Causality, Efficiency, and Technical Change in Productivity Performance : Empirical Evidence from Distribution System Operators in Northern Europe

The European energy sector, particularly the market for electricity distribution, is entering a period of major transformation. Moving from a historically stable setting focused on grid maintenance and harmonization, the sector now faces a predicted unprecedented demand growth driven by electrification and new energy-intensive industries. Meeting this challenge appears to require major investments in grid infrastructure. Given the monopolistic nature of electricity distribution system operators (DSOs), it is essential to ensure that such investments are efficiently employed. Moreover, as secure and affordable electricity supply underpins economic competitiveness and social welfare, evaluating regulatory effectiveness and addressing information asymmetries between DSOs and regulators remain vital. This thesis contributes to the understanding of DSO performance across Denmark, Sweden, Norway, Finland, and Iceland, by encompassing five distinct papers. The first paper, Rasmussen (2025a), describes the data collection and harmonization process for an empirical cross-country dataset used throughout the subsequent papers. The second paper, Rasmussen (2025b), identifies both persistent structural (exogenous) and transient (endogenous) cost inefficiencies across DSOs in all five countries. The third paper, Qasim et al. (2026), shows that ownership structures vary widely but that shifting ownership does not consistently improve efficiency, though it may affect strategic and operational priorities. The fourth paper, Rasmussen et al. (2026), finds that many DSOs operate below optimal scale size, suggesting unrealized economies of scale, which could be realized through merger encouragement. Finally, the fifth paper, Rasmussen (2025c), shows that Danish revenue regulation appears to have modestly reduced overall DSO costs but has not consistently improved cost efficiency within the regulatory time period examined. Together, these papers offer three key policy insights: 1) Cost inefficiencies persist, suggesting that existing revenue or price cap mechanisms, particularly in Denmark, may provide insufficient motivation for sustained efficiency gains. However, when imposed, such frameworks should also account for structural factors beyond DSOs’ control. 2) Further mergers could improve market efficiency, but incentives must avoid promoting over-consolidation beyond optimal scale size. 3) Since ownership type alone does not appear as a driver of efficiency, regulators should focus on operational performance rather than ownership form.