Why has the Nordic electricity market worked so well?

Abstract

The general opinion among power industry representatives and electricity market analysts is that the Nordic electricity market has worked well. The purpose of this paper is to explore why the Nordic electricity market has performed well and to consider to what extent the Nordic experiences are relevant for other countries. In particular, we investigate causes as to why the Nordic market managed to withstand the supply shock in 2002 -2003. A comparison is made with the California case, and the potential problem of market power abuse is investigated in particular. The relatively successful electricity market reform in the Nordic countries seems to be attributable to: a simple but sound market design, a successful dilution of market power, a strong political support for deregulation and voluntary, informal commitment to public service by the power industry.

Reforming the power : an institutional analysis of power sector reforms in Pakistan

“…However, illogically, the price hike has been attributed to electricity reforms which has also reduced admiration for reforms in the region (Erdogdu, 2013b). Amundsen and Bergman (2006) argue that factors that have been key to the comparatively successful electricity reforms in the power sectors of the Nordic countries are (a) adoption of a simple but comprehensive market design, which became possible due to the massive share of hydroelectricity (b) weakened market power due to formation of a well-integrated regional market in the form of Nord Pool (c) strong political commitment from the participating countries for a market based system (d) unconditional participation by the power industry in the market mechanism for the sake of public service due to heavy involvement of the public sector companies in the power sector. They claim that (b) and (c) can be copied by any country or group of countries; however (a) and (d) are non-transferable because they are country specific.…”

Variously worldwide types of deregulated electricity markets and their respective transmission congestion management schemes

“…System price is determined in spot market [11]. When transmission network capacity is sufficient, the wholesale electricity prices in four countries are the same.…”

“…Sufficient hydropower and low demand make Nordic market a nearly wonderful power system [11]. Four electricity markets definitely dilute the market power [11] but due to congestion there are still chances for participants to exercise tricky games [2].…”

“…Four electricity markets definitely dilute the market power [11] but due to congestion there are still chances for participants to exercise tricky games [2].…”

What Happens When it's Windy in Denmark? An Empirical Analysis of Wind Power on Price Variability in the Nordic Electricity Market

“…Prices in the Denmark area do occasionally drop to zero, an effective price floor in the nordpool market 7 but this is a relatively rare occurrence and is unlikely to affect the estimation. Despite a high market concentration of generation in Denmark, most studies of Danish and Nordic market power have failed to detect evidence of consistent market power (see for example Amundsen and Bergman (2006) and Hjalmarsson (2000)). …”