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ERCOT Drops 3 GW Capacity Procurement // Asian LNG Buyers Pay Panama Premium

Welcome Grid Brief! Today we’re looking at ERCOT’s abandonment of a winter capacity procurement program, Asian LNG buyers have to pay a hefty premium to secure US supplies via Panama, and more.

ERCOT Drops 3 GW Capacity Procurement

The Electric Reliability Council of Texas has cancelled a 3 GW capacity procurement to guarantee reliability this winter after no power plants stepped up to provide additional operating reserves.

ERCOT remains unconcerned about the winter despite the failure of this program. “The request for additional capacity was an extra layer of precaution to mitigate higher risk during extreme weather this winter,” said ERCOT President and CEO Pablo Vegas. “ERCOT is not projecting emergency conditions this winter and expects to have adequate resources to meet demand.”

“ERCOT’s RFP was supposed to entice shuttered power plants to restart, but instead the grid operator received demand response offers for just 11 MW,” reports Utility Dive.

According to the North American Electric Reliability Corp., the “risk of a significant number of generator forced outages in extreme and prolonged cold temperatures continues to threaten reliability” in Texas “where generators and fuel supply infrastructure are not designed or retrofitted for such conditions.”

NERC believes the shortage in reserves in Texas is greater than last year “due primarily to robust load growth that is not being met by corresponding growth in dispatchable resources.”

Asian LNG Buyers Pay Panama Premium

The Panama Canal has become a chokepoint as a drought shallows its water. The resultant passage constraints are driving up costs from US LNG suppliers to Asia.

“The Asian gas price premium to Europe for summer 2024 has more than doubled since Oct. 30, when the Panama Canal announced that it would further restrict passage, while the winter 2024 spread has also widened,” reports Bloomberg. “The number of slots available for ships the size of LNG carriers will be reduced by half come January, according to BloombergNEF.”

Analysts believe that Asian buyers will have to shell out more to divert US LNG shipments from Europe as the margin for LNG shrinks.

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