Title: Foreseeing the worst: Forecasting electricity DART spikes
Authors: Remi Galarneau-Vincent - HEC Montreal (Canada) [presenting]
Genevieve Gauthier - HEC Montreal (Canada)
Frederic Godin - Concordia University (Canada)
Abstract: Statistical learning models are proposed for the prediction of the probability of a spike in the electricity DART (day-ahead minus real-time price) spread. Assessing the likelihood of DART spikes is of paramount importance for virtual bidders, among others. The model's performance is evaluated on historical data for the Long Island zone of the New York Independent System Operator (NYISO). A tailored feature set encompassing novel engineered features is designed. Such a set of features makes it possible to achieve excellent predictive performance and discriminatory power. Results are shown to be robust to the choice of the predictive algorithm. Lastly, the benefits of forecasting the spikes are illustrated through a trading exercise, confirming that trading strategies employing the model-predicted probabilities as a signal generate consistent profits.