Have Norwegian producers of hydroelectric power wasted the water?

Norwegian producers of hydroelectric power have been criticized for having exported power to Sweden during the autumn and winter 2003/2004. As this analysis shows, although the reservoir level in Norway was below normal in October already, the negative deviation from the normal reservoir level was even greater in Sweden till the end of the year. Also when the magnitude of the reserve is measured relative to the number of weeks with normal winter production for which it lasts, the situation was worse in Sweden than in Norway. After New Year the deviation from the normal reservoir level has been much the same in the two countries and has changed in parallel. During this period the exchange between the two countries has approximately balanced and the power flow from Sweden to Norway has grown gradually. With this as a background, there is no basis for asserting that the Norwegian producers have managed the water resources in an irresponsible way. In general, the power flow and the water resource management in the two countries appear reasonable considering the water influx and the prices. Different market imperfections may nevertheless have rendered the water resource management socially less then optimal.