Aug
23
2017

Energy Headlines Abroad - U.K. and Mexico

Energy Issues Facing Neighbors and Friends 

Upon returning from a great road trip around the Southeast, it seemed appropriate to look abroad at global energy news. As we all pack up the beach gear and prepare to resume work or school, I hope you can find some use in what we’ve collected below. While neither the U.K. nor Mexican markets make an apples-to-apples comparison with the U.S. energy landscape, some facts leap out from the headlines generated by each country’s experience with deregulation or new technology. 

S&P Global, under the Platts imprint, has released a user-friendly, informative report, “Mexico’s Energy Transformation Takes Hold.” Mexico deregulated its energy markets in stages, beginning in 2013, and is still developing some of the market features now familiar to the United States. Gas trading is in its infancy and the country just split apart its state-owned electricity company into 6 new entities. The lesson here may be that the shift to competitive wholesale and retail markets is easier said than done and may not actually reduce the regulatory workload, or necessarily result in lower prices. 

As the report notes, prices are on the rise in several of Mexico’s regional power and natural gas markets. Platts estimates that some areas could see “premium prices” nearing $9/ MMBtu in areas where supplies are constrained. Factors at play include the increased use of natural gas for electricity generation, combined with widespread delays in constructing new pipeline capacity. On the positive side, Mexico is encouraging development of offshore oil and gas resources, and a U.S. independent company has reported a significant oil discovery of more than one billion barrels.  

Across the pond, some consumers are feeling price and service impacts of retail competition. Great Britain deregulated its retail energy markets in 1999. According to the Financial Times, Ofgem, the energy regulator responsible for ensuring the nation’s wholesale and retail markets are competitive, is looking into whether six companies which control fourteen retail networks may owe up to £14m after customer complaints. These companies don’t supply power or gas, but instead operate the distribution infrastructure. Ofgem is expected to issue a final decision by late November. A consumer watchdog, Citizens Advice, helped spark the inquiry after releasing a report in July 2017 which concluded the network companies over-charged gas and electric consumers. Others maintain that the companies have been slow to connect new customers, including distributed energy and storage resources. 

Just as in the U.S., U.K. utilities are grappling with the coming electric vehicle (EV) revolution. National Grid released a short thought piece recently on EV impacts ahead in Great Britain. This report made headlines when reporters boiled it down to a statement advising against using an 11kW car battery charger and a tea kettle simultaneously for fear of shutting off power in the home. 

Typically, the fastest public chargers weigh in at 50 kW, but still require a half hour to charge an average EV today. However, the report holds out hope for 150 kW chargers in networks that leading auto manufacturers say they plan to build. In British homes, the 3.5 kW charger may soon be replaced by 7 kW and 11 kW chargers, but I imagine consumers will protest if the tea kettle problems aren’t firmly resolved first. British humor aside, this report and discussion of a vastly smaller number of EVs than we will eventually see stateside can help us imagine issues along the way to a future where the typical car buyer can afford an EV, charge it safely and quickly at home, and plan for a long journey free of worry.  

Next week, PACE will return to U.S. shores, continuing to ask how our own policies can be better developed to avoid high prices, constrained fuel supplies, disgruntled consumers, and cold tea.