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**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 .

68 21 11.80 19.58 13 20.Gao Liquan. pp:35-40 (in Chinese). Azeem. Signal Process.00 24. Liu Hongxun (2005). S.51 18 16. “Application of MCP forecasting method in Zhejiang electricity market”.60 15. it shown that chaos theory possesses good effect in solving complexity of electricity price and the problems of non-linear dynamical systems.Journal of Northeastern University (NaturalScience).32. [14] M. but it is still needed to research. Circuits and Systems.60 13. Conclusions In this paper. Acknowledgement This work is supported by the National Natural Science Fund (The Item No.50 error /(%) 2. Vol. No.pp:58-61(in Chinese). D.et a1.69 -2. S. pp:287-305.30 26. pp:1387-1391.Physica D.use different method or combination methods. How to select combination chaos forecasting methods should be the direction that we study.04 12 29. Vol. Darbyshire.42 8 38.67 24 9.(2008)“Electricity price forecasting solution based on time series model”.87 -2. pp:712-716.50 11.48 0. Park.59 -2.(2006) “Electricity price forecast methods of electricity market”.12.77 0. pp:1083-1087 (in Chinese).IEEE Trans. “Research of chaotic classification and synchronization”. [8] D.(2006)“An electricity price forecasting method based on neural network”. No.Cheng Daizhan.Vol.(1989)“Robust estimation of tangent maps and lyapunov spectra”.Vol. Relay. G.80 2 11. [12] N.60 28. International Conference on Communications. through analyzed and compared the forecasting results.88 7 24.48 0. Ushaw.East China Electric Power. Peng Li.01 6 19. Banbrook.34 1. [3] Hu Feng.2.Geometry from a time series phy．Rev ．LettVol.85 3. Vol. [4] Ke Meng.64 1.No. 45.00 38.References Table 2 The forecasting results T/h 1 actual price / ($/wm. O. Vol.99 1.76 22 10.Vol.R. [10] Lei Zhaoming. Tong.12.59 17 24.pp:13-15(in Chinese).00 19.Feng Qian (2007). 70671039) 401 .34. Drake(1993).pp:137 5.T.69 20 13.h) 11.15 13.20 forecasting price/($/wm.34 11 38. “Forecasting System Marginal Price of Electricity by Dynamic Neural Network”.Ting Ji.38 15 26.34. “Bayesian Game Analysis of Bidding Strategy of Generation Company with Incomplete Information”.60 5 18.Zhou Hao.Chen gang(2004). Relay.20 10. 36. G.H. [6] LI ZhiLing.(2002) “Bridge The Gap Between The Lorenz System and The ChenSystem”.10 19.59 14 19. Broomhead.Zhang Qiang(2006). Vol. pp:290-295.49 -1.10.69 0. [13] A.55 2. [9] Zhao Geng.40 18.Packard et a1.18 23 9.70 15.13 3. Merchant.32 1.Relay. [7] Geng XinMin. C.Vol.pp:5460(in Chinese). and meanwhile. McLaughlin (1997).h) 11.27. 459. pp:1477-1481.Neural Networks to Power Systems.Vol. [2] Chen Sijie.IEEE Congress on Evolutionary Computation.No. the power market is a complicated system. Li Jun li.No. [11] Lv Jinhu.60 34. Farah. we should be on the basis of the actual characteristics .6.84 -2.60 12.C. Fang Jinqing. “Control and application of chaos in electrical system”.21.3. Rui Xia. At present.88 0.15 [1] Zhang Xinhua. Dinh. “How to extract Lyapunov exponents from short and noisy time series”.57 16 35.80 10.45 -1. the chaos theory was introduced into electricity price forecasting.Chen Guanrong.5.40 37. 4. Mohammed.00 36.2. Sun Hexu. pp:2337-2343. Huang Shaojun (2004).No.70 9.No.A.01 2.30 25.Journal of Industrial Engineering Management.International Conference on Machine Learning and Cybernetics.84 3.40 14.03 -2. “Load curve shaping using neural networks”.86 10 38.68 -1.11.97 9 38.11.International Journal of Bifurcation and Chaos.45 4 15. Zhang dapeng. the chaos forecasting method based on reconstruction phase-space have developed a lot. pp:77-79 (in Chinese).04 3 13. [5] Wei Ping.43 19 14. No.40 38. J.pp:2917-2926. Ye Ze(2007).33 0. Liu Zuojun.“Electricity reference price forecasting with fuzzy c-means and immune algorithm”.

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