To combine or not to combine? Recent trends in electricity price forecasting

Essentially everyone agrees nowadays that electricity spot price forecasting is of prime importance to the energy business. A variety of methods and ideas have been tried over the years, with varying degrees of success. Yet, despite this diversity of models, it is impossible to select one single, most reliable approach. We argue here that combining forecasts – also known as averaging forecasts, aggregating experts, committee machines or ensemble averaging – is an idea worth considering. Using publicly available data from the Global Energy Forecasting Competition 2014 and four commonly used time series models, we show that for both point and probabilistic forecasts the quality of predictions can be improved if combined.