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Analysing & Forecasting Nordic Electricity Prices - Utilizing technical and fundamental analyses to develop long-­‐term forecasts for the system price

Leeuwendal, Jesse (2013) Analysing & Forecasting Nordic Electricity Prices - Utilizing technical and fundamental analyses to develop long-­‐term forecasts for the system price.

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Abstract:The goal of this research is to gain knowledge about the behaviour of the electricity price in Norway and Sweden. The gained knowledge is used to support to decision process in originating and structuring renewable energy projects in these countries. In order to do so, the key factors influencing the electricity price in these countries are analysed and forecasting models are developed to predict future electricity prices over a 15-­‐year time period. Due to the long-­‐term nature of renewable energy project financing, the analysis and forecast of electricity prices is based on monthly prices. The different monthly electricity prices in Norway and Sweden are statistically analysed during 2000-­‐2012. First conclusion is that the so-­‐called system price is a good indicator for all other prices and is therefore the only price to be further analysed and forecasted in this research. The system price is subject to high volatility, non-­‐normality, daily, weekly and yearly seasonal cycles and price spikes. Furthermore, the system price is mean-­‐reverting, indicating that the price reverts back to its mean over time. To analyse which key factors influence the system price, the research utilises time-­‐series analysis to construct several models, which try to replicate the historical behaviour of the system price. Based on literature research and discussions with experts, several external factors are indicated to have potential influence on the electricity price. The time-­‐series analysis and examination of the performance of the constructed models leads to the conclusion that the main external key factors influencing the system price in Norway and Sweden are: 1) Oil; 2) Electricity demand; and 3) Interconnection of electricity between the Nordic and non-­‐Nordic countries. Besides these external factors, the historical electricity prices of one and two months in the past also have a significant influence on the current monthly electricity price. The time-­‐series analysis develops multiple models replicating the behaviour of the system price. The best performing model is utilised to construct a 15-­‐year out-­‐of-­‐data forecast for the system price, i.e. for the years 2013 till 2027. This model is based on an ARMA structure and utilises the historical electricity price of one month in the past and the external factors oil, demand and interconnection to construct a 15-­‐year monthly electricity price forecast. The forecast includes four different scenarios, leading to the conclusion that the electricity price in 2027 will be between the low scenario (circa €18,-­‐ per MWh) and the medium scenario (circa €40,-­‐ per MWh). Note that these prices are not indexed by inflation. Furthermore, three out of the four scenarios indicate a stable or declining trend for the system price over the upcoming 15 years. The analysis and forecast of the electricity prices in Norway and Sweden develop valuable knowledge for X. The model forms a suitable alternative for simulation forecasting models. The analysis and forecasting model can support future renewable energy project financing opportunities in Norway and Sweden by offering in-­‐depth knowledge about the market and the electricity price in order to make informed decisions. An overview of all conclusions and recommendations can be found in chapter 9, page 59.
Item Type:Essay (Master)
Faculty:ET: Engineering Technology
Subject:56 civil engineering
Programme:Civil Engineering and Management MSc (60026)
Link to this item:http://purl.utwente.nl/essays/63384
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