Supply Function Prediction in Electricity

Abstract In the fast growing literature that addresses the problem of the optimal bidding behaviour of power generation companies that sell energy in electricity auc-tions it is always assumed that every firm knows the aggregate supply function of its competitors. Since this information is generally not available, real data have to be substituted by predictions. In this paper we propose two alternative approaches to the problem and apply them to the hourly prediction of the aggregate supply function of the competitors of the main Italian generation company.