Renewable Energy Supply, Electricity Storage, and the Economics of Forecasting

Electricity markets balance an increasingly intermittent supply with price-inelastic demand, while climate change and electrification of mobility are contributing to transforming diurnal and seasonal demand patterns. Electricity systems face an increasing level of stochasticity, and market participants need to inform their dispatch decisions based on 24-hour price forecasts for participation in Day-Ahead Markets, which in turn depend on supply and demand forecasts. The arrival of grid-scale electricity storage is also creating new scope for prices forecasts, while smaller scale storage systems act as price takers. In the long term, large-scale deployment of grid-scale electricity storage has the potential of significantly reducing price variation through arbitrage, which could shift the “value added” of forecasting from short-term (intra-day) to long-term predictions, and from supporting operational (dispatch) decisions to supporting capacity (investment) decisions.