2008 International Seminar on Future Information Technology and Management Engineering

Research on Electricity Price Forecasting Based on Chaos Theory
Herui Cui Xiuli Song
Department of Economics and Management
North China Electric Power University, Baoding 071003, China
E-mail: cuiherui1967@126.com
series. Also, fuzzy theory [4] and other methods [2] were
used to forecast electricity price.
In recent years, chaos time series analysis has been
studied to investigate complicated non-linear dynamical
systems [9, 10, 11].The chaos system is a definite system,
it is extremely sensitive to the initial value of the system.
For chaos is an action between certainty and randomicity,
it is uncertain in the long term. However, in the short
term, it is feasible to estimate because of strange attractor.
The approach in this paper is such that the electricity
price is looked as a time series. Firstly, on the basis of
reconstruction phase-space , we analyzed the chaotic
characteristic of the electricity price and verified its
chaotic identification by using Lyapunov exponent. Then,
we improve on the local approximation and use the addweighted one-rank multi-steps prediction method to
forecast the short-term electricity price; the results
indicate the method is efficient and accurate.

Abstract
Electricity price forecasting has attracted much
interest in current literature. Many models and methods
have been presented in the past, but most of them
regarded the electricity price system as the linear system
and using the linear theory to predict. In fact, electricity
price system is a nonlinear system, According to its
characteristics of complexity and non-linearity; this paper
proposed a new electricity price forecasting model based
on chaos theory. The proposed method makes use of
chaos time series analysis to capture characteristics of
complicated price behavior. First the chaotic
characteristic of electricity price was verified based on
phase-space reconstitution of time series by means of
Lyapunov exponent. Then the improved add-weighted
one-rank multi-steps prediction model is applied to a
short-term electricity price forecasting. Comparing
electricity price time series with historical date by chaos
theory, the results indicated that it will be a bright merit
to use chaos theory predicting electricity price of
electricity industry.

2. Analysis of chaotic characteristic of the
electricity price

1. Introduction

2.1. Phase-space reconstitution of time series

The price of electricity is the key point of the
electricity industry innovation and one of the key
problems in power market, also it is an important task
which can help the market participants arrange rational
trading plan to maximize their economic benefit. So,
electricity price forecasting has become one of the hot
subjects in the field of power market.
Electricity price is governed by the market supply and
demand and the operating condition, and it is affected by
many factors, such as weather, economic situation,
development planning and accidental failure. The key of
the electricity price forecasting is the method, so many
approaches have been proposed: paper [1] analyzed power
bidding game process with incomplete information and
gave the optimal bidding strategy of generation
companies; in paper [6, 7, 8] neural network method were
used to analyze the characteristics of SMP; paper [3, 5]
proposed electricity price forecasting model based on time

Packard
and
Takens
proposed
phase-space
reconstitution theory [12], which introduces chaos theory
into time series analysis. Chaos forecasting is established
on the basis of phase-space reconstitution of time series.
Reconstituting proper phase-space and making the space
orbit fully spread is the premise of further chaos series
forecasting.
Suppose the observed data of the electricity price as a
single variable time series: x1 , x2 , " , xn

978-0-7695-3480-0/08 $25.00 © 2008 IEEE
DOI 10.1109/FITME.2008.23

Reconstitution phase-space is:

Yi = ( xi +τ , xi + 2τ ,", xi +( m−1)τ )

(i = 1,2," N )

Where τ is the delay time; m is the embedding
dimensions; N = n − ( m − 1)τ is the effective length of
vector series. According to Takens theory, as long as
embedding dimension m and delay time τ are selected
appropriately, “trajectory” gathering in the embedding
space is “dynamics equivalence” of original system under

