Arbitrage in Short-Term Electricity Markets: Economic Value of Multidimensional Ensemble Forecasts
Abstract
Generated quantity and market prices are major risk sources for electricity market participants, especially renewable producers with intermittent generation. Before delivery, wind and solar plants must decide their day-ahead bids, which, through deviations from actual generation, determine the direction and volume of intraday trade. We identify an arbitrage opportunity between these short-term markets that increases expected profits and reduces trading risk. To exploit it, we propose a novel multiple-split approach for estimating multidimensional probabilistic forecasts of market fundamentals. This semi-parametric method produces ensembles preserving true error correlations and supports forecasting of linear and nonlinear functions such as price spreads, residual load, or trading income. Using German electricity market data, we demonstrate superior predictive and economic performance over standard benchmarks.
Fields of Study & Subjects
Energy Load and Power Forecasting
Electric Power System Optimization
Power System Reliability and Maintenance
Publication details
- Journal / source
- Badania Operacyjne i Decyzje/Operations Research and Decisions
- Publisher
- Politechnika Wroclawska Oficyna Wydawnicza
- Volume
- 36
- Issue
- 2
- Pages
- 33–58
- Publication date
- 25 January 2026
- Language
- EN