Analysis of the fundamental predictability of prices in the British balancing market

Bunn, D W, Inekwe, J N and MacGeehan, D (2021) Analysis of the fundamental predictability of prices in the British balancing market. IEEE Transactions on Power Systems, 36 (2). pp. 1309-1316. ISSN 0885-8950 OPEN ACCESS


This research analyses the non-linear and complex effects of drivers of system imbalance prices in the GB electricity market. Unlike day-ahead prices, the balancing settlement prices are comparatively under-researched, yet their importance is growing with greater market risks. The fundamental drivers of these prices are analysed over 2016-2019. The result of a nonlinear modelling approach reveals that system imbalance price exhibits a regime-switching behaviour, driven by weather and demand forecast errors, as well as other system effects. Surprisingly, balancing prices are predictable out of sample and a regime switching specification is more accurate than a linear model for prediction.

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Item Type: Article
Subject Areas: Management Science and Operations
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© 2020 IEEE. Published in: IEEE Transactions on Power Systems (Early Access)

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Date Deposited: 19 Aug 2020 11:41
Date of first compliant deposit: 17 Aug 2020
Subjects: Market forecasting
Electricity supply industry
Last Modified: 16 Mar 2024 01:49

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