Hello and welcome back to Energy Source, coming to you from New York.
The Federal Trade Commission is poised to approve ExxonMobil’s $60bn acquisition of Pioneer Natural Resources on condition that Pioneer’s chief executive Scott Sheffield does not join its board.
The US regulator is expected to allege that Sheffield engaged in collusive activity in the past aimed at reducing oil production and raising prices. The purchase of Pioneer marks Exxon’s largest acquisition since it was formed through the merger of Exxon and Mobil in 1999. More from my colleagues Stefania Palma and Jamie Smyth here.
In other news, big investors in Shell, including Amundi and Axa Investment Managers, have sent a letter to shareholders urging them to back a resolution seeking stronger climate action and send a “strong signal” to the oil and gas industry.
The resolution, filed in January, and the letter mark the most significant shareholder push to date on climate policy at the oil major. More on the investor pushback from our climate correspondent Attracta Mooney here.
Today’s newsletter focuses on the Texas electricity grid. A project by Pattern Energy is vying to build a high-voltage transmission line to connect the isolated power system to the south-eastern US.
Thanks for reading,
Amanda
Power line project offers Texas an electricity ‘lifeline’
When it comes to electricity, Texas is an energy island.
Since the early 20th century, the Lone Star State has operated a grid separate from the rest of the US. It’s a massive system, generating more than 500 terawatt hours of electricity annually, more than the UK.
But a plan to build a 320-mile power line from Texas to the US south-east is challenging the state’s independence. The $2.6bn project, known as Southern Spirit, will be owned and operated by private developer Pattern Energy. When constructed, the project will transmit 3GW of power from wind-rich Texas through Louisiana to customers in Mississippi.
“The project will provide increased electric diversification to help drive down rates for electricity customers, especially in times of high energy demand,” said Hunter Armistead, chief executive of Pattern Energy.
Simon Mahan, executive director of the Southern Renewable Energy Association, said the project could serve as a “lifeline” to avoid power outages, such as the days-long blackout during the deadly Winter Storm Uri in 2021, which exposed the vulnerability of the state’s isolated grid.
While Texas has four lines that connect to other regions, they are relatively small, totalling less than 1.5GW. Southern Spirit would more than double this capacity and comes as the region braces to meet soaring electricity demand growth while maintaining reliability and making progress on decarbonisation.
“We’ve never seen growth like this,” said Michael Webber, a professor at University of Texas in Austin and chief technology officer of Energy Impact Partners. “More connectivity between [Electric Reliability Council of Texas] and neighbouring grids will be good for Texans.” ERCOT is the state’s grid operator.
While the Southern Spirit project is the exception to the norm of the stubbornly independent Texas transmission buildout, there have been legislative efforts to connect the state to the wider grid since the 2021 storm. In February, US Democratic representatives Alexandria Ocasio-Cortez and Greg Casar introduced a bill to connect the Texas grid to the rest of the nation — a piece of legislation that is unlikely to move forward in a Republican-controlled House of Representatives.
Pattern Energy expects to break ground in 2026 and begin operations in 2029, nearly two decades after the concept of the project was first floated. It’s awaiting approval in Louisiana and Mississippi, where concerns over land rights and ratepayer impacts threaten to bring the project to a halt.
In Louisiana, a bill was introduced in the state senate that would prevent a developer from purchasing land for a transmission project if the majority of electricity will not be delivered to customers in the state. Entergy Mississippi, a local utility, has also expressed concerns over the impact of the project on ratepayers.
“There are significant unresolved questions about how the power flows from this line would affect Mississippi customers — both as to the reliability and the cost of their service,” said an Entergy spokesperson, adding that the company has “no fundamental objection” to the project and that “added transmission will certainly be necessary” to meet the growing energy demand.
The Midcontinent Independent System Operator, the regional operator, said it was working with Pattern through MISO’s process for grid connections and “all necessary studies around potential system impacts and costs”. The Mississippi Public Service Commission, the state regulator, declined to comment.
The story of Southern Spirit is emblematic of a wider challenge facing the US energy transition. The country faces a dire need to build out more transmission lines quickly but disagreements over planning, land use and cost allocation imperil construction.
A Department of Energy assessment last year found that regional transmission must more than double and interregional transmission must grow more than fivefold by 2035 to meet decarbonisation targets and realise the benefits of the Inflation Reduction Act, the Biden administration’s landmark climate law.
Despite this need, high-voltage line buildout across the country has slowed to its lowest level in more than a decade. Grid Strategies found that just 55.5 miles of high-voltage transmission were built in the US last year, the lowest since at least 2010. The Southern Spirit project is one of 36 shovel-ready projects that the consultancy has identified that together would expand the US grid by 15 per cent.
Rob Gramlich, president of Grid Strategies, called the need for more transmission a matter of “economic and national security” as the US works to onshore manufacturing in strategic sectors such as semiconductors and batteries, a big contribution to electricity load growth.
The Biden administration has made numerous efforts to speed up transmission, awarding $331mn last week from its $30bn pot of funding allotted in the IRA and the bipartisan infrastructure law to a transmission line owned by LS Power. The Department of Energy also announced a new plan to streamline federal permitting for projects, and a highly anticipated upcoming rule from the Federal Energy Regulatory Commission could speed up transmission planning and bring clean energy faster on to the grid, a process known as interconnection.
“We have an issue on interconnection. We have this growing issue in terms of load . . . and on top of that, we’ve also been slowly working towards building a new system,” said Paul Segal, chief executive of LS Power. “All of that translates into more things need to be built, and more money will need to be spent.”
Larry Gasteiger, executive director of Wires, an industry group, said the funding was a “drop in the bucket” compared with the hundreds of billions of dollars needed in the next two to three decades to build out transmission lines.
“It’s going to take a lot of incremental progress,” Gasteiger said. “There is no one thing that could be done.”
Power Points
Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.
