IMMORTAL - Investigating Market Microstructure and Short-term Price Forecasting in Intra-day Electricity Markets

• Applicants: Professor Dr. Rüdiger Kiesel; Professor Dr. Florian Ziel
• Subject Area: Statistics and Econometrics
• Term: from 2017 to 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 379008354

The expansion of renewable generation and active demand side management has increased the importance of short-term electricity markets, which are seen by many market participants as the future of electricity trading. However, the vast majority of research has been in the context of day-ahead auction trading, the workhorse of power trading in Europe to date. This situation calls for (1) understanding the intraday market microstructure with its continuous trading for individual load periods up to a few minutes before delivery and direct influence of power system fundamentals, so different from the uniform price auction day-ahead markets, and (2) developing innovative forecasting methods that meet the very specific characteristics of intraday electricity trading. The main objective of the project is to adequately address these two challenges. The project offers an integrated approach composed of three interrelated and parallel tasks, which are interesting both from a basic research and a utilitarian point of view. Namely, the project will contribute to the development of econometrics by analyzing existing and introducing new methods for studying the fine structure of intraday markets, such as order flow and trading intensity, utilizing the relation of power market fundamentals and intraday trading, and working out efficient forecasting algorithms for high-frequency time series, tailored for intraday electricity markets. Given that the timeframe for making trading decisions is becoming shorter and shorter, the project will contribute by providing information on the relationship and interactions of trading strategies and power market fundaments as well as guidance as to the appropriate choice of much needed forecasting techniques. From the utilitarian point of view it will contribute to improving forecasting and risk management practices in the energy sector and in the longer run it may contribute to improving the financial stability of energy companies and the national energy security. The unique composition of the German-Polish team with profound research experience on intraday electricity markets, statistical learning expertise and access to energy traders (Kiesel, Ziel) on one hand, and a world-class expert on electricity price forecasting (Weron) on the other, will surely guarantee success.

• DFG Programme: Research Grants
• International Connection: Poland
• Partner Organisation: Narodowe Centrum Nauki (NCN)
• Cooperation Partner: Professor Dr. Rafal Weron