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Water on Fire: Gains from Electricity Trade

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  • Nils‐Henrik M. Von Der Fehr
  • Lise Sandsbråten

Abstract

In light of the ongoing liberalization of electricity trade in the Nordic countries, and perhaps in Northern Europe, we argue that gains from electricity trade may be different from those traditionally associated with comparative advantages and economies of scale. In particular, we consider gains arising from the exploitation of technological complementarities between hydro and thermal systems. Our theoretical framework highlights essential features of the two systems and allows for an analysis of effects of trade. We 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.

Suggested Citation

  • Nils‐Henrik M. Von Der Fehr & Lise Sandsbråten, 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:281-297
    DOI: 10.1111/1467-9442.00063
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    Cited by:

    1. Jan Abrell & Sebastian Rausch & Clemens Streitberger, 2022. "The Economic and Climate Value of Flexibility in Green Energy Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(2), pages 289-312, October.
    2. Abdessalem Abbassi & Ahlem Dakhlaoui & Nihed Ben Khalifa, 2023. "Risk Aversion and Hydro-energy Reservoirs Management under Monopolistic and Oligopolistic Industrial Structures," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 581-590, November.
    3. Stefan Ambec & Joseph A. Doucet, 2003. "Decentralizing hydro power production," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(3), pages 587-607, August.
    4. Yang, Yuting, 2020. "Electricity Interconnection with Intermittent Renewables," TSE Working Papers 20-1075, Toulouse School of Economics (TSE).

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