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Market Power in the Norwegian Electricity Market: Are the Transmission Bottlenecks Truly Exogenous?

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  • Faisal Mehmood Mirza
  • Olvar Bergland

Abstract

In this paper, we test whether producers in the southern Norway price zone utilize information on available transmission capacity to induce transmission congestion in their price zone to exercise market power or not. Endogeneity results for import congestion suggest that congestion is endogenous during late night and morning hours implying that producers in southern Norway restrict their output to induce transmission congestion into their price zone. We find an average markup of about 19.5 percent above the marginal cost during these hours. These results point that NordPool’s policy of making transmission capacity information public to ensure market transparency is not welfare maximizing as strategic producers can use this information to anticipate and induce transmission congestion into their price zone for driving prices away from the competitive levels.

Suggested Citation

  • Faisal Mehmood Mirza & Olvar Bergland, 2015. "Market Power in the Norwegian Electricity Market: Are the Transmission Bottlenecks Truly Exogenous?," The Energy Journal, , vol. 36(4), pages 313-330, October.
    • Handle: RePEc:sae:enejou:v:36:y:2015:i:4:p:313-330
    DOI: 10.5547/01956574.36.4.fmir
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    References listed on IDEAS

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    Cited by:

    1. Brekke, Kurt R. & Straume, Odd Rune & Sørgard, Lars, 2025. "Trade, renewable energy, and market power in power markets," Energy Economics, Elsevier, vol. 151(C).

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    • F0 - International Economics - - General

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