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Welcome to Grid Brief! Here’s what we’re looking at today: Pemex’s Q1 earnings, Westinghouse’s new reactor, NYPA’s new renewable abilities, and more.

Springtime for Pemex?

The first quarter of this year was surprisingly bright for Pemex, Mexico’s state-owned oil company. The company posted $3 billion in profits and better-than-anticipated output.

Is it an occasion to pop bottles? Not so fast, according to experts.

“The short-term outlook for Pemex remains uncertain. Despite high oil prices throughout 2022, Pemex posted net annual earnings of just $1.2 billion as well as a $9.4 billion loss in Q4. Similarly, 2023's Q1 earnings are still about half those of Q1 2022,” Juan David Rojas, an intelligence fellow at Florida International University’s Jack D. Gordon Institute for Public Policy, said in an email.

And then there’s the debt.

“The company’s short term financial debt totaled as much as $24.9 billion by the end of March, and the money it owed its suppliers reached $14.9 billion,” reports Bloomberg. “The government would need to provide an average of $10 billion a year to Pemex for the next three to five years to improve its financial situation, according to Saverio Minervini, head of Latin America energy at Fitch Ratings.”

Mexico’s state-owned behemoth is also asking the government for an extension on a tax deferral.

With billions of Pemex’s debt maturing this year, AMLO’s administration is pinning its hopes on an output increase from the Dos Bocas project, which is set to begin operations later this year, Rojas told Grid Brief.

Westinghouse’s New SMR

Westinghouse has unveiled plans for a small modular reactor (SMR) to produce emissions-free electricity.

The reactor, called AP300 for its 300 MW capacity, is modeled off of its big brother, the AP1000. The AP300 will not use special fuels or liquid metal coolants, unlike some other next-generation reactors. Westinghouse plans to start constructing the reactor by 2030 and to have it up and running by 2033.

SMRs are designed to meet different needs from their forebears, such as replacing shut coal plants or serving more remote communities with less electricity demand. Their smaller design has attracted a fair bit of attention, as large nuclear power plants have become exceedingly difficult to build in America. SMRs may also have better luck in America’s electricity markets than their larger siblings, as electricity markets disincentivize large capital investments in reliable power plants.

“Westinghouse also sees potential customers in sub-Saharan Africa, which could bring electricity for the first time to some areas,” reports Reuters. “The company is not sure yet whether the technology can be exported to China, where the first AP1000s began operations in 2018. That year, former President Donald Trump's administration issued restrictions on exports of nuclear technology newer than the AP1000 due to nuclear proliferation concerns.”

If the government recognizes the AP300 as a variant of the already existing AP1000, then the new reactor might dodge some of the regulatory and proliferation burdens. So far, only one SMR has been approved by US regulators: the NuScale reactor. It still needs permits.

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Renewable Public Power in the Empire State

New York has just passed the Build Public Renewables Act which directs the New York Power Authority to build, own, and operate new renewable energy projects. The measure aims to help the Empire State reach its 2019 goal of cutting statewide greenhouse gas emissions 85% over 1990 levels by 2050.

“The bill also requires six peaker plants in New York City operated by NYPA to be shut by 2030, five years sooner than called for by Democratic Gov. Kathy Hochul,” reports Utility Dive. “Critics say they are among the most polluting oil and gas plants and are typically sited in low-income neighborhoods.”

An example of such oil and gas plants are the ones that replaced the Indian Point nuclear power plant prematurely shut down by Hochul’s predecessor, Gov. Anthony Cuomo. The Build Public Renewables Act makes no mention of nuclear.

Shutting down peaker plants early—i.e., plants that ramp up to meet urgent demand and secure reliability—will strain the New York grid even more. In July of last year, the New York Independent System Operator announced that it was “already close to minimum reliability requirements” and warned of potential systemic risks: “While the state’s bulk electric system meets current reliability requirements, risks to reliability and system resilience remain.” NYISO’s Power Trends report for 2022 revealed that the New York grid’s installed reserve margin dropped from 20.7 % to 19.6% between 2021 and 2022.

The grid operator also pointed out that in order to reach New York’s climate goals, 10% of the state’s generation will have to come from resources that are not yet commercially available. Not to mention New York has now banned new buildings from installing gas hook ups, piling more demand onto the state’s electricity system.

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Conversation Starters

• Texas might have a tough summer on its hands. “Public Utility Commission Chair Peter Lake on Wednesday warned that Texas’ main power grid is at risk for outages this summer if wind turbines don’t produce enough electricity when it’s needed,” reports the Texas Tribune. “He yet again made the case that more on-demand power sources, such as natural-gas-fueled power plants or batteries, need to be built to make the grid more reliable.”

• Is India over coal? “India plans to stop building new coal-fired power plants, apart from those already in the pipeline, by removing a key clause from the final draft of its National Electricity Policy (NEP), in a major boost to fight climate change,” reports Reuters. “The draft, if approved by the federal cabinet chaired by Prime Minister Narendra Modi, would make China the only major economy open to fresh requests to add significant new coal-fired capacity. India and China account for about 80% of all active coal projects as most developing nations wind down capacity to meet climate targets.”

• Iraq wants off this ride (the ride is LNG). “One of Iraq’s main priorities is to improve the country’s energy sector, and recently signed agreements will help Iraq cut the cord on the importation of natural gas,” reports Oilprice.com. “Iraqi Prime Minister, Mohammed Shia’ al-Sudani, reaffirmed on Thursday at the 2023 Iraq Forum in Baghdad his commitment to shoring up the country’s rich energy sector—addressing in particular the country’s reliance on imported natural gas. Other natural gas-related issues that the Prime Minister vowed would be a priority is achieving gas self-sufficiency, preserving its environment, and reducing natural gas flaring.”

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