398

4 0. q j ) ⎤ H ( q. Many different techniques have been proposed for the estimation of the Lyapunov spectrum over the past years. On the other hand. 2. s j ) is the uncertainty of q .7 0. then the recovered state vector will consist of components that posses minimal mutual information between them.9 false nearest neighbors 0. Take the historical data of electricity price in certain region from February 1 to May 31 in 2007 for example.we may define the conditional entropy: 0. The approach is based on the idea that the distance between two nearby orbits of attractors grow exponentially with time.3.2 states yields si . there will be less false neighbors.3 transition probabilities Ps ( si ) that a measurement of the defined to be of s = si 0.The information entropy is then defined as: n H ( s ) = − ∑ Ps ( si ) log Ps ( si ) i =1 the amount . si ) = H ( si ) + H ( q ) − H ( si . For the time series of the electricity price in this paper. differential homeomorphism. making it possible to choose an appropriate embedding dimension.2. The concept of mutual information is below: Given an N -element sequence.The mutual information is then that a the 0. the Lyapunov exponents are extracted from the phase space.8 Accordingly. si ) = − ∑ ⎢ log ⎥ ⎢ ⎥ i =1 ⎣⎢ Ps ( si ) ⎦⎥ ⎣⎢ Ps ( si ) ⎦⎥ 0 1 2 3 4 5 6 7 embedding dimensions 8 9 10 Figure 2 Curve of false neighbors and embedding dimension Where Ps ( si .5 0. the corresponding delay τ = 8.1 ⎡ Psq ( si . figure 2 shows the relational curve between the fractions of the false 399 . q ) . Selection of embedding dimension and delay time 1 0.reduce 0. it is depended on the combination of optimal embedding dimension and embedding window width τω = τ ( m − 1) to determine.5 0. thereby establishing that the embedding dimension is m = 9 .7 mutual information In this paper. we may calculate the 0. and shown in table 2. given si . This shows that the evolution of electricity price is extremely sensitive to the initial conditions. if the embedding dimension m = 9 . The false neighbors are meant the phase points very near one another owing to the rather low dimensional space. q j ) ⎤ n ⎡ psq ( si . showing that the slight changes of the electricity price will grow exponentially with the passage of time.2 0.4 0. leading to very great changes. q j In the case H ( q. The mutual information approach measures the nonlinear dependence between successive points and it is the most comprehensive method of determining proper delay times.9 0.If the delay time τ is chosen to coincide with the first minimum of the mutual information.neighbors and the embedding dimension. the false neighbors equal zero. figure1 shows that the mutual information gets the first minimum. It can be seen that.8 0. by making the assignment s = x (t ). The Lyapunov exponents are all great than zero. If the Lyapunov exponent is greater than zero.6 The method of the Lyapunov exponent can be employed to determine whether the process generating a time series is chaotic. because the measurement uncertainty of q : I ( q. There are many methods to determine τ and m , However. q j ) is the probability that measurements 2.q = x (t +τ ) .3 0. With an increase of the embedding dimension.6 0.1 0 0 1 2 3 4 5 6 delay time 7 8 9 10 Figure 1 Mutual information curve 1 0. Lyapunov exponent is a measure for describing quantitatively this feature of chaos. This paper has used the method suggested by Derbyshire and Broohead (referred to as the DB technique from now on)[13][14]which has been shown to perform better in the presence of noise and more stable. Chaotic identification of electricity price of s and q yields si . the dynamic system is chaotic time. we use mutual information approach to determine τ and the false nearest neighbor method to determine the minimal sufficient embedding dimension m .

