[en] Deregulation of electricity industry in Europe has tended to start with a grace period of energy surplus inherited from the previously expansive coordinated economies and further amplified by better resource utilisation from extended international trade. The regulatory challenge has therefore primarily been to allocate existing generation to consumers in an efficient way. However, as energy demand increases, due to economic growth, the challenge of providing new capacity surfaces. The Nordic region, which has been a pioneer in internationalising and deregulating electricity, is now approaching this stage, ahead of most of the rest of Europe. While the Nordic case is characterised by specificities related to hydropower it also raises the more general challenge of capacity expansion under a deregulated market economy. The article therefore discusses how the Nordic investment challenges of today shed light on more generic challenges that may become more general European challenges of tomorrow. In a final section, the article discusses policy options available to address the investment/price-hike challenge. The argument is put forward that recursion to some degree of coordinated governance might seem necessary if solutions are confined within large-scale technical systems. However, within the context of a small-scale decentralised technological development, one may be more confident of competitive solutions. (Author)

[en] In electricity markets, not only does the risk of substantial price variations over time exist, but so does the risk of price variations over space, as prices between locations can differ due to transmission congestion. To manage this risk, Contracts for Difference (CfDs), i.e., forwards on the spread between a particular area price and the (unconstrained) system price, were introduced at the Scandinavian electricity exchange Nord Pool at the end of 2000. We empirically investigate the pricing of these CfDs over the period 2001 through 2006 and find that CfD prices contain significant risk premia. Their sign and magnitude, however, differ substantially between areas and delivery periods, because areas are subject to transmission congestion to a varying extent. While the relation between risk premia and time-to-maturity is not uniform for CfDs, there is a negative relation for implied area and system forwards, which can be explained by the relative hedging demand of market participants. In addition, we find that risk premia of CfDs and implied area forwards vary systematically with the variance and skewness of the underlying spot prices. This confirms both implications of the Bessembinder and Lemmon [Bessembinder, H., Lemmon, M.L., 2002. Equilibrium pricing and optimal hedging in electricity forward markets. Journal of Finance, 57, 1347-1382] model. (author)

[en] We consider the possibility of improving the utilization of the capacity of the Nordic transmission grid, by improving on the methods for congestion management. We use a simplified model of the Nordic power market, and different load-scenarios are developed in order to illustrate the effects. By improving the coordination of the system operator function, we may achieve that the actual bottlenecks, both as regards to the location and capacity, form the basis for the definition of price areas. This may result in a better partition of the grid, not necessarily following the borders between the control areas of today's system operators. We also consider solving intra zonal bottlenecks 'directly', through the area prices and 'indirectly' by 'moving' internal capacity constraints to the borders between price areas. The examples illustrate that this 'indirect' congestion management may be costly, and result in larger price differences than necessary. (author)

[en] This paper summarises the historical development of three Nordic nuclear research centres, and discusses their role in technology transfer and international collaboration. It examines the extent to which they have adapted to the changing environment for nuclear power or whether the society they serve has accepted them as established institutions with a continuing role.(author) 24 refs

[en] Although the Nordic countries were among the first to develop competition in the electricity industry, it took a long time to make retail competition work. In Norway and Sweden a considerable number of households are actively using the market but very few households are active in Finland and Denmark. One problem has been institutional barriers involving metering, limited unbundling of distribution and supply, and limited access to reliable information on contracts and prices. (author)

[en] This note investigates price differentials between electricity forwards and portfolios of short-term futures with identical delivery periods at the Nordic Power Exchange (Nord Pool). Since both contracts are traded at the same exchange, there is no influence of, for example, different market microstructure and default risk when examining the effect of the marking-to-market of futures on the price differential. Although the prices of the futures portfolios are, on average, below the corresponding forward prices, these price differentials are, on average, not statistically significant and not economically significant when taking transaction costs into account. Given the characteristics of the electricity contracts under observation, this is consistent with the predictions of the model and indicates efficient pricing in the Nord Pool forward market in contrast to previous results. (author)

[en] The Norwegian University of Life Sciences (NMBU) started global radiation (G) measurements in 1949. PAR measurements started in 1978 as part of a Nordic project. The project terminated in 1981, but the measurements continued at NMBU. We have used the data from the Nordic project’s seven stations and the long time series from NMBU to investigate the limitations of using the relative flux density method for the estimation of PAR from G. The yearly mean value of the relative flux density PAR/G at NMBU is 0.48 with a standard deviation of 0.02. The monthly mean values of PAR/G show a seasonal variation, with its maximum (0.50) in late summer and minimum in the winter months (0.45). The seasonal variation corresponds to 15% difference in relative cloud cover. Data from the original Nordic project gave the opportunity to investigate the usability of the relative flux density method in the Nordic area. The flux ratio for July was generally larger than the ratio for September or October, even though the differences are small and not statistically significant. In trying to explain this, one obvious candidate is the cloud cover. In the lack of cloud data, time records of global radiation were used to select fair weather and overcast days. For all stations, fair days show higher flux ratios and overcast days show lower flux ratios. Neglect of cloud cover may lead to an error in the calculation of PAR from the simple formula PAR = constant G of the order of 10%.

No abstract available

[en] What measures are needed to protect customers when a utility market is first opened to competition? In the UK, residential (domestic) customers must be able to terminate energy contracts at 28 days' notice. This rule was introduced as a transitional protection for customers and for competition. However, the regulatory justification for the rule seems to have evolved over time. Removing the rule could have a number of advantages, including the development of fixed-price fixed-term contracts. The advantages of retaining the rule are questionable. In other retail sectors there is no regulatory concern or requirement of this kind. UK electricity suppliers have begun to offer capped prices for specified periods of time, suggesting that there is a growing customer demand for this. Fixed-price fixed-term contracts are a common form of competition in Scandinavia. The 28 day rule no longer seems necessary to protect customers and is more likely to distort than to protect competition. In retrospect, it would have been preferable not to introduce the rule in the first place. (author)

[en] In this paper we propose a three-factor spike model that accounts for different speeds of mean reversion between normal and spiky shocks in the Scandinavian power market. In this model both short and long-run factors are unobservable and are hence estimated as latent variables using the Kalman filter. The proposed model has several advantages. First, it seems to capture in a parsimonious way the most important risks that practitioners face in the market, such as spike risk, short-term risk and long-term risk. Second, it explains the seasonal risk premium observed in the market and improves the fit between theoretical and observed forward prices, particularly for long-dated forward contracts. Finally, closed-form solutions for forward contracts, derived from the model, are consistent with the fact that the correlation between contracts of different maturities is imperfect. The resulting model is very promising, providing a very useful policy analysis and financial engineering tool to market participants for risk management and derivative pricing particularly for long-dated contracts. (author)