Electricity price forecasting using a new data fusion algorithm

Accurate price forecasting is crucial for all market participants in electricity markets. This study presents a hybrid price forecasting framework based on a new data fusion algorithm. Owing to the complexity and distinct nature of the electricity price, a single forecast engine cannot capture all different patterns of the price signals. Hence, this study focuses on a hybrid forecasting method to extract the advantages of several forecasting engines. In the proposed method, artificial neural network, adaptive neuro‐fuzzy inference system and autoregressive moving average are employed as primary forecast engines (agents) which provide three independent price forecasts. Then, a new data fusion algorithm, the modified ordered weighted average (modified OWA), is proposed to combine the three forecasts to generate a single unified price forecast. Hopefully, the fusion's output outperforms all the agents’ forecasts. The author's proposed fusion algorithm, unlike conventional OWA, uses the feedback from the agents’ error. The proposed framework is evaluated on the Spanish electricity market. The results confirm the ability of the proposed fusion framework to provide more accurate forecasts compared with the input agents forecasts. Results are also compared with some of the recent electricity price forecasting methods.