Mexico and the State of Texas in the United States share the same threat this summer: blackouts.
Droughts and record temperatures have boosted electricity demand, testing the capacity of their respective networks.
The dreaded cuts, however, seem to originate from diametrically opposite causes: in Texas the system has been left in the hands of private parties, while in Mexico they have been excluded.
The Texas power grid is known for being independent from the rest of the US, a very appropriate move for a state with a strong separatist identity.
In a territory larger than France and an economy the size of Russia, the network is comparable to that of entire countries and is currently failing.
A first crisis occurred in February of last year, when extremely low temperatures froze part of the infrastructure that allows the conversion of natural gas into electricity.
Now, authorities are urging Texans, both in homes and in industry, to reduce their electricity consumption to avoid blackouts, since their transmission capacity is insufficient.
For its part, in Mexico, the National Center for Energy Control (Cenace) has said that the lack of investment in the national transmission network can generate blackouts, something that businessmen and sector analysts have warned since the federal government began to block the participation of private companies.
The Federal Electricity Commission (CFE) even buys more natural gas than it can use to generate electricity, in part because private investment that was expected to build the pipelines to take advantage of the gas has stalled.
Telecommuting and cryptocurrencies
For many reasons, this has been a particularly high summer for electricity demand, says Morris Greenberg, electricity markets analyst at S&P Global Platts Analytics.
Telecommuting enabled by the pandemic has led to a migration to Texas cities where taxes and rents are lower, causing the population to grow.
In addition, the state has attracted a large number of cryptocurrency miners, a process that consumes high amounts of electricity.
“Beyond that, Texas has had very low levels of precipitation for a long period of time, which drives up temperatures and the need to use air conditioning,” adds Greenberg.
The Electric Reliability Council of Texas (ERCOT) said this week that there was "no market solution available" in a system in which private companies have been allowed to self-regulate.
In February 2021, when blackouts due to lack of access to natural gas caused 32 deaths in the state, Greenberg advocated for a more regulated market.
“Since then, regulation has been improved, but it hasn't gone as far as creating a term capacity market, as other regional operators have,” says Greenberg.
A capacity market, or
forward,
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.
“There also needs to be better planning to avoid what is happening now,” says Greenberg, “planning for what appear to be already consistent temperature extremes which, some would say, are due to climate change.”
Water cuts and possible blackouts
Three hours from the Texas border is Monterrey, capital of the state of Nuevo León.
The inhabitants there have been without water for six weeks in which, in some neighborhoods, they only have access for a couple of hours.
Meanwhile, federal authorities declared a drought emergency in the country, since almost seven out of ten municipalities do not have the amount of water they need, according to the National Water Commission (Conagua).
Temperatures in the north of the country continue to rise, boosting electricity consumption.
In May, according to information recovered by the newspaper
Reforma
, the general director of Cenace, Ricardo Mota, said in a forum that the country could suffer blackouts due to the "lag" in the expansion of the national transmission network.
The government of President Andrés Manuel López Obrador has asked, since 2019, that sector regulators stop issuing operating permits to private companies, which has limited investment in infrastructure.
The government has also passed legislation to privilege the entry of CFE plants, to the detriment of private ones.
The most affected sector in Mexico has been renewable energy, which, ironically, has saved Texas from suffering blackouts so far this summer.
According to a report in
Texas Monthly
magazine , electricity generation from solar panels doubled this summer compared to the same period last year, filling in the gaps for natural gas generation.
This has clearly been the biggest benefit of letting private parties install their own technology.
This week, the Bloomberg
agency
reported that companies such as Engie, Enel and Acciona Energía have been blocked by Mexican regulators and prevented from operating solar plants and wind farms.
CFE seeks to make electricity a captive market in which the company has a monopoly, forcing all consumers to buy from the state company.
But CFE cannot pay the amount of investment that the transmission network requires to guarantee supply.
Mexico produces 28% of the natural gas it consumes to produce electricity.
The rest is imported, mostly, from Texas, the main producer of the fuel in the US. During the previous federal administration, Mexico promised to buy more natural gas than it can transport and use.
The idea was that such contracts "anchor" large private investments in gas pipelines, explains Francisco Barnés, an energy consultant, former official of the Energy Regulatory Commission (CRE) and former rector of the Autonomous University of Mexico (UNAM).
"This was the strategy that was followed to tender the pipelines that are required to bring gas to the country and it is necessary to tender them so that they have the capacity that is not required in the short term, but rather that which is required for several 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 (Sener) sent to the CRE and Cenagas, it intends to force private companies in Mexico to buy the natural gas that is left over from CFE and Pemex.
This is not necessary, says Barnés.
"If they have surplus gas purchased in the US market, which is a very liquid market, the surplus gas acquired by the CFE can be placed and sold in the United States," explains the specialist, who was also an official at Sener.
Public or private investment
Both Greenberg and Barnés agree that an electricity system that guarantees supply can only be achieved with a mixture of private participation and regulation.
“Unexpected extraordinary events always generate problems, regardless of who is the actor with the responsibility of responding to them and there are simply not enough elements to foresee that it is going to be an extraordinarily hot summer and that it requires an additional demand for natural gas. Barnes says.
Private investment, he assures, usually responds better to immediate needs, while public investment tends to do longer-term planning.
“The best option is a participation of a state company that has good planning and financing to timely install the large plants of the Mexican State, which is the one that can best assume these risks in the face of planning for the basic supply that represents a percentage important part of national consumption and therefore it is in the hands of CFE”, says Barnés.
"And let, as was intended, make a growing participation of private investment and take part of the market of large consumers who are willing to take other risks and other opportunities."
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