ARIMA models to predict next-day electricity prices

Abstract
Price forecasting is becoming increasingly relevant to producers and consumers in the new competitive electric power markets. Both for spot markets and long-term contracts, price forecasts are necessary to develop bidding strategies or negotiation skills in order to maximize benefit. This paper provides a method to predict next-day electricity prices based on the ARIMA methodology. ARIMA techniques are used to analyze time series and, in the past, have been mainly used for load forecasting, due to their accuracy and mathematical soundness. A detailed explanation of the aforementioned ARIMA models and results from mainland Spain and Californian markets are presented.