Can Agent-Based Models Forecast Spot Prices in Electricity Markets? Evidence from the New Zealand Electricity Market

David Young, Stephen Poletti, Oliver Browne
2012 Social Science Research Network  
Modelling price formation in electricity markets is a notoriously difficult process, due to physical constraints on electricity generation and flow. This difficulty has inspired the recent development of bottom-up agent-based models of electricity markets. While these have proven quite successful in small models, few authors have attempted any validation of their model against real-world data in a more realistic model. In this paper, we take one of the most promising algorithms, the modified
more » ... h and Erev algorithm, and apply it to a 19-node simplification of the New Zealand electricity market. Once key variables such as water storage are accounted for, we show that our model can mimic short-run (weekly) electricity prices at these 19 key nodes quite closely. 3
doi:10.2139/ssrn.2046853 fatcat:rwlwtxnrandfhn5zowdgvwxbeq