X-model: further development and possible modifications

• Main Author: Sergei Kulakov
• Format: Article
• Language: English
• Published: MDPI AG 2020-02-01
• Series: Forecasting
• Subjects: energy economics; energy forecasting; econometric modeling; electricity supply; electricity demand
• Online Access: https://www.mdpi.com/2571-9394/2/1/2

The main goal of the present paper is to improve the X-model used for day-ahead electricity price and volume forecasting. The key feature of the X-model is that it makes a day-ahead forecast for the entire wholesale supply and demand curves. The intersection of the predicted curves yields the forecast for equilibrium day-ahead prices and volumes. We take advantage of a technique for auction curves’ transformation to improve the original X-model. Instead of using actual wholesale supply and demand curves, we rely on transformed versions of these curves with perfectly inelastic demand. As a result, the computational requirements of our X-model are reduced and its forecasting power increases. Moreover, our X-model is more robust towards outliers present in the initial auction curves’ data.