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Market power in the expanding Nordic power market
Department of Finance and Statistics, Swedish School of Economics and Business Administration, PO Box 479, FIN-00101 Helsinki, Finland.
Umeå University, Faculty of Social Sciences, Department of Economics.
Department of Economics, Dalarna University, Borlänge, Sweden ; The Swedish Retail Institute (HUI), Stockholm, Sweden.
2011 (English)In: Applied Economics, ISSN 0003-6846, E-ISSN 1466-4283, Vol. 43, no 9, 1035-1043 p.Article in journal (Refereed) Published
Abstract [en]

We examine if the Nordic power market, Nord Pool, has been competitive or if electricity suppliers have had market power. Specifically, since the evolution from national markets to a multi-national and largely deregulated power market has taken place stepwise, we also examine how the degree of market power has evolved during this integration process. The Bresnahan–Lau method together with weekly data during 1996–2004 are used in the analysis, which shows that electricity suppliers have had small, but statistically significant, market power, but that the market power has been reduced as the Nord Pool area has expanded.

Place, publisher, year, edition, pages
Routledge, 2011. Vol. 43, no 9, 1035-1043 p.
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-26876DOI: 10.1080/00036840802600269ISI: 000289545700001OAI: oai:DiVA.org:umu-26876DiVA: diva2:274613
Available from: 2009-10-30 Created: 2009-10-30 Last updated: 2015-06-22Bibliographically approved
In thesis
1. Market liberalization and market integration: Essays on the Nordic electricity market
Open this publication in new window or tab >>Market liberalization and market integration: Essays on the Nordic electricity market
2012 (English)Doctoral thesis, comprehensive summary (Other academic)
Alternative title[sv]
Marknadsliberalisering och integrering : studier av den nordiska elmarknaden
Abstract [en]

This thesis consists of four self-contained papers related to the Nordic electricity market.

Paper [I] examine how the reform of the Nordic electricity markets has affected competition in the electric power supply market, Nord Pool. The question is if the common power market has been competitive or if electric power generators have had market power during the period 1996 -2004. Moreover, since there was a stepwise evolution from national markets to a multinational power market, we also ask how the degree of market power has evolved during this integration process. The results show that electric power generators have had a small, but statistically significant, degree of market power during the whole period.  However, studying the integration effect, i.e. how the market power has been affected by additional countries joining Nord Pool, it show that the degree of market power has been reduced and finally vanished as the market has expanded and more countries joined the collaboration.

Paper [II] analyse how the deregulation of the Swedish electricity market has affected the price of electric power and how the change in electric power price, in turn, has affected consumers’ welfare. The result shows that the change in pricing principle of electric power following the deregulation has increased consumer welfare over the period studied (1996-2006), with welfare gains about 100 SEK per customer per year, indicating a three per cent welfare gain for the average customer.

Paper [III] study whether (and to what extent) the multinational electricity market integration has affected the price dynamics at the Nordic power exchange. The results shows that a larger electricity market seems to reduce the probability of sudden price jumps, but also that the effect on volatility seem to depend on the characteristics, i.e. production structure, of the integrated markets.

In Paper [IV] a two-stage study is conducted to investigate the extent to which shocks in the demand and supply for electricity translate into price jumps, and the extent to which this process is affected by the prevailing market structure. The main findings from the study is that whether demand and supply shocks translate into price jumps largely depends on the prevailing market structure, i.e. on how far the market works from capacity constraints. A notable feature of the empirical analysis is also that the marginal effects from positive demand and negative supply shocks on the jump probabilities are mostly insignificant and of small magnitude.

Place, publisher, year, edition, pages
Umeå: Umeå universitet, 2012. 26 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 852
Keyword
Consumer welfare, Electricity price, Market integration, Market power, Price jump
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:umu:diva-61605 (URN)978-91-7459-523-9 (ISBN)
Public defence
2012-12-13, Samhällsvetarhuset, s205h, Umeå universitet, Umeå, 13:15 (English)
Opponent
Supervisors
Available from: 2012-11-21 Created: 2012-11-20 Last updated: 2012-11-20Bibliographically approved

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Lundgren, Jens

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