HYDROELECTRIC RENT AND PRECIPITATION VARIABILITY - THE CASE OF NORWAY

Norway is about to reorganize its electricity production sector from a predominantly administered one to one which is based on market prices and principles of efficiency. The objective of this paper is to model the energy sector and to measure the size of hydro rent before and af ter, the reorganization. We construct a regionally diversified and int egrated equilibrium model of production, transmission, and distributio n of hydroelectricity. Particular attention, is paid to the role of pr ecipitation variability for the size and regional variation of hydro r ent. We consider alternative routes for assessing the size of hydro re nt in a long-run perspective.