Browsing by Author "Väliviita, Akseli"

In this master's thesis, I analyze the presence and implications of market power in the Nordic market for electricity. I estimate a structural oligopoly model using aggregate bidding data from the Nordic spot market, Elspot, as well as reduced-form models using aggregate bidding data and data on reservoir water levels of hydropower plants. These models shed light on noncompetitive behaviour in the wholesale market for electricity, and suggest that dominant hydropower firms withhold production when price elasticity of demand is relatively high. Data on the reservoir water level of hydropower plants can be used to estimate how market power and the price elasticity of demand influence production decisions. I collect this data from the NO5 pricing zone in Western Norway for the years 2020-2023, when the European energy market was in crisis. I propose an algorithm to estimate reservoir water levels that is based on publicly available satellite imagery, that I use to collect data from over 300 reservoirs. Using this data, I analyze the production decisions of hydropower producers and how they are influenced by their size, market power and elasticity of demand. I also estimate a structural model, in which market power is analyzed using aggregate bidding data as well as other market data. To estimate this model, I replicate the price-clearing algorithm of the Nordic day-ahead electricity market, the Elspot. I also collect data on wind power production and demand forecasts on the ENTSO-E transparency platform. I find evidence of market power for the sample years of 2020-2023. The results also suggest that market power did not have the same kind of influence in the years 2022 and 2023 as it did in 2020 and 2021, or that the structural model was unable to identify market power in these years.