Efficient modeling and forecasting of electricity spot prices

- Incorporates every established stylized fact of electricity prices
- Provides insights for the structure of the leverage effect
- Proves the effect of wind and solar power on price
- Accounts for specific holiday effects and daylight saving time effects
- Uses efficient and rapid state of the art estimation techniques

The increasing importance of renewable energy, especially solar and wind power, has led to new forces in the formation of electricity prices. Hence, this paper introduces an econometric model for the hourly time series of electricity prices of the European Power Exchange (EPEX) 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 influences on the 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 the estimation. Moreover, it is shown that several existing models are outperformed by the procedure developed in this paper.