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Distributional forecasting of electricity DART spreads with a covariate-dependent mixture model

Author

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  • Forgetta, Anthony
  • Godin, Frédéric
  • Augustyniak, Maciej

Abstract

We develop a covariate-dependent mixture model to describe the behavior of electricity DART spreads, which are differentials between day-ahead and real-time prices of electricity. The model includes three regimes: a regular DART regime, a positive spike regime, and a negative spike regime. The model exhibits sufficient flexibility to allow covariates impacting both the frequency and severity of DART spread spikes, and to reproduce salient stylized facts of DART spread dynamics. The covariates considered include forecasts for load, weather, and natural gas prices. The application of our model on data from the Long Island zone of the NYISO (New York Independent System Operator) exhibits a satisfactory fit to the data. Numerical experiments reveal that including covariates in the severity component of the model is crucial, while mild additional performance is obtained with their inclusion in the frequency component. Furthermore, neural network-based quantile regression benchmarks are unable to improve performance over our mixture model.

Suggested Citation

  • Forgetta, Anthony & Godin, Frédéric & Augustyniak, Maciej, 2025. "Distributional forecasting of electricity DART spreads with a covariate-dependent mixture model," Energy Economics, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:eneeco:v:144:y:2025:i:c:s0140988325001562
    DOI: 10.1016/j.eneco.2025.108332
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    More about this item

    Keywords

    Electricity markets; Mixture models; Risk management; Distributional forecasts;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-

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