An overview and verification of electricity price forecasting models

Many methods and models have been developed to forecast the energy prices in the market environment since the restructuring of the electricity power industry. This paper presents a brief overview of different techniques and models in the literature of energy price forecasting. Then it compares and classifies different models and methods to verify whether these are suitable for different purposes of forecasting or not. Classification is based on the type of the models, suitability with respect to power market, time horizon, level of accuracy and forecasting aim. Based on this approach, a complementary classification of price forecasting models is proposed, which can be used for choosing the suitable method for certain cases. Also, the use of hidden Markov models (HMM), as an interesting method, is proposed in detail with a modeling and simulation by using the Spanish electricity market data.