  Forecasting imbalance prices is essential for strategic participation in the
short-term energy markets. A novel two-step probabilistic approach is proposed,
with a particular focus on the Belgian case. The first step consists of
computing the net regulation volume state transition probabilities. It is
modeled as a matrix computed using historical data. This matrix is then used to
infer the imbalance prices since the net regulation volume can be related to
the level of reserves activated and the corresponding marginal prices for each
activation level are published by the Belgian Transmission System Operator one
day before electricity delivery. This approach is compared to a deterministic
model, a multi-layer perceptron, and a widely used probabilistic technique,
Gaussian Processes.
