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This work considers the issue of modeling and forecasting electricity prices within the functional time series approach. As this is often performed by estimating and predicting the different components of the price dynamics, we study whether jointly modeling the components, able to account for their inter-relations, could improve prediction with respect to a separate instance of modeling. To investigate this issue, we consider and compare the predictive performance of four different predictors. The first two, namely Smoothing Splines-Seasonal Autoregressive (SS-SAR) and Smoothing Splines-Functional Autoregressive (SS-FAR) are based on separate modeling while the third one is derived from a single-step procedure that jointly estimates all the components by suitably including exogenous variables. It is called Functional Autoregressive with eXogenous variables (FARX) model. The fourth one is a combination of the SS-FAR and FARX predictors. The predictive performances of the models are tested using electricity price data from the northern zone of the Italian electricity market (IPEX), both in terms of forecasting error indicators (MAE, MAPE and RMSE) and by means of the Diebold and Mariano test. The results point out that jointly estimating the components leads to significantly more accurate predictions than using a separate instance of modeling. In particular, the MAE, MAPE, and RMSE values for the best predictor, based on the FARX( 3 , 0 , 4 ) model, are 4.25, 9.28, and 5.38, respectively. The percentage error reduction is about 20% with respect to SS-SAR (3 , 1) and about 10% with respect to SS-FAR(5). Finally, this study suggests that the forecasting errors are generally higher on Sunday and Monday, from hours 3 to 6 in the morning and 14 to 15 in the afternoon, and in June and December. On the other hand, prices are relatively lower on Wednesday, Thursday, and Friday, from hour 20 to 1 a.m., and in January and February. [ABSTRACT FROM AUTHOR]

This work proposes a new approach for the prediction of the electricity price based on forecasting aggregated purchase and sale curves. The basic idea is to model the hourly purchase and the sale curves, to predict them and to find the intersection of the predicted curves in order to obtain the predicted equilibrium market price and volume. Modeling and forecasting of purchase and sale curves is performed by means of functional data analysis methods. More specifically, parametric (FAR) and nonparametric (NPFAR) functional autoregressive models are considered and compared to some benchmarks. An appealing feature of the functional approach is that, unlike other methods, it provides insights into the sale and purchase mechanism connected with the price and demand formation process and can therefore be used for the optimization of bidding strategies. An application to the Italian electricity market (IPEX) is also provided, showing that NPFAR models lead to a statistically significant improvement in the forecasting accuracy. [ABSTRACT FROM AUTHOR]