ARIMA models to predict next-day electricity prices

TLDR

Price forecasting is increasingly important for producers and consumers in competitive electric power markets, where accurate forecasts support bidding strategies and negotiations, and ARIMA techniques—known for their accuracy in load forecasting—have been widely used for time‑series analysis. The study proposes a method to predict next‑day electricity prices using ARIMA models. The authors develop ARIMA models and apply them to data from mainland Spain and California to forecast next‑day electricity prices. The ARIMA models achieve accurate next‑day price predictions for mainland Spain and California markets.

Abstract

Price forecasting is becoming increasingly relevant to producers and consumers in the new competitive electric power markets. Both for spot markets and long-term contracts, price forecasts are necessary to develop bidding strategies or negotiation skills in order to maximize benefit. This paper provides a method to predict next-day electricity prices based on the ARIMA methodology. ARIMA techniques are used to analyze time series and, in the past, have been mainly used for load forecasting, due to their accuracy and mathematical soundness. A detailed explanation of the aforementioned ARIMA models and results from mainland Spain and Californian markets are presented.