Sustainable Energy Transition

Policy reports, book chapters

A market design for efficient investment in generation capacity

The electricity market in Sweden faces major challenges in the coming years. Population growth, electrification of transport and industrial processes and the establishment of new electricity-intensive industries, especially data centers, are expected to drive a large increase in electricity consumption. A large part of production is approaching its technical life span and will need to be renewed or replaced with other production over the next 20 years.

This report addresses the question of how to ensure sufficient capacity to achieve a reliable supply of electricity at reasonable prices in the future electricity market. The report focuses on the incentives to invest in new electricity generation, identifies strengths and weaknesses of the current market design and makes suggestions for improvements with the purpose of increasing efficiency.

Download Incitamenten att investera i produktion på elmarknaden by Pär Holmberg and Thomas Tangerås.

How to create an integrated electricity market?

The world’s first multinational electricity market was formed with the creation of the Nordic power exchange, Nord Pool. Lars Persson and Thomas Tangerås analyze the incentives to undertake transmission network investment in the context of the liberalized Nordic electricity market. Welfare improving investment in a multinational electricity market requires accounting for the cross-border effects of capacity expansion. The authors propose methods to increase voluntary cooperation on international infrastructure projects, with an aim to increase aggregate efficiency and achieve equitable distribution of the gains from market integration.

Download: Transmission network investment across national borders: The liberalized Nordic electricity market by Lars Persson and Thomas Tangerås, in Mohammad Reza Hesamzadeh, Juan Rosellón and Ingo Vogelsang (eds.):Transmission Network Investment in Liberalized Power Markets, Springer Lecture Notes in Energy, Vol. 79, 2020

Energy markets, ownership and the climate

This book analyzes the effect of public versus private ownership in the energy market on the incentives to exercise market power, invest in quality improvements and R&D and to expand the business. It specifically considers the marginal effects of environmental investment by municipal energy companies. A final chapter conducts an empirical study of ownership effects on the environmental performance of CHP plants.

Order: Energimarknaden, ägandet och klimatet by Tommy Lundgren, Jesper Stage, Thomas Tangerås and Björn Carlén, SNS Förlag, 2013

Proposals to reduce price differentials in the Swedish electricity spot market

The Swedish Ministry of Enterprises has investigated proposals to reduce price differentials between Southern Sweden and other price areas in Sweden. We emphasize that the spot market can work efficiently only if prices are allowed to appropriately reflect the real bottlenecks in the electricity system.

Download: Remissvar på "Analys av möjliga åtgärder för att dämpa prisområdesproblematiken i Sydsverige" by Sven-Olof Fridolfsson, Pär Holmberg and Thomas Tangerås, March, 2013

An integrated electricity market improves competitiveness of the EU internal market

We analyze the pros and cons of an intergrated European electricity market. Our analysis shows that Europe in general and its consumers in particular benefit from integration through lower and more stable electricity prices. But these benefits will be realized only to the extent electricity prices reflect physical bottlenecks in the electricity system and competition in the electricity transmission network improves. Investment efficiency improves with a centralized regulatory authority at the EU level, provided the political influence of the individual member states is balanced.

Download: En gemensam elmarknad stärker EU:s konkurrenskraft by Pär Holmbeg and Thomas Tangerås, in Antonina Bakardjieva Engelbrekt, Lars Oxelheim and Thomas Persson (eds.): Ett konkurrenskraftigt EU till rätt pris - Europaperspektiv 2013, Santérus Förlag, 2013

Competition  and price formation

This report describes bidding strategies in the electricity spot market and how competition and bidding rules shape those strategies. The report discusses how to increase the performance of electricity markets. Research has shown spot market performance to improve whenever producers contract a larger share of their production in the forward market, or if they are vertically integrated into the retail market. Efficiency also improves with the creation of smaller bid areas.

Download: Konkurrens och prisbildning, by Pär Holmberg, in Mats Bergstrand (ed.): Utfryst eller upplyst - en antalogi om elmarknaden, 2012

The investment incentives in the Swedish electricity market

The question of how to achieve efficient investments is of fundamental importance to Swedish electricity supply, not least because nuclear power represents a large share of production and the current reactors are ageing. The main message of this report is that a larger number of market participants and less centralization would improve the conditions for socially beneficial investments. We make four recommendations: (i) allow generating companies not currently active in the market the possibility to bid for new nuclear power; (ii) abolish the law which grants the Swedish transmission system operator, Svenska Kraftnät, monopoly rights over international interconnections; (iii) force electricity retailers to offer real-time prices; and (iv) maintain municipal veto rights over new investments and allow the municipalities to charge investment fees.

Download: Investeringar på elmarknaden - fyra förslag för förbättrad funktion, Rapport till Expertgruppen för miljöstudier 2011:5 (with English summary) by Sven-Olof Fridolfsson and Thomas Tangerås

Increased transparency in electricity markets

The European Regulator's Group for Electricity and Gas (ERGEG) is in the process of devising guidelines for the transparency of the electricity market. We propose that (i) individual bidding curves as well as financial contract positions be published - possibly with a lag; (ii) data be stored for at least ten years; (iii) the transparency rules apply to both day-ahead and real-time markets.

Download: Comments on ERGEG Transparency Guidelines, by Sven-Olof Fridolfsson, Pär Holmberg and Thomas Tangerås, October, 2010

International cooperation

Visiting researchers

Collaborating with others is essential for IFN as a research institute. Our researchers co-author articles with colleagues from other institutes, and many also teach at various universities and colleges.

As part of our extensive program of guest researchers, leading international researchers visit the institute. The visitors present and pursue their research as well as interact and cooperate with researchers at IFN.

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