Forecasting Transmission Congestion Using Day- Ahead Shadow Prices

Day-ahead shadow price forecasting is a useful tool for market participants as well as market operators in a wholesale electricity market. Shadow price forecasting is seen by market operators as an additional decision-making support tool for congestion management. Similarly, different market participants may use shadow price forecasting as a tool for strategy improvement in day-ahead or spot markets. This paper proposes a factor model to forecast shadow prices for a market based on locational marginal prices. The proposed approach handles time series using least-squares estimation. This method performs day-ahead shadow price forecasting and provides interpretable signals for different congestive conditions