Why has the Nordic electricity market worked so well?

The purpose of this paper is to explore why the Nordic electricity market has worked quite well and to consider to what extent the Nordic experiences are relevant for other countries. In particular, we investigate causes as to why the Nordic market managed to withstand the supply shock in 2002–2003. A comparison is made with the California case, and the potential problem of market power abuse is investigated in particular. The relatively successful electricity market reform in the Nordic countries seems to be attributable to the followings: a simple but sound market design, a successful dilution of market power, a strong political support for deregulation and voluntary, informal commitment to public service by the power industry.