Presented By

Mahiraj Singh Rawat

Roll No : 09M204
Power System (M.Tech)
 INTRODUCTION
 Norway was one of the first countries in Europe to deregulate it's
electricity market, with the adoption of the Energy Act in 1991.

 The Norwegian electricity market was subsequently integrated with the

Swedish, Finnish and Danish markets to become the Nordic electricity
market: the first common, integrated, intercountry electric power market in
the world.

 Electricity generation in Norway is almost entirely from hydroelectric

power plants. Of the total production in 2005 of 137.8 TWh, 136 TWh
was from hydroelectric plants, 860 GWh was from thermal power, and
499 GWh was wind generated.

 In 2005 the total consumption was 125.8 TWh .

 Norway was the first country to generate electricity commercially using

sea- bed tidal power . A 300 kilowatt prototype underwater turbine
started generation in the Kvalsund, south of Hammerfest,on November
13, 2003 .
 INTRODUCTION
 The Transmission network which was formerly owned by Statkraft , is now
owned and operated by Statnett ,Which is also ISO for the regulated market.

 Norway has one of the highest rates of per-capita consumption of electricity in

the world.

 In December 2001, state-owned Norwegian electricity company Statkraft

purchased independent electricity company Trondheim Energiverk for $483 million.

 6 May 2008, the Norwegian and Dutch electricity grids are interconnected
by NorNed submarine high-voltage (450 kilovolts) cable with a capacity of
700 megawatts.
 Generation Capacity in Norway

Percentage of Electricity generation in 2006

S.No Sources Percentage (%)
1 Coal 0.1 %
2 Oil 0.0 %
3 Natural Gas 0.4 %
4 Bio mass 0.3 %
5 Waste 0.1 %
6 Nuclear 0.0 %
7 Hydro 98.5 %
8 Wind 0.6 %
9 Other 0.1 %
Generation Capacity in Norway
Electricity Installed Capacity in Norway
Electricity Net Generation in Norway
Electricity Consumption in Norway
 The Background to Deregulation
 The main motivation for electricity market reform was an increasing dissatisfaction with the
performance of the sector in terms of economic efficiency in resource utilization, particularly
with regard to investment behavior, which caused capacity to exceed demand considerably.

 During the regulation period, all investments in production and transmission capacity
were subject to cost reimbursement. This was implemented either through direct market
prices, cross-subsidization between utilities, or direct public subsidies.

 There was no direct link between market prices (since there was no functioning market)
and investment or between market prices and operating cost efficiency. The government
when determining its budget, set the following year’s prices in the electricity market. The
government equated prices to average costs until 1979, from when it set price equal to
long-run marginal costs (LRMC).

 In 1979, the government, in a green paper, St. meld nr 54 (1979–1980) decided that the
electricity price level in the long run should reflect long-run marginal cost. The escalation
period continued until 1985.
 The Background of Deregulation
Inefficiencies in production .

There was no systematic evaluation of potential inefficiencies in production before

deregulation of the electricity market .

During the late 1980s, between 5 and 6 per cent of the inflow of water to the reservoirs
was spilt annually (even in normal inflow years).

Production capacity in state-owned companies has not increased following increases in

marginal cost .

The power price has never been high enough to cover the marginal cost of expansion.

The expansion of capacity has led to excessive investments.

 The Background of Deregulation
Inefficiencies in transmission and distribution.

Kittelsen (1993, 1994) and Førsund and Kittelsen (1998) used production frontier analysis
to test for inefficiencies in network distribution companies. They estimated total annual
efficiency losses to be between 1.1 and 1.8 billion Norwegian kroner (approximately 300
million USD). This amount constitutes 25 per cent of the resources used for distribution per
year.

Inefficiencies in the market .

Bye and Strøm (1987) did a backward calculation of prices at the power plant (a
homogenous good) from statistics on purchaser prices (including transmission and taxes)
for different consumers.
 The Background of Deregulation
Power prices—net of taxes and transmission fees. Current prices. øre (kWh)

In 2004, 1USD=6.7 NOK; i.e. 20 øre/kWh= 3 cents/kWh

The Background of Deregulation
 Scope for Improvement
Nordic electric power market model was suggested as a potential benchmark for market
organization and the efficient functioning of electric power markets.

 Market dominance and market power.

 Design and operation of investment markets.

 Network integration and system operation.

 Integration of the Nordic market with the European electricity market at large.
 Conclusion
 During the regulation period, investment in production and transmission capacity in the electricity
market was subject to cost reimbursement, through either direct prices in the market, cross
subsidization between utilities or direct public subsidies.

 Several studies report substantial inefficiencies in the production, transmission, distribution and
market distribution of electricity.

 The new deregulated market was intended to build on the principles applied in an already existing
spot market for interruptible power.

 Following deregulation, electricity prices fell, prices between consumer groups became more
equal, investment declined in both production and transmission capacity and over time, the return
on capital increased.
 References
 Loi Lei Lai, Power System Restructuring and Deregulation,
John Wiley & Sons, Ltd., 2001, pp.68-70 .
THANK YOU