Sempra, Entergy to Advance Renewable Energy in South Texas

Sempra, a subsidiary of its eponymous parent company, already has some facilities in development in the area where Entergy already services 486,000 customers in Southeast Texas. The non-binding arrangement announced July 26 allows the two firms to work collaboratively to achieve sustainability goals.

“Sempra Infrastructure has greenhouse-gas reduction goals for our facilities through the utilization of lower-carbon technologies, including electrification of key processes, carbon dioxide sequestration and the use of cost-effective renewable energy,” said Martin Hupka, president of LNG and net-zero solutions at Sempra.

The collaboration includes an implementation schedule for renewable energy procurement that would supply Sempra Infrastructure affiliated facilities, subject to approval by the Public Utility Commission of Texas.

“The memorandum of understanding between Entergy Texas and Sempra Infrastructure sets forth a framework for the two companies to collaborate on developing a renewable electricity plan,” Allie Payne with Entergy Texas told Hart Energy. “There is no set deployment date.”

Entergy Texas plans to invest over $2.5 billion by the end of 2024 to build a cleaner, more resilient and sustainable energy future for southeast Texas. The firm has entered into a 20-year power purchase agreement with Umbriel Solar for 150 megawatts of solar. The facility will be in Polk County, Texas and is expected to be operational in early 2024.

In addition, Sempra is developing the proposed Port Arthur Pipeline Louisiana Connector, which would transport and provide natural gas to the proposed Port Arthur LNG project and exploring additional opportunities to co-locate lower-carbon hydrogen production and storage.

Discussing Cheniere Energy Inc.’s recent success in marketing a facility that is significantly behind every other project in the Gulf Coast reinforces the view that “LNG is a big boys’ game,” said Stifel analyst Benjamin Nolan.

Earlier this month, Sempra announced a 5 million tonnes per annum (mtpa) agreement with ConocoPhillips Co. at the Port Arthur facility, which now has more than 10 mtpa of a 13.5 mtpa underway.

“We do expect perhaps some smaller projects with lower financing requirements could find a home, but it is not the YMCA and not everyone is a winner.”–Benjamin Nolan, Stifel

“With FERC approval already in hand, it is likely the next project to move forward,” Nolan said.

“While new [companies] have been successful in winning offtake contracts, the big companies are making better progress toward actually making final investment decisions.”

That doesn’t mean it’s impossible—Venture Global has achieved some success, Nolan said—but despite a stronger commercial environment, the financial landscape for smaller cap companies is much more challenging.

Larger projects tend to require more than $10 billion in debt financing for larger projects.

“The cost of capital between an investment grade company like Cheniere or Sempra is dramatic, as is the ability to capitalize projects with internally generated cash flow,” he said. “We do expect perhaps some smaller projects with lower financing requirements could find a home, but it is not the YMCA and not everyone is a winner. Without opening more gas from the Marcellus, we expect there is only room for a small handful of new facilities.”