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Quantifying the economic efficiency impact of inaccurate renewable energy price forecasts

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  • Croonenbroeck, Carsten
  • Hüttel, Silke

Abstract

We demonstrate a simple approach to quantify economic efficiency losses due to inaccurate energy price forecasts. We show that empirically, forecasting errors have their impact on efficiency losses. There are hints that suggest a time-dependent pattern of deadweight losses. Solar infeed, which is considered to be a strongly volatile form of energy, increases the efficiency loss of energy allocations. For wind power, however, this effect is not significant. After all, we provide yet another argument for the requirement of even more accurate forecasts in order to decrease unwanted losses of economic efficiency, even though we show that at their current state, forecasts are fairly accurate already.

Suggested Citation

  • Croonenbroeck, Carsten & Hüttel, Silke, 2017. "Quantifying the economic efficiency impact of inaccurate renewable energy price forecasts," Energy, Elsevier, vol. 134(C), pages 767-774.
    • Handle: RePEc:eee:energy:v:134:y:2017:i:c:p:767-774
    DOI: 10.1016/j.energy.2017.06.077
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    Cited by:

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    2. Hugo Algarvio & Fernando Lopes & António Couto & João Santana & Ana Estanqueiro, 2019. "Effects of regulating the European Internal Market on the integration of variable renewable energy," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 8(6), November.
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    4. Christian Giovanelli & Seppo Sierla & Ryutaro Ichise & Valeriy Vyatkin, 2018. "Exploiting Artificial Neural Networks for the Prediction of Ancillary Energy Market Prices," Energies, MDPI, vol. 11(7), pages 1-22, July.

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    More about this item

    Keywords

    Economic efficiency; Electricity prices; Forecasts; Deadweight loss; Electricity supply and demand;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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