Demand, generation and price in the Norwegian market for electric power

We analyse the simultaneous determination of supply, demand and price in the competitive Norwegian electricity market. Deregulated in 1991, this market is pretty mature and it offers numerous data required carrying out an interesting study. Stochastic and seasonal water inflow, water storage possibilities and demand variations make this market interesting both from a theoretical and empirical view. We establish a small supply-demand model of the Norwegian electricity market. The model is estimated using weekly data from 1994 to 1995. Data for 1996 are used for post-sample examination of the model. Unexpected inflow, snow and temperature conditions explain a large part of the variation in the electricity generation, demand and price. Within and post-sample simulation of the estimated model reproduce demand and price patterns considerably well