Scandinavian Working Papers in Economics

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

No 02/05: How to play the game as the bridge between two European power markets – the case of Western Denmark

Eirik S. Amundsen (), Bjarne Donslund () and Ole Jess Olsen ()
Additional contact information
Eirik S. Amundsen: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway
Bjarne Donslund: Eltra, Postal: Fjordvejen 1-11, DK-7000 Fredricia, Denmark
Ole Jess Olsen: Department of Environment, Technology and Social Studies, Roskilde University, Postal: P.O. Box 260, DK-4000 Roskilde, Denmark

Abstract: In this paper we set out to investigate the price and quantity fluctuations in Western Denmark, which took place during the winter season 2002-2003. This was a period, which exhibited critical supply conditions in the Nordic area due to a shortage of hydropower. On average, the market in Western Denmark helped to ease the situation by large net exports. However, a more detailed investigation reveals anomalies in market behaviour that do not fit well into this overall positive description of the situation. Several explanations of the anomalies are offered. These may work separately or act in concert. In particular, we look at the large capacity of volatile wind power; the role of the guaranteed fixed prices and the design and functioning of the special auction system of transmission capacity in the interface between Western Denmark and Germany.

Keywords: electricity trade; market power; wind power

JEL-codes: D43; L13; L94

29 pages, March 14, 2005

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