An hour-ahead prediction model for heavy-tailed spot prices

Jae Ho Kim, Warren B. Powell

Research output: Contribution to journalArticle

9 Scopus citations

Abstract

We propose an hour-ahead prediction model for electricity prices that capture the heavy tailed behavior that we observe in the hourly spot market in the Ercot (Texas) and the PJM West hub grids. We present a model according to which we separate the price process into a thin-tailed trailing median process and a heavy-tailed residual process whose probability distribution can be approximated by a Cauchy distribution. We show empirical evidence that supports our model.

Original languageEnglish (US)
Pages (from-to)1252-1266
Number of pages15
JournalEnergy Economics
Volume33
Issue number6
DOIs
StatePublished - Nov 1 2011

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Energy(all)

Keywords

  • Electricity spot market
  • Heavy-tail
  • Mean-reversion
  • Median-reversion

Fingerprint Dive into the research topics of 'An hour-ahead prediction model for heavy-tailed spot prices'. Together they form a unique fingerprint.

Cite this