Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 15/04: THE NORDIC MARKET: SIGNS OF STRESS?

Nils-Henrik M. von der Fehr (), Eirik S. Amundsen () and Lars Bergman ()
Additional contact information
Nils-Henrik M. von der Fehr: University of Oslo, Department of Economics, Postal: P. O. Box 1095 Blindern, N-0317 Oslo, Norway
Eirik S. Amundsen: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway
Lars Bergman: Stockholm School of Economics, Postal: P.O. Box 6501, SE-113 83 Stockholm,

Abstract: The supply shock that hit the Nordic electricity market in 2002-2003 put the market to a severe test. A sharp reduction in inflow to hydro reservoirs during the normally wet months of late autumn pushed electricity prices to unprecedented levels. We take this event as the starting point for analysing some potential weaknesses of the Nordic market. We conclude that fears regarding supply security and adequacy are likely to be unfounded. Nevertheless, as inherited over-capacity is eroded, and new market-based environmental regulation takes effect, tighter market conditions are to be expected. It is then crucial that retail markets are fully developed so as to allow consumers to adequately protect themselves from occurrences of price spikes.

Keywords: Production; Pricing; and Market Structure; Size Distribution of Firms; Firm Performance: Size; Diversification; and Scope; Retail and Wholesale Trade; e-Commerce; Air Transportation; Organizational Behavior; Transaction Costs; Property Rights; Oligopoly and Other Forms of Market Imperfection.

JEL-codes: D23; D43; L11; L25; L81; L94

28 pages, November 27, 2004

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