Latent Space Representation of Electricity Market Curves for Improved Prediction Efficiency

Abstract: This work presents a three-phase ML prediction framework designed to handle a high dimensionality and multivariate time series character of the electricity market curves. In the preprocessing phase, we transform the original data to achieve a unified structure and mitigate the effect of possible outliers. Further, to address the challenge of high dimensionality, we test three dimensionality reduction techniques (PCA, kPCA, UMAP). Finally, we predict supply and demand curves, once represented in a latent space, with a variety of machine learning methods (RF, LSTM, TSMixer). As our results on the MIBEL dataset show, a high dimensional structure of the market curves can be best handled by the nonlinear reduction technique UMAP. Regardless of the ML technique used for prediction, we achieved the lowest values for all considered precision metrics with a UMAP latent space representation in only two or three dimensions, even when compared to PCA and kPCA with five or six dimensions. Further, we demonstrate that the most promising machine learning technique to handle the complex structure of the electricity market curves is a novel TSMixer architecture. Finally, we fill the gap in the field of electricity market curves prediction literature: in addition to standard analysis on the supply side, we applied the ML framework and predicted demand curves too. We discussed the differences in the achieved results for these two types of curves.