The Nordic Market: Signs of Stress?

Nils-Henrik M. von der Fehr, Eirik S. Amundsen () and Lars Bergman

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: The supply shock that hit the Nordic electricity market in 2002-2003 put the market to a severe test. A sharp reduction in inflow to hydro reservoirs during the normally wet months of late autumn pushed electricity prices to unprecedented levels. We take this event as the starting point for analysing some potential weaknesses of the Nordic market. We conclude that fears regarding supply security and adequacy are likely to be unfounded. Nevertheless, as inherited over-capacity is eroded, and new market-based environmental regulation takes effect, tighter market conditions are to be expected. It is then crucial that retail markets are fully developed so as to allow consumers to adequately protect themselves from occurrences of price spikes.

New Economics Papers: this item is included in nep-ene
Date: 2005-05
Note: CMI, IO
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