The forecasting procedure of the improved local approximation is below.ek =∑Pi ∑x x . d i . Given different number of the near state. x M + k +τ . f =∑Pi ∑xMi +k data. establishing the near state vector aggregation of the present state X M . T where e = (1. the prediction result is worse. we can suppose c = 1 . 4. xi + 2τ . i = 1. (2)Find the states near the present state in phase space. " q ) and j =1 j Yi = ( xi +τ .β = ∑Pi ∑(x ) . the mth element of X M + k .020 0. xi +( m−1)τ ) (i = 1. the chaos forecasting model has a very good effect for short-term forecasting. ( i = 1.define the weighting of X Mi is: distance in Pi = and X q j α =∑Pi ∑x . Basing on the reconstruction phase space. it indicates that the value of forecasting errors of electricity price are acceptable.1) Using the weighting least square method.2. calculate the partial The weighted one-rank prediction method will cause heavy computation burden as well as cumulative error in multi-step short-term forecasting.where x M + k + ( m −1)τ . we have calculated τ = 8 and m =9 from the mutual information and the false neighbors methods. Add-weighted prediction model one-rank derivative. is the k-step predictive value. the choice of τ from the mutual information method is good. " . d i means the distance d m denotes the minimum exp( − c ( d i − d m )) q m Then. " x M + k + ( m −1)τ ) . showing that it is possible to accurately make short-term forecast of the electricity price." q 400 . Here.87. we get the reconstruction phase space named X m ∑ Pi [∑ ( xMij +k − a k − bk xMij ) 2 ] = min Table 1 Lyapunov exponents Embedding dimension q − d m )) i =1 Where c is the parameter.".of these. Forecasting results analyzed In this paper. the prediction is best. and with the increase of the embedding dimension.06%. in the prediction procedure. and N is number of time series Mi i =1 where X Mi is the jth element of X Mi .024 0.019 3. and the Lyapunov exponents are all greater than zero.1.In all. The advantage of this model is that the computation is small. (1)Phase-space reconstitution The choice of the embedding dimension m and the time delay τ is very important. we constructed the forecasting model with the historical data of electricity price in certain region from February 1 to May 31 in 2007.We used ∑ exp( − c ( d i i=1 j j Mi q m i=1 j=1 j 2 Mi q m i=1 j=1 j j Mi+k Mi i q m i=1 j=1 −1 ⎛ a k ⎞ ⎛ α β ⎞ ⎛ ek ⎞ ⎜⎜ ⎟⎟ = ⎜⎜ ⎟⎟ ⎜⎜ ⎟⎟ ⎝ bk ⎠ ⎝ m α ⎠ ⎝ f k ⎠ Introduce a k and bk into X M + k = a k e + bk X M , we can get the predictive value X M + k = ( x M + k . We have tested in the prediction. It is the same to m . τ = 8. (3)Forecasting The local linear fits can be expressed as: X Mi + k = a k e + bk X Mi ." N ) Here m =9. the time series is chaotic.5% are less than 3%. so.and then used the model to research the daily price for next day. 7 8 9 10 11 Lyapunov exponent 0. its adaptability is strong. Reconstruct the phase-space using the parameters we estimated above. when τ is larger or smaller than 9.Lyapunov exponents are very small. table 2 shows the actual price and the forecasting price. the rate of evolution of the electricity price is rather slow.020 0.2.022 0. in this paper we improve on the local approximation and use the addweighted one-rank multi-steps prediction method to forecast the electricity price based on phase space reconstruction. the maximum error is 3. . we found different m and τ will lead to different result and even the difference is large. By using the improved add-weighted one-rank multisteps method. so.51% and the average error is 2. we found the prediction result is different. How to select the states near the present state in phase space is very important. 2 . when the number is equal to m +10. q q m m m ⎧ q j j 2 j j + = a P x b P x P ( ) ∑ k∑ i∑ Mi i ∑ x Mi + k x Mi ⎪ k ∑ i ∑ Mi ⎪ i =1 j =1 i =1 j =1 i =1 j =1 ⎨ q q m m ⎪ a k m + bk ∑ Pi ∑ x Mij = ∑ Pi ∑ x Mij + k ⎪⎩ i =1 j =1 i =1 j =1 multi-steps The matrix representation is ⎛ α β ⎞⎛ a k ⎞ ⎛ ek ⎞ ⎜⎜ ⎟⎟⎜⎜ ⎟⎟ = ⎜⎜ ⎟⎟ ⎝ m α ⎠⎝ bk ⎠ ⎝ f i ⎠ Where: between X M Mi .

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