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EECI Industry Economics White Paper Series
26 August 2021
“As Chair of NERA’s Global Energy, Environment, Communications, and Infrastructure Practice, it is my pleasure to introduce the Industry Economics White Paper Series, which highlights how NERA leverages our in-depth industry expertise to provide robust and uniquely rigorous economic analysis. Our experts draw on decades of experience combined with specialized knowledge and deep expertise in regulated industries and competitive markets.” — NERA Managing Director Dr. Christian Dippon.
Economics of Air Traffic Management in the Drone Era
NERA Associate Director Dr. Hector Lopez and Managing Director Richard Marsden consider the economic trade-offs of four models of flight right allocation and argue that none on their own will be able to ensure the efficient allocation of flight rights in the long run. They propose a hybrid framework that provides for both the short- and long-term allocation of flight rights using a combination of real-time and forward markets for airspace. The real-time market would manage congestion whenever it arises, and the forward market would provide certainty of access to support long-term investments.
NERA Managing Director Dr. Jeff D. Makholm and Associate Director Dr. Laura T. W. Olive astutely examine the history of gas markets in the US and offer keen insight into how the experience differs from that in Europe. They note that we should embrace the differences and support an industry that has aided significant carbon reductions without any particular overarching policy.
Setting Water Permit Durations: The Long and Short of It
NERA Associate Director Kevin Counsell discusses factors that should be considered in setting water permit durations. Mr. Counsell examines the trade-offs between setting longer and shorter durations and comments on how the appropriate balance for water permit durations might be assessed. Additionally, he suggests the optimal duration is likely best assessed on a case-by-case basis, which would include an analysis of the factors discussed in the paper and their applicability to the water resource and water permits in question. With a rigorous assessment of the considerations raised in Mr. Counsell’s paper, water permitting regimes improve their chances of mitigating much of the contentiousness in setting permit durations, allowing for an appropriate balance to be struck.
Associate Director Katie Orlandi, Senior Consultants Paul Cardona and Rachel Northcutt, and Managing Director Benjamin Chee highlight how NERA leverages industry expertise to provide robust economic analysis and shape a unique approach to auction design. The authors highlight two case studies that illustrate the diversity of auction design choices and show how key elements in the design and implementation of competitive bid processes can look different depending on the context and client’s requirements. The paper also describes several building blocks to creating a successful competitive bid process and presents challenges and questions that may arise.