Can Agent-Based Models Forecast Spot Prices in Electricity Markets? Evidence from the New Zealand Electricity Market
Electric Power Research Institute
University of Auckland - Department of Economics
University of Auckland - Faculty of Business & Economics
January 24, 2012
Modelling price formation in electricity markets is a notoriously difficult process, due to physical constraints on electricity generation and flow. This difficulty has inspired the recent development of bottom-up agent-based models of electricity markets. While these have proven quite successful in small models, few authors have attempted any validation of their model against real-world data in a more realistic model. In this paper, we take one of the most promising algorithms, the modified Roth and Erev algorithm, and apply it to a 19-node simplification of the New Zealand electricity market. Once key variables such as water storage are accounted for, we show that our model can mimic short-run (weekly) electricity prices at these 19 key nodes quite closely.
Number of Pages in PDF File: 40
Keywords: Agent-based modelling, electricity markets
JEL Classification: Q4, L11, L94, D43, D21working papers series
Date posted: April 28, 2012
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