Analyzing and forecasting zonal imbalance signs in the Italian electricity market

In this paper, within the Italian electricity market, we analyse the features and the dynamics of the imbalance sign, defined as the sign of the algebraic sum of energy bought and sold by the national Transmission and System Operator during the real-time balancing of the electric network. The analyses provide evidence that the probability of having a positive (negative) sign exhibits a serial dependence structure and a dependence on the load periods, as well as on past history. Based on this evidence, we build a suitable model for zonal sign dynamics, and we use it for an out-of-sample forecasting exercise concerning the probability of a positive imbalance sign, πt. The results show that the zonal imbalance sign is 'predictable.' An economic evaluation of the benefits of using the proposed model is also provided.