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Huurman, C., Ravazzolo, F. and Zhou, C. (2012). The power of weather Computational Statistics and Data Analysis, 56(11):3793--3807.

  • Affiliated authors
    Francesco Ravazzolo, Chen Zhou
  • Publication year
    2012
  • Journal
    Computational Statistics and Data Analysis
View publication

Weather information demonstrates predictive power in forecasting electricity prices in day-ahead markets in real time. In particular, next-day weather forecasts improve the forecast accuracy of Scandinavian day-ahead electricity prices in terms of point and density forecasts. This suggests that weather forecasts can price the weather premium on electricity prices. By augmenting with weather forecasts, GARCH-type time-varying volatility models statistically outperform specifications which ignore this information in density forecasting.