A novel approach to forecast electricity price for PJM using neural network and similar days method

Price forecasting in competitive electricity markets is critical for consumers and producers in planning their operations and managing their price risk, and it also plays a key role in the economic optimization of the electric energy industry. This paper explores a technique of artificial neural network (ANN) model based on similar days (SD) method in order to forecast day-ahead electricity price in the PJM market. To demonstrate the superiority of the proposed model, publicly available data acquired from the PJM Interconnection were used for training and testing the ANN. The factors impacting the electricity price forecasting, including time factors, load factors, and historical price factors, are discussed. Comparison of forecasting performance of the proposed ANN model with that of forecasts obtained from similar days method is presented. Daily and weekly mean absolute percentage error (MAPE) of reasonably small value and forecast mean square error (FMSE) of less than 7$/MWh were obtained for the PJM data, which has correlation coefficient of determination (R-2) of 0.6744 between load and electricity price. Simulation results show that the proposed ANN model based on similar days method is capable of forecasting locational marginal price (LMP) in the PJM market efficiently and accurately.