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Water on Fire: Gains from Electricity Trade

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

Abstract

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.

Suggested Citation

  • von der Fehr, Nils-Henrik M & Sandsbraten, Lise, 1997. " Water on Fire: Gains from Electricity Trade," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 281-297, June.
  • Handle: RePEc:bla:scandj:v:99:y:1997:i:2:p:281-97
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    Citations

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    Cited by:

    1. Abrell, Jan & Rausch, Sebastian, 2016. "Cross-country electricity trade, renewable energy and European transmission infrastructure policy," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 87-113.
    2. DAKHLAOUI Ahlem & MOREAUX Michel, 2007. "Trade-off between Hydro and Thermal Power Generation under Uncertainty," LERNA Working Papers 07.13.234, LERNA, University of Toulouse.
    3. Mulder, Peter & de Groot, Henri L. F. & Hofkes, Marjan W., 2003. "Explaining slow diffusion of energy-saving technologies; a vintage model with returns to diversity and learning-by-using," Resource and Energy Economics, Elsevier, vol. 25(1), pages 105-126, February.
    4. Finn Roar Aune & Rolf Golombek & Sverre Kittelsen & Knut Einar Rosendahl, 2004. "Liberalizing the energy markets of Western Europe - a computable equilibrium model approach," Applied Economics, Taylor & Francis Journals, vol. 36(19), pages 2137-2149.
    5. Haddad, Mohamed S., 2011. "Capacity choice and water management in hydroelectricity systems," Energy Economics, Elsevier, vol. 33(2), pages 168-177, March.
    6. Petter Vegard Hansen, 2009. "Inflow Uncertainty in Hydropower Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 189-207, March.
    7. Pfeiffer, Birte & Mulder, Peter, 2013. "Explaining the diffusion of renewable energy technology in developing countries," Energy Economics, Elsevier, vol. 40(C), pages 285-296.
    8. Billette de Villemeur, Etienne & Pineau, Pierre-Olivier, 2012. "Regulation and electricity market integration: When trade introduces inefficiencies," Energy Economics, Elsevier, vol. 34(2), pages 529-535.
    9. DAKHLAOUI Ahlem, 2007. "Dynamic games in the wholesale electricity market," LERNA Working Papers 07.21.242, LERNA, University of Toulouse.
    10. Førsund, Finn R., 2009. "Energy in a Bathtub: Electricity Trade between Countries with Different Generation Technologies," Memorandum 17/2009, Oslo University, Department of Economics.

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