Implementing an energy trading strategy using forecasting of energy prices and production

Energy production is evolving over time: the number of players involved is increasing and new variables, such as the rate of production from renewable resources, are introducing the influence of uncontrollable events as weather conditions. Consequently, this fact leads to an increasing of the volatility of the production and, as a result, of the price, with more variables to take into account. In previous times, energy production was handled locally, and the energy price was settled daily. On the contrary, nowadays the interconnection throughout all Europe has created new opportunities for energy traders, particularly with the advent, as anticipated, of the volatile renewable resources. Producers are hence facing the challenge of adapting to this new landscape. The new markets (so-called Cridas "Complementary Regional Intraday Auctions") have been created to enable them to adjust their position for selling and bidding quantities of energy during the day ahead or the same day of offering. In this way they can maximize the income from selling or buying energy through all the energy markets. The aim of this thesis is to find a way to maximize the profit with a proper strategy. First of all, it has shown the current development of the Italian energy markets, the trends of the historical price, the exchange volumes in the markets and then portfolio of energy production in the peninsula and the islands. After that, it is required to forecast the price on the relevant energy markets, and, to this aim, several models have been implemented, with the target of reducing the error in comparison with the actual data. Later on, a forecasting of energy production in different types of power plants has also been developed. This has allowed to understand the quantity of energy that a producer could sell or bid. Finally, as anticipated, it is shown how different strategies for selling and bidding energy can change the expected earnings by the end of the negotiation. Different strategies will be shown to understand which of them is the winning one.