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As the year draws to an end, we want to wish all of our clients, associates and friends a joyous festive season and a successful start to 2023.

2022 was an exciting year for ECA. We were delighted to go back to a normal working mode meeting clients, holding workshops and engaging with stakeholders face to face where possible.

We have continued growing our economic regulation services by providing important (and at times intensive) support to several regulators through their electricity and gas price controls. Our investment planning team has further improved the suite of electricity market and system models we have developed through our least cost generation, integrated resource planning and net zero investment strategy engagements. We have also seen great interest from clients in electricity market design questions and in particular pricing and regulation approaches for flexible supply assets to support the energy transition.

We have been excited to add a few new pins to ECA’s global experience map (including the beautiful island nations of Iceland, the Seychelles and Vanuatu), complementing the continuation and deepening of our engagements and relationships in markets we know well, such as Greece, Indonesia and Kenya.

All this means that our team continues to grow steadily and that our ‘ECA weeks’ in summer and winter get ever busier.

2023 is unlikely to be a ‘calm and steady’ one. Global energy market upheavals will continue raising major regulatory and policy questions on security of supply, affordability and decarbonisation.

We very much look forward continuing to support our clients and working with our friends and associates in finding answers to these questions and delivering innovative, practical and robust solutions to the exciting challenges facing the sector.

From all of us at ECA, happy festive season and a very happy new year.

Following our 2021 Insight on inflation of the Regulatory Asset Base (RAB) and Weighted Average Cost of Capital (WACC), in this Insight we shed light on the treatment of working capital and work-in-progress, which are seemingly esoteric issues that can have a significant impact on tariffs and a regulated company’s ability to cover its costs.

Please read the full Insight here.

In the first of our ECA Insight – deep dive series, Iro Sala and Frederik Beelitz look at policy responses to the unprecedented energy price spikes in Europe. We consider both, market re-design proposals and support mechanisms, to provide an overview of different approaches in tackling high prices.

Although there are plenty of factors that have resulted in a constrained power market, eg low hydro output, French nuclear shutdowns, the current situation is primarily a gas supply crisis bleeding into the power market. The policy focus should therefore be on addressing gas shortages and rebalancing Europe’s gas supply mix away from Russian gas.

In the power sector, there is a danger of hastily proposed electricity market reforms being mainly targeted at shielding consumers from high prices. These reforms may be detrimental to long-term objectives we want to see, namely providing incentives for much needed investments in low carbon, flexible and reliable supply. Any power market reform proposal should therefore be designed – not just by the guiding principle of affordability – but by considering the incentives it sets for longer term investment requirements.

You can read the full Insight here.

In ECA’s recent Insight, Robert Barnett looks at market designs being proposed to cover the case where increased penetration of near-zero variable cost generation from renewables and nuclear leads to a collapse in prices to zero at times. This insight considers what is actually happening to prices and why the solutions being proposed seem not to consider the economics of price signals and efficiency incentives and so do not provide advantages for consumers and generators compared to the status quo. The solutions seem to offer a halfway house approach that is likely to have the opposite effects to what was intended. Read the full Insight here.

ECA has been contracted by the European Bank for Reconstruction and Development (EBRD) to scope, recommend and help implement appropriate performance-based incentives (PBIs) for electricity network firms in North Macedonia. Work will cover “traditional” PBI areas such as interruptions but also focus on how decarbonisation objectives may be supported.

Finally! For the first time in 3 years, we were able to restart our tradition of the ‘ECA Summer week’.  It’s a week whenl ECA colleagues from around the world get together in London for fun, games, the occasional tipple and interesting discussions. Last week we orienteered our way through the East Sussex countryside (thanks to Arena Events for an amazing day), had the pleasure of tasting British wines c/o Balfour Winery and celebrated ECA’s 25th anniversary at The Union Club. Thanks to all staff at ECA for a fantastic week.

Please see our LinkedIn page for more photos.

Peter Robinson recently acted as Webinar Moderator for a panel discussion on ‘Electrification Challenges in Sub-Saharan Africa’, the first in a series of webinars hosted by ERRA. This first webinar discussed the status quo and ways forward for the fundamental development of electricity access in Sub-Saharan regions. Speakers presented current statistics and elaborated on ongoing challenges and needs to foster the process, and the event also aimed to shed light on existing projects that enhance regional regulatory cooperation. The full recording of the panel discussion can be heard HERE and the next will take place in Autumn 2022.

We took the opportunity to have a complete office makeover whilst our staff had to work from home. Our refurbishment includes bright new meeting rooms, pristine desk spaces, a large break-out space, shiny new kitchen, and an energy efficient heat pump system. A sleek and refreshed look for the London office and a big thumbs up from all of the team here at ECA.

This month we are pleased to welcome Ben Gregory to ECA. He graduated in BA(Hons) Politics, Philosophy and Economics from the University of Oxford in 2020, then went on to complete a master’s degree in MSc Environmental Economics and Climate Change at the London School of Economics. Prior to starting at ECA, Ben spent 6 months working for Greenback Recycling Technologies, where he supported the planning and development of their carbon accounting system. He will contribute to the team with data analysis; a big welcome to the ECA team Ben!