Mid- to long-term modeling of electricity market prices

Abstract

Mid- to long-term forecasting of electricity market prices remains a challenging task. Fundamental models can readily account for the drivers of mean electricity price level movements, but often fail to capture essential short-term price curve characteristics like high volatility and negative prices. We here report a hybrid fundamental-econometric model capable of reproducing both the short-term stylized facts and the long-term overall levels of spot market prices obtained at the EEX with a high degree of accuracy, including low mean average error and reproduction of negative prices.