A Day-Ahead Electricity Price Prediction Based on a Fuzzy-Neuro Autoregressive Model T.Niimura, Hee-Sang Ko Department of Electrical and Compute Engineering ‘The University of British Columbia ‘Vancouver, BC V6T 124 ‘Canada Abstract ~ This paper presents a fuzzy regression model to estimate uncertain electricity market prices in deregulated Industry environment. The price of electricity in a deregulated market Is very volatile in time. Therefore, i¢ is difficult to ‘estimate an accurate market price using historically observed data. In the proposed method, uncertain market prices are ‘estimated by am autoregressive model using a neural network, nd the time series model is extended to fuzzy model to consider ‘the possible ranges of market prices. The neural network finds the ersp value for AR model and then the low and high ranges ‘of fuzzy model are found by linear programming. Therefore, the Proposed model can represent the possible ranges of a day- ‘ahead market price. For # numerical example, the model is ‘applied to California Power Exchange market dats. Keywords: Elecwcity marke, pric, time series, autoregresson, neural network, fuzzy numbers. 1. INTRODUCTION Many countries have restructured their electrical power industry and introduced deregulation and competition by ‘unbundling generation, transmission and distribution functions, and allowing open market access, In the deregulated environment, a market-based system of electricity transactions has been introduced [1] where clectricty is traded as a commodity and the balance of supply and demand significantly influences its price. The theory of spot market pricing of electricity states that the hourly spot price can be determined by such factors as fuel and ‘maintenance costs, the availability of generator and network, and costs to compensate for transmission losses [2]. ‘This work was pel supported by grants fom Nasonal Science snd Eiacring Research Coun of Canada and Bish Columbia Advanced ‘Syste laste (0-7803-7278-6/02/$10.00 ©2002 TEEE a Deregulated Elects K Ozawa Faculty of Economies Hosei University Machidashi, Tokyo 194-0298 Japan In the modeling of spot price of electricity, one common approach is to observe the price fora long period of time and fit a statistical model based on the observed time series [BJ[4}, The estimated price depends on many factors such as the periodicity of demand, temperature and other ‘meteorological influences, the loading order of generators, etc. In [5] production costing model is used to represent the ‘main variables that affect the spot price of electricity. Atificial neural network is applied in [6] to predict electricity prices based on past price, demand, and estimated reserves. In ‘general, traditional methods are aimed at predicting « most likely price in the future, but the other information such a5, extent of possible variation would be also useful to make effective decisions In this paper, the uncertain market prices are represented by f time series model with fuzzy parameters {7}. The auto- regressive model is applied to estimate @ market price by a fuzzy number with the most likely price as its mean value and the interval encompassing the range of possible highest and lowest prices with varying degrees of possibility. To find the crisp mean value of fuzzy number, neural network is adapted ‘with linear activation function and Levenberg-Marquart algorithm is applied to train the neural network (8). Linear programming computes the range of fuzzy number which ‘ives the possible lowest and highest price. The proposed model is applied to California Power Exchange (CalPX) market data [9] to predict next day's ‘maximum forward price ranges of wholesale electricity using past seven day data, A data set for two months from May 1999 to June 1999 is used for training neural network and the autoregressive model is validated with data set from July 1999 to December 1999, Finally, the range of market prices is estimated forthe year 2000.Ul. TIME SERIES MODEL FOR MARKET PRICE A. Neural Network for Time Series Estimation ‘The multilayer perceptron (MLP) neural network [8) is applied to determine parameters for an autoregressive (AR) ‘model considering n diserete time periods as below. Hk +1) =a, (k)+any(k-I + tay y(k=—m41), (1) where (A) isa time series datum observed. A two layer MLP neural network, as shown in Fig. 1, is introduced to obtain the AR model. All activation