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Tuesday, August 16, 2022

Mexico and Texas face potential blackouts due to (fundamentally) opposite systems

The states of Mexico and Texas in the United States share the same threat this summer: blackouts. Drought and record temperatures have driven up electricity demand, testing the capacity of their respective networks. However, the dire cuts arise for completely opposite reasons: in Texas the system has been left in the hands of private parties, while in Mexico they are excluded.

The Texas power grid is known to be independent from the rest of the US, a very fitting move for a state with a strong separatist identity. In an economy larger than France and the size of Russia, the network is equivalent across countries and is currently failing. The first crisis occurred in February last year, when extremely low temperatures froze part of the infrastructure that allows natural gas to be converted into electricity. Now, officials are urging Texans, both at home and in industry, to reduce their electricity consumption, to avoid blackouts because their transmission capacity is inadequate.

For its part, in Mexico, the National Center for Energy Control (Cenes) has said that a lack of investment in national transmission networks could generate blackouts, something that traders and analysts in the region have warned as the federal government Blocking has started. Participation of private companies. The Federal Electricity Commission (CFE) buys more natural gas than it can use to generate electricity, as hopes of building pipelines to take advantage of the gas from private investment have stalled.

Telecommunications and Cryptocurrencies

For a number of reasons, this has been a particularly high summer for electricity demand, says Morris Greenberg, electricity market analyst at S&P Global Platts Analytics. Pandemic-enabled telecommuting has led to migration to Texas cities where taxes and rents are low, increasing the population. Furthermore, the state has attracted a large number of cryptocurrency miners, a process that consumes high amounts of electricity.

“In addition, Texas has had very low rainfall levels for a long time, which increases the temperature and the need to use air conditioning,” Greenberg says. The Electric Reliability Council of Texas (ERCOT) said this week that there is “no market solution available” in a system that allows private companies to self-regulate. In February 2021, when a lack of access to natural gas killed 32 people in the state, Greenberg advocated for a more regulated market.

“Since then, regulation has improved, but it hasn’t gone as far as creating a term capacity market, as other regional operators have,” Greenberg says. a potential market, or ahead, It is a wholesale electricity market designed to promote economic investment in long-term resources where they are most needed to guarantee operation. For it to exist, the government must write the rules.

“What’s happening now also needs better planning,” says Greenberg, “planning for what’s already seen in persistent temperature extremes is, some would say, the cause of climate change.” are reasons.

Water cuts and potential blackouts

The state capital of Nuevo León is Monterey, three hours from the Texas border. Residents there have been without water for six weeks, to which, in some neighborhoods, they have access for only a few hours. Meanwhile, according to the National Water Commission (Conagua), federal officials declared a drought emergency in the country, as nearly seven out of ten municipalities lack access to water. Temperatures continue to rise in the north of the country, increasing electricity consumption.

In May, as per the information received by the newspaper remodelingRiccardo Mota, general director of Senes, said in a forum that the country could face a blackout because of the “lag” in the expansion of the national transmission network. President Andres Manuel López Obrador’s government has asked since 2019 that sector regulators stop issuing operating permits to private companies that have limited investments in infrastructure. The government has also passed legislation to privilege the entry of CFE plants to the detriment of private plants.

The most affected sector in Mexico has been renewable energy, which has ironically saved Texas from suffering a blackout so far this summer. According to a magazine report Texas MonthlyElectricity generation from solar panels doubled this summer compared to the same period last year, filling the gap for natural gas production. This has clearly been the biggest advantage of letting private parties establish their own technology. This week, agency bloomberg reported that companies such as Engie, Enel and Acciona Energía have been blocked by Mexican regulators and barred from operating solar plants and wind farms.

CFE wants to make electricity a captive market in which the company has a monopoly, forcing all consumers to buy from the state company. But the CFE cannot pay the amount of investment that the transmission network requires to guarantee its supply.

Mexico produces 28% of the natural gas consumed for electricity generation. The rest is imported, mostly, from Texas, the main producer of the fuel in the US. During the previous federal administration, Mexico promised to purchase more natural gas than it could transport and use. The idea was that such contracts “anchor” large private investments in gas pipelines, explains Francisco Barnes, an energy consultant, former Energy Regulatory Commission (CRE) official and former rector of the Autonomous University of Mexico (UNAM).

“This was the strategy that was followed to tender the pipelines needed to bring gas into the country and tender them so that they have the capacity which is not required in the short term, but is what is needed for many years ahead,” he says. Barnes. But the government of López Obrador paralyzed the tenders and now, according to an official letter that the Ministry of Energy (CENER) sent to CRE and Cénagas, it intends to force private companies in Mexico to buy natural gas. What is left is CFE and Pemex.

It’s not necessary, says Barnes. “If they have surplus gas purchased in the US market, which is a very liquid market, then the surplus gas acquired by CFE can be kept and sold in the United States,” explains the expert, who was also an official of Senor. .

public or private investment

Both Greenberg and Barnes agree that a supply-guaranteed power system can only be achieved through a mix of private participation and regulation. “Unexpected extraordinary events always cause problems, regardless of who is the actor responsible for responding to them, and there are not enough elements to predict that this is going to be an exceptionally hot summer and that there is an excess of natural gas.” Demand is needed. Barnes says. Private investment, he assures, usually responds better to immediate needs, while public investment tends to plan longer.

“The best option is the involvement of a state company that has good planning and financing to set up large plants in the Mexican state in a timely manner, which is the most important of these risks in terms of planning for the basic supply that represents one.” The percentage is a significant portion of national consumption and is therefore in the hands of the CFE”, says Barnes. “And, as intended, drive increased participation of private investment and be part of a market of larger consumers who are willing to take on other risks and other opportunities.”

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World Nation News Desk
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