Electricity price forecasting is a highly complex process that depends on numerous variables including demand, transmission conditions, weather forecasts, government regulations, market conditions, financial speculation, and more. Especially in deregulated, competitive markets, the supply and demand for electricity have numerous outside factors and variables influencing them. Demand is one of the key factors that decide how much electricity is generated at a point in time as large-scale storage of electricity without loss is still not practical. Development of efficient & cost-effective electricity storage systems would have a significant impact on electricity pricing as it would make it possible to generate electricity during low-demand, lower-cost sources and store and supply it to the grid when there is a higher demand.
The quality and accuracy of weather data are better than ever, and the energy industry is embracing digitalization, making available more data to base forecasting models on. We have also made tremendous advancements in our ability to manage, process and gain insights from big data, and this has contributed to increased accuracy in electricity price forecasting. With all the newly available data and technologies, electricity price forecasting is ready for disruption.
Diana Bacila- Senior Coal Market Analyst at Alpiq is of the opinion that better availability of fundamental and weather data will continue helping the forecasting process by reducing uncertainty and errors. She says, “This will increase the accuracy of power price forecasting in the short-term, urging players to strengthen their data management skills in order to be able to process and efficiently use the latest volume of information. For long-term price forecasting, the improved renewable forecasting process will help to better assess the “new normal” and therefore the need for residual power generation, potentially reducing the uncertainty for thermal asset owners. On the other hand, regulatory risks focused on reducing emissions will remain a significant driver in power price forecasting.”
Increased digitalization by power utility corporations has contributed to making more and more data available for forecasts and projections. Technology has helped refine the pricing forecasting process.
While experts agree that improvements in technology and increased availability and accuracy of data will improve price forecasting accuracy, some are also of the opinion that the fundamental electricity price forecasting processes are likely to remain the same.
The energy industry is now at a point in time when it is better equipped technologically to tackle electricity price forecasting than ever before. To discover what is new in the world of electricity price forecasting and to be in the know about the impact of COVID-19 on electricity market from experts, join us online for the Impact of COVID-19 on Energy Market & Price 2020 Forum.