functions in hidden layer are sanh(x) (described as J, in Fig. 1), and the ors). activation funetion in output layer is x (r¢ Fig. 1. A filly connected wo-ayer feoormad etek, ‘The output ofthe MLP is ‘The derivative of the output with respect tothe input gis H+) a0) Som{imsfer rove) 0 Now, to make the model much simpler, linear activation function for f; and Fy is applied to the MLP in Fig. 1, and the linear output can be represented as follows: Skt = Sy & yr oempe Wo, @ pola and the derivative ofthe output with respect to the input (7) +1 peg =f Bet) Eom won © From Taylor series expansion, parameter a, is obtained by = UH), BEFD 3H) ~ eet) In general, the parameters of the AR model (1) can be obtained as follows: [ovens] o. From (1) and (6), the vector of the most likely market price (crisp value) can be obtained. For the linear activation function in the neural network the inputs are scaled between 0.1 and 0.9 by the maximum and ‘minimum inputs ofthe time window considered as below Fk+h) @ WEL) = s-y(k-14 +b o where oD = vk-1+1), 4m — wy: weight which connects input and hidden layer ‘ w;: weight which connects output and hidden layer and ‘my: number of hidden neurons p= 2 oye 1wj9: weight which connects hidden layer and bias ee ‘Wo: Weight which connects output layer and bias os W?: —vestor form of [9,25 My] y= Mat y(h-L4D], yO = Mit +0) Wi > vector form of wp Lr Maro yy] and PeNQoa (0-7803-7278-6102/810.00 ©2002 IEEE 1363Because the time window for the training moves step by 3 andy are subsequently updated for a correct scaling. Outside ofthis window there is no need of assuming normal distribution of errors, which can give rise to the difficulty of stationarity in regular regression-based time series modeling [10]. This scaling is also consistent with the fuzzy model introduced below which observes the possible data ranges within an interval determined by the past data. B. Fuzzy Model for Market Price Ranges Financial markets are extremely efficient, that is, any given Point in time the market very quickly reflects the actual values of underlying stocks or commodities. The efficient market hypothesis states that the adjustment of prices to new information is so rapid that any new information which affects this value is accounted for by the market before the ‘general public can make trades based on it. This concept is widely tested by attempting to capture relationship between present and past spot prices using simple stochastic linear time series models, In this paper, fuzzy autoregressive (FAR) model is applied to represent the ranges of time series data of prices. The possible ranges represented by the FAR model by no means indicate the probability of the occurence of high or low extremes but could provide information of extent of the possible extremes based on the past data, FAR model is represented in (8). VRAD A kD A yR-Dt AME-n41) 8) where A,is the fizzy coefficient. The parameters Av Aysecsdq are 80 determined that the observed demand- price data are encompassed by the fuzzy model. Fig. 2 shows the triangular fuzzy set representing the fuzzy number A, with three parameters ¢F,a,,¢¢ (cf,¢z 20). Fig2, Triangular zy for represion parameters (0-7803-7278-6/02/810.00 ©2002 THEE ‘The mean value a, of the triangular fuzzy number is determined by the crisp regression model using the neural network. Based on (8), the possible highest price »*(A), and the possible lowest price y“(k) can then be represented a8 follows: YD = (a, +o WW +(a9 Hed) VR—D + @ Hoy teh) y(k—n1) FED =a GVH He —AHED4~ G0) +(e, em) (k= n+) To obtain the remaining FAR parameters cfand ¢7, a linear programming problem is solved to minimize the vagueness ofthe model such that: Minimize: £ O*E-D-K-14D} ay subject to FOMDEMGMD ia nay FELD) s kL, EF rvntnncy 20. III, NUMERICAL EXAMPLES. The California Power Exchange data (9] is applied for demonstration of the proposed FAR model. In this example, only the daily maximum data are used. To obtain the most likely value, the neural network is applied. The data set from May 1999 to June 1999 are used to train the neural network and the data set from July 1999 to December 1999 are used for the validation of an estimated ‘AR model. The seventh order AR. model to reflect a week ‘before data is applied and linear activation function is also used. Fig. 3 shows the validation of AR model. Market prices are scaled to make use of linear activation function. 1364