Comparing the forecasting performances of linear models for electricity prices with high RES penetration

We compare alternative univariate versus multivariate models and frequentist versus Bayesian autoregressive and vector autoregressive specifications for hourly day-ahead electricity prices, both with and without renewable energy sources. The accuracy of point and density forecasts is inspected in four main European markets (Germany, Denmark, Italy, and Spain) characterized by different levels of renewable energy power generation. Our results show that the Bayesian vector autoregressive specifications with exogenous variables dominate other multivariate and univariate specifications in terms of both point forecasting and density forecasting. (C) 2020 The Authors. Published by Elsevier B.V. on behalf of International Institute of Forecasters.