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Article

Event-Based Evaluation of Electricity Price Ensemble Forecasts

House of Energy Markets and Finance, University of Duisburg-Essen, 45141 Essen, Germany
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Author to whom correspondence should be addressed.
Forecasting 2022, 4(1), 51-71; https://doi.org/10.3390/forecast4010004
Submission received: 1 November 2021 / Revised: 15 December 2021 / Accepted: 20 December 2021 / Published: 29 December 2021
(This article belongs to the Special Issue Forecasting Prices in Power Markets)

Abstract

The present paper considers the problem of choosing among a collection of competing electricity price forecasting models to address a stochastic decision-making problem. We propose an event-based evaluation framework applicable to any optimization problem, where uncertainty is captured through ensembles. The task of forecast evaluation is simplified from assessing a multivariate distribution over prices to assessing a univariate distribution over a binary outcome directly linked to the underlying decision-making problem. The applicability of our framework is demonstrated for two exemplary profit-maximization problems of a risk-neutral energy trader, (i) the optimal operation of a pumped-hydro storage plant and (ii) the optimal trading of subsidized renewable energy in Germany. We compare and contrast the approach with the full probabilistic and profit–loss-based evaluation frameworks. It is concluded that the event-based evaluation framework more reliably identifies economically equivalent forecasting models, and in addition, the results suggest that an event-based evaluation specifically tailored to the rare event is crucial for decision-making problems linked to rare events.
Keywords: electricity price forecasting; probabilistic forecasting; statistical models electricity price forecasting; probabilistic forecasting; statistical models

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MDPI and ACS Style

Vogler, A.; Ziel, F. Event-Based Evaluation of Electricity Price Ensemble Forecasts. Forecasting 2022, 4, 51-71. https://doi.org/10.3390/forecast4010004

AMA Style

Vogler A, Ziel F. Event-Based Evaluation of Electricity Price Ensemble Forecasts. Forecasting. 2022; 4(1):51-71. https://doi.org/10.3390/forecast4010004

Chicago/Turabian Style

Vogler, Arne, and Florian Ziel. 2022. "Event-Based Evaluation of Electricity Price Ensemble Forecasts" Forecasting 4, no. 1: 51-71. https://doi.org/10.3390/forecast4010004

APA Style

Vogler, A., & Ziel, F. (2022). Event-Based Evaluation of Electricity Price Ensemble Forecasts. Forecasting, 4(1), 51-71. https://doi.org/10.3390/forecast4010004

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