# Feature-driven Improvement of Renewable Energy Forecasting and Trading

## TL;DR

This paper introduces a simple, effective feature-driven method to improve renewable energy forecasts and trading strategies, leading to better prediction accuracy and reduced balancing costs in electricity markets.

## Contribution

It presents a novel, data-driven newsvendor model that utilizes valuable predictors to enhance renewable energy forecasting and trading performance.

## Key findings

- Improved wind power forecast accuracy by several percentage points.
- Significant reduction in balancing costs for wind power producers.
- Demonstrated effectiveness on a realistic Danish wind power case study.

## Abstract

Inspired from recent insights into the common ground of machine learning, optimization and decision-making, this paper proposes an easy-to-implement, but effective procedure to enhance both the quality of renewable energy forecasts and the competitive edge of renewable energy producers in electricity markets with a dual-price settlement of imbalances. The quality and economic gains brought by the proposed procedure essentially stem from the utilization of valuable predictors (also known as features) in a data-driven newsvendor model that renders a computationally inexpensive linear program. We illustrate the proposed procedure and numerically assess its benefits on a realistic case study that considers the aggregate wind power production in the Danish DK1 bidding zone as the variable to be predicted and traded. Within this context, our procedure leverages, among others, spatial information in the form of wind power forecasts issued by transmission system operators (TSO) in surrounding bidding zones and publicly available in online platforms. We show that our method is able to improve the quality of the wind power forecast issued by the Danish TSO by several percentage points (when measured in terms of the mean absolute or the root mean square error) and to significantly reduce the balancing costs incurred by the wind power producer.

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Source: https://tomesphere.com/paper/1907.07580