The Nordic market for wholesale electricity is inherently prone to market manipulation. One special characteristic of the electricity market is that even firms with relatively small market shares may exert market power unilaterally in certain periods. This is due to the mix of the non-storability of electricity and capacity constraints in the production and transmission of electricity

nugget in Chapter Four.

In addition to achieving the objectives outlined by DoDo of profit pooling and sharing among the physical market players, markets should be configured such that trading intermediaries (ie purely financial players) cannot contribute to physical market volatility.

I believe that the market structure I outlined in my recent (August/Sepetmebr 2007) articles in "Energy Risk" achieves both the former - through a "Pooling" mechanism, and the latter by simply and effectively separating the security of price from the security of supply in a new way ("unitisation" of electricity).


"Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky