A Cross-country Comparison
Edited by Jean-Michael Glachant and Dominique Finon
Ole Jess Olsen and Klaus Skytte INTRODUCTION Northern Europe provides an interesting case study with respect to the development of competition in the electricity supply industry. Transmission lines and established rules for exchanging power have long since integrated the electricity utilities in the four Nordic countries, Denmark, Finland, Norway and Sweden, facilitating beneﬁcial exchanges between hydropower and thermal power. Finland, Norway and Sweden were among the ﬁrst European countries to implement radical national reforms and to institutionalize cross-border trade. The focus of this chapter is on the development of a common electricity market in Northern Europe. We will also include Germany in our study, as it is becoming increasingly connected to, and integrated with, the power market in the four Nordic countries.1 Increased cross-border competition is an obvious means to improve competition. However, the persistence of market imperfections can create obstacles for the achievement of eﬃcient competition. Such market imperfections are likely to be ampliﬁed by diﬀerent national traditions and diﬀerent institutional choices for the electricity supply industry. The chapter starts with a short introduction to the electricity market in the ﬁve countries, and the economic and environmental advantages to be gained from further integration and cross-border competition. In the next section, the main features of the national reforms are presented. We provide more details on Denmark as the other four countries are discussed in other chapters. Then follows a discussion of diﬀerent types of market power that can be harmful to competition and...
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