In the master thesis we are focusing on the development of a model, which main purpose will be forecasting of administrative power flows on the day-ahead electricity market in Italy. Administrative or commercial electricity flows are contractual flows that are result of trading with electricity on the electricity market. The challenge we addressed while designing the model relates to the impact of the newly built undersea electric cable between Italy and Montenegro on the Italian electricity system. This connection represents an additional route for trading between Central and South-Eastern Europe and is of particular interest for traders present in these markets.
In the first part of the thesis we are presenting the specifics of the electricity market, which is considered as one of the most complex commodity markets. At the beginning we are introducing the processes of deregulation and liberalization, which are responsible for shaping the electricity market into what it is today and their impact on the Italian electricity sector. We are continuing with the explanation of the whole trading process by presenting the participants in the electricity market, trading methods and types of electricity markets. We are concluding the first part with the presentation of market coupling as one of the possibilities of market integration of European electricity markets.
The second part of the research is dedicated to the introduction of the Italian electricity system and the description of the operation of the model. In terms of electricity structure, Italy is a fairly complexed country, that’s why an insight into the events happening in the country makes it easier for the trader to develop a better trading strategy. Therefore, the proposed model is set up to show a picture of the Italian electricity system, during the forecasting of commercial electricity flows on the Italian day-ahead market the new connection between Italy and Montenegro is always on the forefront. Furthermore, we are discussing the events in the Italian electricity market and the key factors influencing the change of the commercial electricity flows on the day-ahead market. The model tries to predict the commercial electricity flows for one day in advance, consequently, its accuracy level is largely conditioned by the accuracy of the forecasted input data for that day. Hence the fact that the correct choice of input data (the most accurate forecast of the inputs) plays a crucial role in increasing the accuracy level of the forecast.
We tested the model on an actual study-case and observed the dependence between the change of the input data and the final results. The final calculations confirmed our expectations and showed the effect of changed input data on the forecasted commercial flows. The results of the model were presented in the form of a report, where all the calculations were collected in a tabular and graphical form. This kind of presentation of the final results makes it possible for the user to quickly review the forecasted commercial electricity flows and detect potential risk of congestion at individual interconnectors.
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