Imperfect Competition in the Nordic Electricity Markets

Abstract:

Imperfect competition in a liberalized Nordic electricity market is simulated in a partial equilibrium model with elaborated demand and supply systems, the latter also including bi-production of district heating. It is found that Cournot competition can facilitate surprisingly large excess profits, even when a competitive fringe is allowed. The results indicate that a widely used concentration measure, the Hirshman-Herfindahl index, is a poor guide for revealing market power in electricity markets. This is in accordance with the findings of other recent research.