Deregulation of electricity markets—The Norwegian experience

Abstract

Abstract:\nIn this paper, we describe the approach to, and experience of, the deregulation and liberalisation of\nthe Norwegian electricity sector from 1991. The Norwegian electricity market was subsequently\nintegrated with the Swedish, Finnish and Danish markets to become the Nordic electricity market: the\nfirst common, integrated, intercountry electric power market in the world. We discuss the background\nto electricity market reform, the analytical and legal foundations for reform, and the chosen market\nand regulatory design. We find that the market has performed well in terms of economic efficiency\nand market functionality, even when exposed to severe supply shocks because of water shortages\nfor a power system that relies heavily on hydropower. However, we also identify issues and\nchallenges that must be addressed to improve the performance of the Nordic electricity market and\nits regulatory system.\nKeywords: Deregulation, Market design, Electricity markets