Electricity spot price forecasting in two Swedish regions : Analysis of factors which cause price differences between SE3 (Stockholm) and SE4 (Malmö) price regions

Abstract: Factors which effect the differences and similarities between spot prices in the region SE3 (Stockholm) and the region SE4 (Malmö) are investigated. Predictors, which may influence the spot prices, are electricity consumption, electricity production, electricity flow, electricity capacity, wind power production and other electricity indexes. The significance of a statistical analysis crucially depends on the choice of an adequate model. In this thesis the focus is on regression building. Well established candidates are the Generalized Linear Model (GLM), the Generalized Additive Model (GAM) and the Autoregressive Integrated Moving Average with Explanatory (ARIMAX). Preference should be given to non-parametric methods in case the data apparently cannot be explained by any model at hand. For parameter estimation the methods are the maximum likelihood method, the least-squares method and the Local Scoring procedure. Selected models are tested on energy data for the regions SE3 (Stockholm) and SE4 (Malm¨o). The models provide quite good results, and allow to distinguish the degree to which each factor influences on the spot price. It is established that electricity consumption, electricity production and wind power production have a major influence on the spot price formation. Besides, import/export flows of SE3/SE4 regions partially explain the differences in the spot price between these regions.