Power price forecasting

Power price forecasting (also referred to as electricity price forecasting) is simply the process of using mathematical models to predict what power prices will be in the future given your assumption of the inputs.

Forecasting methodology

Driving factors

Everything from salmon migration to a forest fires can affect current and future power prices. However, when forecasting those prices there are some fundamental drivers that are the most likely to be considered.

Those drivers are:
* Weather driven demand
* Hydro availability
* Power plant outages
* Fuel price
* Transmission outages

Weather driven demand

Studies show that generally demand for power is driven largely by temperature. Heating demand in the winter and cooling demand (air conditioners) in the summer are what primarily drive the seasonal peaks around the year in most regions. Within the power industry it is generally recognized that 65 degrees F is the magic number where anything above people will begin turning on their air conditioning in a non-linear fashion. Also, anything below 65 degrees F will have people turn on the heat in the same non-linear way. Obviously, there is some subjectivity to this regarding the region specific habits and architecture.

Hydro availability

Snowpack, streamflows, seasonality, salmon, etc all affect the amount of water that can flow through a dam at any given time. Forecasting these variables allows one to predict the available potential energy for a dam for a given period. Some regions such as the Pacific Northwest get a large percentage of their generation from hydro-electric dams.

Power plant outages

Whether planned or unplanned, outages affect the total amount of power that is available to the grid.

Fuel price

Transmission outages