Abstract
Abstract The paper aims at modelling the electricity generator’s expectations about price development in the Latvian day-ahead electricity market. Correlation and sensitivity analysis methods are used to identify the key determinants of electricity price expectations. A neural network approach is employed to model electricity price expectations. The research results demonstrate that electricity price expectations depend on the historical electricity prices. The price a day ago is the key determinant of price expectations and the importance of the lagged prices reduces as the time backwards lengthens. Nine models of electricity price expectations are prepared for different natural seasons and types of the day. The forecast accuracy of models varies from high to low, since errors are 7.02 % to 59.23 %. The forecasting power of models for weekends is reduced; therefore, additional determinants of electricity price expectations should be considered in the models and advanced input selection algorithms should be applied in future research. Electricity price expectations affect the generator’s loss through the production decisions, which are made considering the expected (forecasted) prices. The models allow making the production decision at a sufficient level of accuracy.
Highlights
The concept of expectations is a key element of the behavioural economics (Chow, 2011) and refers to the anticipation or belief about the future of variable, such as commodity price, inflation, interest rates, wage, etc. (BN Vocabulary, 2016)
The research results demonstrate that electricity price expectations depend on the historical electricity prices
The research investigated the scientific issue of price expectations in the day-ahead electricity market in Latvia during 3 June 2013 to 9 February 2016
Summary
The concept of expectations is a key element of the behavioural economics (Chow, 2011) and refers to the anticipation or belief about the future of variable, such as commodity price, inflation, interest rates, wage, etc. (BN Vocabulary, 2016). The concept of expectations is a key element of the behavioural economics (Chow, 2011) and refers to the anticipation or belief about the future of variable, such as commodity price, inflation, interest rates, wage, etc. The topic of the price expectations has been well documented in the scientific literature. The theoretical background of price expectations was laid by M. The methodological insufficiencies of the adequate measurement of the expectations were solved by G. de Menil & S. The issues of the measurement of the price expectations in the electricity market by applying various forecasting methods were tackled by J. Weron (2014) summarised the methods applied to forecast electricity prices. The determinants of price expectations were presented by
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