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Market liberalization and market integration: Essays on the Nordic electricity market
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
2012 (English)Doctoral thesis, comprehensive summary (Other academic)Alternative title
Marknadsliberalisering och integrering : studier av den nordiska elmarknaden (Swedish)
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 [en]
Consumer welfare, Electricity price, Market integration, Market power, Price jump
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-61605ISBN: 978-91-7459-523-9 (print)OAI: oai:DiVA.org:umu-61605DiVA: diva2:570731
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
List of papers
1. Market power in the expanding Nordic power market
Open this publication in new window or tab >>Market power in the expanding Nordic power market
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
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:umu:diva-26876 (URN)10.1080/00036840802600269 (DOI)000289545700001 ()
Available from: 2009-10-30 Created: 2009-10-30 Last updated: 2017-12-12Bibliographically approved
2. Consumer welfare in the deregulated Swedish electricity market
Open this publication in new window or tab >>Consumer welfare in the deregulated Swedish electricity market
2009 (English)In: Frontiers of Finance and Economics, ISSN 1814-2044, Vol. 6, no 2, 101-119 p.Article in journal (Refereed) Published
Abstract [en]

The deregulation of the Swedish electricity market in 1996 affected both the market design and the pricing of electricity. Since 1996, the electricity price faced by consumers has increased dramatically. Due to the high electricity price and large company profits, a debate about the success of the deregulation has emerged. As such, the aim of this paper is to investigate whether or not the deregulation of the Swedish electricity market has improved consumers’ welfare. The theoretical framework is an equivalent variation method and the analysis is performed using monthly data for the period January 1996 to January 2007. The results indicate that deregulation has kept the power price (excluding taxes) down and increased consumer welfare in Sweden.

Place, publisher, year, edition, pages
Social Science Electronic Publishing, Inc, 2009
Keyword
Equivalent variation, Consumer welfare, Power market
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:umu:diva-26877 (URN)
Available from: 2009-10-30 Created: 2009-10-30 Last updated: 2012-11-20Bibliographically approved
3. Multinational electricity market integration and electricity price dynamics
Open this publication in new window or tab >>Multinational electricity market integration and electricity price dynamics
2008 (English)In: Proceedings of the EEM 2008, 2008, 1-6 p.Conference paper, Published paper (Refereed)
Series
Proceedings of the EEM 2008
National Category
Economics
Identifiers
urn:nbn:se:umu:diva-26883 (URN)
Conference
5th International Conference on the European Electricity Market
Available from: 2009-10-30 Created: 2009-10-30 Last updated: 2012-11-20
4. Why do electricity prices jump?: Empirical evidence from the Nordic electricity market
Open this publication in new window or tab >>Why do electricity prices jump?: Empirical evidence from the Nordic electricity market
2012 (English)In: Energy Economics, ISSN 0140-9883, E-ISSN 1873-6181, Vol. 34, no 6, 1774-1781 p.Article in journal (Refereed) Published
Abstract [en]

The paper empirically explores the possible causes behind electricity price jumps in the Nordic electricity market, Nord Pool. A time-series model (a mixed GARCH–EARJI jump model) capturing the common statistical features of electricity prices is used to identify price jumps. By the model, a categorical variable is defined distinguishing no, positive and negative jumps. The causes for the jumps are then explored through the use of ordered probit models in a second stage. The empirical results indicate that the structure of the market plays an important role in whether shocks in the demand and supply for electricity translate into price jumps.

Place, publisher, year, edition, pages
Elsevier, 2012
Keyword
Electricity price, price jumps, electricity market
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:umu:diva-57890 (URN)10.1016/j.eneco.2012.07.006 (DOI)
Available from: 2012-08-20 Created: 2012-08-20 Last updated: 2017-12-07Bibliographically approved

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