Better price forecasts in the energy sector by combining fundamental and stochastic models (ProKoMo)

Funded by: Federal Ministry of Economic Affairs and Energy

Link to project website:  pro-ko-mo.de

The project ProKoMo is a three-year research project funded by the Federal Ministry for Economic Affairs and Energy. It is dedicated to the combination of fundamental models and stochastic models. The aim is to improve the forecasting quality of electricity price forecasts. Fundamental energy system models usually determine prices based on a detailed bottom-up analysis of the demand and supply side. On the one hand, they are able to depict real techno-economic interactions. On the other hand, they can barely account for stochastic influences. Therefore, probability statements about future developments are very limited. However, such probability statements can be well obtained from stochastic models. These contain by design stochastic innovations and / or error terms, from whose probability distributions, quantiles and variances, for example, confidence intervals of predictions can be derived.

By further developing, combining and interlinking the two model types (fundamental model and stochastic model), the project combines the advantages of both methodological approaches. The structural statements of the fundamental models should be preserved, but their predictions should be provided with distribution functions or probability statements. With the help of the improved price forecasts, the power plant deployment in the short term as well as investment decisions processes in the long term, are expected to become more efficient. This ultimately leads to a reduction of system costs and thus improves the economic efficiency of the energy system.

Executing Departments:
Brandenburg University of Technology Cottbus-Senftenberg
Chair of Energy Economics
Prof. Dr. Felix Müsgens

Karlsruhe Institute of Technology
Institute of Operations Research, Analytics and Statistics
Prof. Dr. Oliver Grothe

        

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