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TxEnergyUpdate - June 6, 2022

The TxEnergyUpdate keeps you up to date on the energy sector's latest news and stories



The U.S. Energy Information Administration (EIA) estimated that on average there will be an increase of 3.9% in the price of electricity for U.S. households this summer. For the entire summer, the agency projects that the average household is expected to spend 0.9% more for electricity compared to summer 2021, according to the EIA. "The higher price is largely driven by supply and demand," Nick Loris, vice president of public policy for C3 Solutions. "Particularly with natural gas, which provides 38% of our electricity needs, we've been operating in an environment of constrained supply and higher demand." Households in the Mid-Atlantic are projected to pay 8.4% more this summer, and households in the South Atlantic are estimated to spend 6.5% more. Utility companies are already issuing warnings to customers ahead of the summer months. The Pennsylvania Public Utilities Commission is encouraging customers to "carefully review their electric bills to understand the rates they will be paying" ahead of June 1.

In a letter to Securities and Exchange Commission chairman Gary Gensler, 16 Republican governors expressed their opposition to the SEC’s proposed climate-change disclosure rule. The proposed rule would require publicly traded companies to include on their SEC-mandated reports information about climate risks, greenhouse-gas emissions, and other climate-related metrics as defined by the SEC. “As governors, we are deeply concerned your proposed rule veers far outside the SEC’s authority as a federal agency,” the governors wrote. The 16 governors who signed this letter are raising the right concerns about the SEC’s proposal. The rule is evidence of mission creep beyond the SEC’s proper role in the economy and within the federal government. Texas governor Greg Abbott is among the governors who expressed opposition.

With the US economy looking at a likely recession and inflation reaching levels unseen in 40 years, the Biden Administration uses scapegoats to blame for the downturn. One of this past month’s scapegoats was freight rail. The Administration, as well as public utilities, have blamed the railroad for a shortage of coal. Indeed the freight rail industry has experienced shipping shortfalls in the last year, but these are largely outcomes of a difficult economy, not the cause of it. The coal was prioritized for another customer willing to pay more: China. As the U.S. Energy Information Administration reports, US coal exports to China skyrocketed from roughly 1.8 million tons in 2020 to nearly 13 million tons in 2021. Increasingly, US coal is shipped overseas rather than to American energy plants like Big Bend serving American customers facing higher energy bills.



Total hydrocarbon production in the Permian Delaware Basin, the top-producing play in the Permian, will hit a record 5.7 million barrels of oil equivalent per day (boepd) average in 2022, according to Rystad Energy research. Spurred on by high oil prices and appealing well economics, total production is set to grow by around 990,000 boepd, almost half of which – 433,000 boepd – is new oil production. Investments in the basin are also expected to jump, surging more than 40% from 2021 levels to reach $25.7 billion this year. A significant contributor to this growth is the majors – ExxonMobil, Chevron, BP and ConocoPhillips – who last year cut Permian Delaware investments by 33% vs. 2020. This production growth may seem like a reaction to the US government’s call for increased supply, but most of the drilling and capital expansion was already guided by the companies at the end of 2021, before Russia’s invasion of Ukraine. Public operators have been reluctant to chase higher production growth and remain focused on capital discipline in the face of cost inflation and labor and equipment shortages.

There's a new battery energy storage facility announced by Vistra Corp in North Texas that is being touted as part of the solution to help minimize disruptions in electricity when the demand gets high. Located at the DeCordova Energy Storage Facility in Granbury, the 3,000 individual battery modules stored in 86 containers can hold 260-megawatts, which can power about 130,000 Texas residences during normal grid conditions. "With these batteries, they are charging at night for the most part when we’re not using power as much and all those wind farms are blowing across the state of Texas. They're charging with energy when it’s most available and then they’re going to put that power back onto the grid when our customers really need it” explained Claudia Morrow senior vice president of development for Vistra Corps. What makes the Granbury site unique is the fact that it's considered a hybrid. Across from the containers of batteries are four combustion turbines that are powered by natural gas and backed up by diesel fuel in case there are any issues getting natural gas. The Granbury site was constructed in less than a year and got its first actual real-world experience last week when ERCOT asked people to conserve energy due to the unseasonably hot May weather and the fact several power plants went offline. “It worked out well that we were able to test and it performed exactly as it was supposed to," said Morrow about the batteries.

Tesla Inc. is hoping to turn some Texas homes into “virtual power plants” after tests showed its home batteries can be quickly tapped to reduce stress on the state grid. Tesla is making the push after trying a project that pooled together 64 northern Texas homes outfitted with rooftop solar and Powerwall batteries. Tesla is advocating for rule changes with the main Texas grid operator (ERCOT) to set terms on how owners of such residential batteries can participate in the power market and be compensated.

The agency that oversees the state power grid now has a map locating the critical resources needed for keeping the power flowing. They also have contact information in case of emergencies. The map is the first of its kind in the state for use during disaster and emergency preparedness and response. The Public Utility Commission of Texas (PUC) says it will update the map twice per year: once before hurricane season and again before winter season. Bud Weinstein, a retired SMU economist and energy expert states "The idea is, unlike a situation last year when ERCOT didn't know that the gas lines had frozen up. Now, they'll be able to tell if there's a problem with gas transmission”. The current map has more than 65,000 facilities. Critical infrastructure make up the state’s electricity supply chain, including electric generation plants and the natural gas facilities that supply fuel to power the plants.



Citing the climate crisis, the Los Angeles City Council voted to ban most gas appliances in new construction, a policy that’s expected to result in new homes and businesses coming equipped with electric stoves, clothes dryers, water heaters and furnaces. Councilmember Nithya Raman, the policy’s lead author states that Friday’s vote “puts us in line with climate leaders across the country,”. New buildings could also use non-fossil fuels such as green hydrogen or renewable gas, at least in theory. But those options are relatively experimental and untested. In the 87th Legislative Session, Texas passed a bill to that banned energy discrimination in new construction of homes or businesses.


That's all for this edition of TxEnergyUpdate. Visit for further energy updates and publications.


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