infonet-economy

We propose a novel regime-switching approach for modeling electricity spot prices that takes into account the relation between spot and forward prices. Additionally the model is able to reproduce spikes and negative prices. Market prices are based on an observed forward curve. We distinguish between a base regime and an upper as well as a lower spike regime. The model parameters are calibrated using historical hourly price forward curves for EEX Phelix and the dynamics of hourly spot prices. The model is compared with common time series approaches like ARMA and GARCH.