Demand, generation and price in the Norwegian market for electric power

We analyse the simultaneous determination of supply, demand and price in th e competitive Norwegian electricity market. Deregulated in 1991, this marke t is pretty mature and it offers numerous data required carrying out an int eresting study. Stochastic and seasonal water inflow, water storage possibi lities and demand variations make this market interesting both from a theor etical and empirical view. We establish a small supply-demand model of the Norwegian electricity market. The model is estimated using weekly data from 1994 to 1995. Data for 1996 are used for post-sample examination of the mo del. Unexpected inflow, snow and temperature conditions explain a large par t of the variation in the electricity generation, demand and price. Within and post-sample simulation of the estimated model reproduce demand and pric e patterns considerably well. (C) 2001 Elsevier Science B.V. All rights res erved.