Efficient Modeling and Forecasting of the Electricity Spot Price

The raising importance of renewable energy, especially solar and wind power, led to new impacts on the formation of electricity prices. Hence, this paper introduces an econometric model for the hourly time series of electricity prices of the EEX which incorporates specific features like renewable energy. The model consists of several sophisticated and established approaches and can be regarded as a periodic VAR-TARCH with wind power, solar power and load as influencing time series. It is able to map the distinct and well-known features of electricity prices in Germany. An efficient iteratively reweighted lasso approach is used for estimation. Moreover, it is shown that several existing models are outperformed by using the procedure developed within this paper.