Forecasting Electricity Prices: An Optimize Then Predict-Based Approach

We are interested in electricity price forecasting at the European scale. The electricity market is ruled by price regulation mechanisms that make it possible to adjust production to demand, as electricity is difficult to store. These mechanisms ensure the highest price for producers, the lowest price for consumers and a zero energy balance by setting day-ahead prices, i.e. prices for the next 24 h. Most studies have focused on learning increasingly sophisticated models to predict the next day's 24 hourly prices for a given zone. However, the zones are interdependent and this last point has hitherto been largely underestimated. In the following, we show that estimating the energy cross-border transfer by solving an optimization problem and integrating it as input of a model improves the performance of the price forecasting for several zones together.