Energy in a Bathtub: Electricity Trade between Countries with Different Generation Technologies

Finn Førsund

No 17/2009, Memorandum from Oslo University, Department of Economics

Abstract: Many countries have followed a policy of being self-sufficient in electricity. However, in the last two decades exchange of electricity across borders has become more widespread, and the European Union's policy is to encourage a gradual expansion of crossborder trading and integration of electricity markets. It is therefore of interest to study what happens with the price formation in home markets when borders are opened up for trade in electricity and generating technologies differ. There is a common international market, Nord Pool, between the Nordic countries since 1996, and trade now takes place between many European countries on a bilateral basis. A stylised general equilibrium model of trade of electricity between two countries; Hydro and Thermal, with hydro and thermal technologies, is used to investigate price and quantity consequences going from autarky to trade in a competitive market, as revealed by using a social planning perspective for cooperation between countries.

Keywords: Electricity; hydropower; thermal power; international trade (search for similar items in EconPapers)
JEL-codes: F14 Q40 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009-08-06
New Economics Papers: this item is included in nep-ene and nep-int
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Published in Modern cost-benefit analysis of hydropower conflicts, Johansson, per-olov, Kristrøm, bengt (eds.), 2011, chapter 6, pages 76-96, Edward Elgar.

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