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Probabilistic Forecasting of German Electricity Imbalance Prices

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  • Michał Narajewski

    (House of Energy Markets and Finance, University of Duisburg-Essen, 45141 Essen, Germany)

Abstract
The imbalance market is very volatile and often exhibits extreme price spikes. This makes it very hard to model; however, if predicted correctly, one could make significant gains by participating on the right side of the market. In this manuscript, we conduct a very short-term probabilistic forecasting of imbalance prices, contributing to the scarce literature in this novel subject. The forecasting is performed 30 min before the delivery, so that the trader might still choose the trading place. The distribution of the imbalance prices is modelled and forecasted using methods well-known in the electricity price forecasting literature: lasso with bootstrap, gamlss, and probabilistic neural networks. The methods are compared with a naive benchmark in a meaningful rolling window study. The results provide evidence of the efficiency between the intraday and balancing markets as the sophisticated methods do not substantially overperform the intraday continuous price index. On the other hand, they significantly improve the empirical coverage. Therefore, the traders should avoid participating in the balancing market, which is inline with the objective and current regulations of the market. The analysis was conducted on the German market; however, it could be easily applied to any other market of a similar structure.

Suggested Citation

  • Michał Narajewski, 2022. "Probabilistic Forecasting of German Electricity Imbalance Prices," Energies, MDPI, vol. 15(14), pages 1-17, July.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:14:p:4976-:d:857870
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    References listed on IDEAS

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    Cited by:

    1. Bartosz Uniejewski, 2023. "Smoothing Quantile Regression Averaging: A new approach to probabilistic forecasting of electricity prices," Papers 2302.00411, arXiv.org, revised Nov 2024.
    2. Yuriy Bilan & Serhiy Kozmenko & Alex Plastun, 2022. "Price Forecasting in Energy Market," Energies, MDPI, vol. 15(24), pages 1-6, December.

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