Forecast Value Considering Energy Pricing in California

Forecasting of weather conditions such as solar irradiance and wind speed and direction is essential for efficient integration of solar and wind power into the energy portfolio. Several metrics can be used to evaluate forecast effectiveness: consistency, quality, and value [1]. Consistency refers to the correspondence between the forecast and the judgments made by forecasters to determine the forecast (i.e. do the same inputs that are used to determine a forecast produce the same forecast). Quality refers to the difference between forecasts and observations. Finally, value refers to the incremental monetary benefits of forecasts to users. There are two prominent groups that use solar forecasts: solar power generators and system operators. In an open market, solar power generators would primarily rely on the value criterion because forecast quality does not necessarily translate to forecast value. For example, a forecast that has a higher quality during peak net load times of the day, when energy prices are high and errors would be more costly, may be more valuable than a forecast that has an overall higher quality, but not necessarily at the critical time of day. System operators, however, are primarily concerned with the quality of a forecast, as reliability and accurate planning of the power grid is their primary concern. Secondary is forecast value to operate the energy market optimally reducing energy generation, transmission, and reserve costs on the grid. For example, an underforecast would result in over-procurement of energy at a higher marginal cost and possibly transmission congestion near the solar power plant; an overforecast would result in under-procurement of energy, purchase of energy from reserves or regulation, and potential operation of transmission lines below capacity.