Short-Term Forecasting of Electricity Spot Prices Containing Random Spikes Using a Time-Varying Autoregressive Model Combined With Kernel Regression

Abstract

Forecasting spot prices of electricity is challenging because it not only contains seasonal variations, but also random, abrupt spikes, which depend on market conditions and network contingencies. In this paper, a hybrid model has been developed to forecast the spot prices of electricity in two main stages. In the first stage, the prices are forecasted using autoregressive time varying (ARXTV) model with exogenous variables. To improve the forecasting ability of the ARXTV model, the price variations in the training process have been smoothened using the wavelet technique. In the second stage, a kernel regression is used to estimate the price spikes, which are detected using support vector machine based model. In addition, mutual information technique is employed to select appropriate input variables for the model. A case study is carried out with the aid of price data obtained from the Australian energy market operator. It is demonstrated that the proposed hybrid method can accurately forecast electricity prices containing spikes.