Texas Approves $10 Billion for Reliability // Mideast Conflict Troubles EU LNG
Welcome to Grid Brief! Here’s what we’re looking at today: Texas shells out for grid reliability, the Hamas-Israel conflict cuts the EU off from Egyptian LNG, and more.
Texas Approves $10 Billion for Reliability
The Texas legislature has just passed a constitutional amendment that authorizes a new Texas Energy Fund to offer low-interest loans for natural gas plants, microgrids, and grid modernization. The amendment passed by two-thirds and endows the TEF with $10 billion.
“The Texas Energy Fund will be administered by the PUCT, with a total pot of $7.2 billion available to support any new construction or upgrade that results in at least 100 MW of dispatchable generation coming online and interconnecting to the Electric Reliability Council of Texas grid before June 1, 2029,” reports Utility Dive. “Another $1.8 billion will support the development of microgrids and backup power for critical facilities across the state, and $1 billion will go to grid modernization, weatherization and other efforts in the non-ERCOT portions of Texas.”
Texas has been trying to fortify its grid since the catastrophic Uri blackouts in 2021. Proponents of the bill argue these loans will help achieve greater reliability, but questions remain about the PUCT’s competency to assess default risk. Others decry the funding for helping the fossil fuel industry. Texas will still need to resolve winterization issues in its pipeline infrastructure; without just-in-time supply, gas power plants can’t fire up.
Mideast Conflict Troubles EU LNG
The European Union may no longer have access to Egyptian LNG due to the conflict in Israel and Egypt’s tight supply.
“Egypt shipped 80% of its liquefied natural gas (LNG) exports to Europe last year as the continent sought to replace Russian pipeline gas after Moscow's invasion of Ukraine,” reports Reuters. “The European Union has in June last year signed a framework deal between the bloc, Israel and Egypt that would allow Cairo to maintain ‘relatively high volumes’ of LNG deliveries to Europe.”
But the Israeli Tamar gas field has shut down in response to the Israel-Hamas conflict, choking flows to Egypt. As we covered in August, Egypt has struggled to balance is gas supply and has faced blackouts.
Alex Froley, an LNG analyst at ICIS, told Reuters that "Egypt's LNG exports look set to remain low to zero over winter.” Egypt’s LNG cargoes dropped from 42 last year to 2 this year, according to Froley.
But the EU may get through winter alright, so long as demand destruction eases the strain on the continent’s gas storage and the weather stays relatively mild.
CHART OF THE DAY: The horror story of Germany’s industrial crisis continues. September was the 4th consecutive month of m-on-m decline in industrial activity, with energy-intensive firms (red line) under continued pressure.
— Javier Blas (@JavierBlas)
Nov 8, 2023
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US sanctions Russian LNG. “The US is solidifying its position as the world’s top supplier of gas in a market upended by war,” reports Bloomberg. “The nation slapped sanctions last week on a soon-to-start Russian liquefied natural gas project over the invasion of Ukraine. Traders are still dissecting the specifics, but the measures against the Arctic LNG 2 facility could curb deliveries to its foreign owners, which include the Japanese government and France’s TotalEnergies SE.”
And the UK hits Russia with more sanctions. “The United Kingdom sanctioned on Wednesday another 29 individuals and entities that are supporting Russia’s oil and gold sectors, adding to the list of 1,800 individuals and entities that have already been sanctioned by the UK,” reports Oilprice.com. “The list of sanctioned entities includes Russia’s largest gold refiner as well as Russian oligarchs and third-country enablers that the UK has said are helping to fuel Russia’s war efforts in Ukraine. Also finding itself on the list of newly sanctioned entities is a UAE-based network responsible for funneling $300 million in gold revenues to Russia, which includes gold trader Paloma Precious DMCC and Howard Jon Baker.”
Panama may cancel a copper mine contract. “Panama's abrupt moves this week to potentially annul the contract for one of the world's biggest and newest copper mines through a referendum and proposed law alarmed global investors and wiped out about 40% of First Quantum Minerals' market value,” reports Reuters. “Lawmakers on Thursday ended efforts to scrap the contract by law, while a proposed bill to decide the future of the deal signed by First Quantum and the Panama government through a referendum in December is stuck in Congressional proceedings.”
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