So far so good: experiences and challenges in the Scandinavian power market

Abstract

The Californian power market crisis in 2001 and power blackouts in New York and Italy in 2003 have questioned the robustness of market-based power systems. Electricity reforms in Scandinavia have so far been a success story, and represent the only truly international power market. This article explores the experience and the future of the Scandinavian electricity market, using a scenario analysis to explore what is required to extend the present success story. It is evident that the Scandinavian market will require new investments if a price and supply crisis is to be avoided. Low prices, security of supply, and environmental concerns will remain key energy policy aims, but the coming capacity crunch is likely to rise to the top of the agenda and increase the risk of heavy handed political intervention. Power sector regulation is getting ever more complex and consumes increasing resources, and the scope of regulation is growing. The process of restructuring is likely to reduce the number of actors in all parts of the supply chain, and the dominant role of public ownership may be undermined as the region increasingly integrates into continental Europe.