4.7 Article

Multi-step ahead forecasts for electricity prices using NARX: A new approach, a critical analysis of one-step ahead forecasts

Journal

ENERGY CONVERSION AND MANAGEMENT
Volume 50, Issue 3, Pages 739-747

Publisher

PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.enconman.2008.09.040

Keywords

Electricity market; Forecasting; Nonlinear autoregressive model with exogenous inputs; Multivariate adaptive regression splines; Takens' embedding theorem; Wavenet

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The prediction of electricity prices is very important to participants of deregulated markets. Among many properties, a successful prediction tool should be able to capture long-term dependencies in market's historical data. A nonlinear autoregressive model with exogenous inputs (NARX) has proven to enjoy a superior performance to capture such dependencies than other learning machines. However, it is not examined for electricity price forecasting so far. In this paper, we have employed a NARX network for forecasting electricity prices. Our prediction model is then compared with two currently used methods, namely the multivariate adaptive regression splines (MARS) and wavelet neural network. All the models are built on the reconstructed state space of market's historical data. which either improves the results or decreases the complexity of learning algorithms. Here, we also criticize the one-step ahead forecasts for electricity price that may suffer a one-term delay and we explain why the mean square error criterion does not guarantee a functional prediction result in this case. To tackle the problem, we pursue multistep ahead predictions. Results for the Ontario electricity market are presented. (C) 2008 Elsevier Ltd. All rights reserved.

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