Electricity spot price modeling by multi-factor uncertain process: a case study from the Nordic region

In recent years, the liberalization of energy markets (especially electricity) by many countries has led to much attention being paid to their modeling. The energy market modeling under the framework of probability theory is valuable when the distribution function is close enough to the actual frequency. However, due to the complexity and variability of the world, economic reasons and changing government policies, this assumption is not applicable in some cases. Under such circumstances, we propose an uncertain two-factor model based on uncertain differential equations to evaluate the electricity spot price dynamics. Then, several essential indicators of electricity are investigated and generalized moment estimation for unknown parameters is also provided. Two case studies by using electricity data from the Oslo and Stockholm regions illustrate our approach. We also compare the proposed model with one-factor uncertain model driven by Liu process and the electricity stochastic model. A detailed numerical study illustrates the efficiency of the proposed model to evaluate electricity spot prices.