Algorithmic Trading of Real-time Electricity with Machine Learning

Ganesh, VN and Bunn, DW (2024) Algorithmic Trading of Real-time Electricity with Machine Learning. Quantitative Finance, 24 (11). pp. 1545-1559. ISSN 1469-7688

Abstract

Algorithmic trading is becoming the dominant approach in many electricity spot and futures markets. This paper focuses on the emerging interest in the less documented real-time imbalance markets, by developing reinforcement learning agents to find profit-making opportunities algorithmically. We develop a repeatable experimental setting to compare different market participants and explore the applications of Q-learning with neural networks for three types of market participants: a non-physical trader, a gas generator, and a battery electricity storage system. We backtest all three agents using British data across summer and winter months to compare their profits, risks and various experimental design considerations.