Improving Short-Term Electricity Price Forecasting Using Day-Ahead LMP with ARIMA Models

TL;DR

This paper develops ARIMA-based models, including SARIMA and ARMAX-GARCH, to improve short-term electricity price forecasts by leveraging DALMP and RTLMP data, outperforming existing methods in the MISO market.

Contribution

It introduces a novel combination of SARIMA and GARCH models with exogenous variables to enhance short-term electricity price prediction accuracy.

Findings

ARMAX-GARCH model outperforms other ARIMA models in accuracy.

Incorporating exogenous variables like weekend indicators improves forecasts.

Models trained on MISO data demonstrate practical effectiveness.

Abstract

Short-term electricity price forecasting has become important for demand side management and power generation scheduling. Especially as the electricity market becomes more competitive, a more accurate price prediction than the day-ahead locational marginal price (DALMP) published by the independent system operator (ISO) will benefit participants in the market by increasing profit or improving load demand scheduling. Hence, the main idea of this paper is to use autoregressive integrated moving average (ARIMA) models to obtain a better LMP prediction than the DALMP by utilizing the published DALMP, historical real-time LMP (RTLMP) and other useful information. First, a set of seasonal ARIMA (SARIMA) models utilizing the DALMP and historical RTLMP are developed and compared with autoregressive moving average (ARMA) models that use the differences between DALMP and RTLMP on their forecasting capability. A generalized autoregressive conditional heteroskedasticity (GARCH) model is implemented to further improve the forecasting by accounting for the price volatility. The models are trained and evaluated using real market data in the Midcontinent Independent System Operator (MISO) region. The evaluation results indicate that the ARMAX-GARCH model, where an exogenous time series indicates weekend days, improves the short-term electricity price prediction accuracy and outperforms the other proposed ARIMA models