Robust Functional Principal Component Analysis in Electricity Markets

L. Grossi

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M. Bernardi

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A. Cerasa

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F. Nan

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Abstract

The main objective of the paper is to propose a procedure for detecting outliers that may be linked to market manipulation, utilizing microdata from daily auctions that establish the equilibrium price and quantity in deregulated electricity markets. In contrast to previous approaches, we advocate observing and approximating the shape of the supply curves instead of focusing solely on observed prices. This shift is motivated by the fact that market manipulation events involve the strategic decisions of market operators, directly influencing the shape of the supply curve. Therefore, the fundamental hypothesis is that the strategic behavior of operators is established assuming a non-flexible demand curve.

${}^{1}$

Ro.S.A. and Department of Engineering and Architecture, University of Parma, Italy, [luigi.grossi@unipr.it]
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Joint Research Centre (Ispra), European Commission, [Mara.BERNARDI@ec.europa.eu]
${}^{3}$

Joint Research Centre (Ispra), European Commission, [Andrea.CERASA@ec.europa.eu]
${}^{4}$

Joint Research Centre (Ispra), European Commission, [Fany.NAN@ec.europa.eu]

Keywords: Electricity Prices – Outliers detection – Robust estimators – Robust FPCA