Conditional nod for Puerto Rico fuel swap plan

Puerto Rico’s energy regulator PREB granted conditional approval to switch the primary fuel of the Palo Seco mobile packs (81MW) to natural gas from ultra-low sulfur diesel.

The change is part of company Genera’s fuel optimization plan, which aims to reduce the price of fuels through logistics-related market negotiations, market-price risk management, improved plant efficiency and switching to LNG from diesel.

New Fortress Energy controls Genera, which manages power authority PREPA’s 4,693MW thermal park.

In a resolution, the watchdog said that although Genera failed to meet certain requirements necessary for the approval, factors that led to the conditional nod included the urgent need to stabilize fuel prices, reduce energy costs and promote cleaner fuels.

According to Genera, the swap will save US$12.8mn annually and will not require incremental capital investment, and that the only requirement entails replacing outdated or damaged components.

As part of the switch, Genera expects the mobile packs’ capacity factor to increase, which PREB says will make the capacity more of an intermediate load unit rather than a peaker.

“Running the units more frequently will accelerate wear and tear, resulting in higher expenses for maintenance, repairs, and replacement of components. These additional costs will further diminish the potential savings from the fuel switch, as the anticipated financial benefits may be offset by the increased expenditures required to keep the units operating reliably at a higher utilization rate,” the watchdog added.

The Palo Seco resolution is in the Documents box in the top right corner.

Regarding the proposed fuel switch for combustion turbines at Mayagüez (220MW), PREB said a separate resolution and order will be issued “in the near future.”