The value of forecasts: Quantifying the economic gains of accurate quarter-hourly electricity price forecasts

Highlights: • Although quarter-hourly electricity spot trading gains importance discussions of forecasting of these time-series are sparse. • Our paper proposes a prediction model for the 15-minute EPEX intraday call auction as well as quarter-hourly intraday trading. • We apply an elastic net and consider a variety of input factors such as solar production or early 15-minute EXAA prices. • In addition to forecasting performance, we discuss economic benefits of accurate electricity price forecasts. We propose a multivariate elastic net regression forecast model for German quarter-hourly electricity spot markets. While the literature is diverse on day-ahead prediction approaches, both the intraday continuous and intraday call-auction prices have not been studied intensively with a clear focus on predictive power. Besides electricity price forecasting, we check for the impact of early day-ahead (DA) EXAA prices on intraday forecasts. Another novelty of this paper is the complementary discussion of economic benefits. A precise estimation is worthless if it cannot be utilized. We elaborate possible trading decisions based upon our forecasting scheme and analyze their monetary effects. We find that even simple electricity trading strategies can lead to substantial economic impact if combined with a decent forecasting technique.