecasts embody crucial information for producers and consumers when planning bidding strategies in order to maximize their benefits and utilities. A Generator/firm/Individual Power Producer (IPP) which is able to forecast prices correctly can adjust its own production schedule accordingly and hence maximize its profits. But one has to bear in mind that electricity is a very unique commodity that cannot be economically stored and the end user demand shows strong seasonality. This current study reviews literature pertaining to short term electricity price modeling and forecasting and gives direction for future researchers.Keywords: Electricity, Price, Market, Modeling, Forecasting

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