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Water on Fire: Gains from Electricity Trade

  • von der Fehr, Nils-Henrik M
  • Sandsbraten, Lise

In light of the ongoing liberalization of electricity in the Nordic countries, and perhaps in Northern Europe, the authors argue that gains from electricity trade may be different from those traditionally associated with comparative advantages and economies of scale. In particular, they consider gains arising from the exploitation of technological complementarities between hydro and thermal systems. The authors' theoretical framework highlights essential features of the two systems and allows for an analysis of effects of trade. They study three trading regimes, which may arise either endogenously or because of trade regulations: day-night power exchange, seasonal energy banking and unbalanced trade. The analysis suggests that gradual trade liberalization may be costly. Copyright 1997 by The editors of the Scandinavian Journal of Economics.

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 99 (1997)
Issue (Month): 2 (June)
Pages: 281-97

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Handle: RePEc:bla:scandj:v:99:y:1997:i:2:p:281-97
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