Forecasting Day Ahead Spot Electricity Prices

Electricity price forecasting serves critical role for various stakeholders by providing predictions for different time horizons including short-term, day-ahead, medium-term and long-term forecasts aiding in market operations, planning and investment decisions. In this study we explored role of power exchanges and spot electricity markets in promoting transparency, competition and efficiency in electricity industry emphasizing their significance in optimizing grid balance, encouraging renewable energy investment and ensuring reliable electricity market. The study reviewed literature pertaining to electricity price forecasting and explored functioning of Day Ahead Spot Electricity Market (DAM) within wholesale electricity trade framework and auction-based process and explored multifaceted nature of spot electricity prices highlighting their volatility, mean-reverting tendencies, seasonal patterns and impact of auto-correlation and price spikes. The study takes Indian spot electricity market as an example and highlights changing landscape of power sector in India, role of power exchange and emphasizing the need for empirical studies to understand and forecast spot electricity prices in the Indian context.