[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] The Board of the Nordic Nuclear Safety Research (NKS) decided in the autumn 2000 to contract out two separate evaluations on the NKS Programme 1998-2001. Martin Oeiby from the NorwegiOe Radiation Protection Authority was requested to perform an evaluation on overall administration of the NKS Programme. Two experts conducted the scientific evaluation. Gustaf Lowenhielm from the Swedish Nuclear Power Inspectorate was requested to assess projects on nuclear safety issues and waste management, and Raimo Mustonen from the Finnish Radiation and Nuclear Safety Authority to evaluate projects on radiation protection and nuclear emergency preparedness. This report deals with the scientific evaluation. The report contains brief review on the history of the Nordic nuclear and radiation safety co-operation and on the development of Programme for 1998-2001. Brief summaries of activities in all the projects are given, together with the main results of the projects. The evaluators give their subjective assessments on the success and effectiveness of the projects based on the evaluation criteria agreed With the NKS Board in the beginning of work. Also some general recommendations for the future co-operation are given. (au)

[en] The opening of Nord Pool in 1996 seriously constrained the power companies' ability to exercise market power within their national borders. Currently there is an integration process going on among the power companies in the Nord Pool area. It manifest itself in terms of take-over and reciprocal acquisition of shares in the power companies - nationally and abroad. This process may undo what the introduction of the common power market achieved in curtailing market power. The aim of this paper is to investigate the effects on market power of increased cross- ownership in the Nordic power market. (au)

[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] NKS research work during the years 2002-2005 and its results have been evaluated against a set of criteria defined by the NKS Board. The evaluation encompassed the NKS-R (reactor safety) and NKS-B (emergency preparedness) programs and was conducted by two persons per program. The mode of work of the two evaluation teams was adapted to the special conditions of the program at hand, one being aimed more at the nuclear industry and the other at a more academic surrounding; in both cases, however, with great involvement of relevant national authorities. The findings of the evaluators are presented in this report. Financing and participating organizations, end users, deliverables, quality aspects, cost-benefit issues, time schedules, budgets and related issues are discussed. Finally, the sections on NKS-R and NKS-B, respectively, include conclusions and recommendations for future NKS work. (au)

[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] Demand-side flexibility and demand response to high prices are prerequisites for the proper functioning of the Nordic power market. If the consumers are unwilling to respond to high prices, the market may fail the clearing, and this may result in unwanted forced demand disconnections. Being the TSO of Western Denmark, Eltra is responsible of both security of supply and the design of the power market within its area. On this basis, Eltra has developed a new mathematical model tool for analysing the Nordic wholesale market. The model is named MARS (MARket Simulation). The model is able to handle hydropower and thermal production, nuclear power and wind power. Production, demand and exchanges modelled on an hourly basis are new important features of the model. The model uses the same principles as Nord Pool (The Nordic Power Exchange), including the division of the Nordic countries into price areas. On the demand side, price elasticity is taken into account and described by a Cobb-Douglas function. Apart from simulating perfect competition markets, particular attention has been given to modelling imperfect market conditions, i.e. exercise of market power on the supply side. Market power is simulated by using game theory, including the Nash equilibrium concept. The paper gives a short description of the MARS model. Besides, focus is on the application of the model in order to illustrate the importance of demand response in the Nordic market. Simulations with different values of demand elasticity are compared. Calculations are carried out for perfect competition and for the situation in which market power is exercised by the large power producers in the Nordic countries (oligopoly). (au)

[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%.