Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1242: Transmission Network Investment across National Borders: The Liberalized Nordic Electricity Market

Lars Persson () and Thomas Tangerås ()
Additional contact information
Lars Persson: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Thomas Tangerås: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: The world’s first multinational electricity market was formed with the creation of the Nordic power exchange, Nord Pool. We analyze the incentives to undertake transmission network investment in the context of the liberalized Nordic electricity market. Welfare improving investment in a multinational electricity market requires accounting for the cross-border effects of capacity expansion. We propose methods to increase voluntary cooperation on international infrastructure projects, with an aim to increase aggregate efficiency and achieve equitable distribution of the gains from market integration.​

Keywords: Coalition formation; Cross-border transmission investment; Multilateral bargaining; Nordic electricity market; Shapley Value

JEL-codes: C71; F15; L43; L94

36 pages, October 17, 2018

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