Puerto Rico's green dreams snared by mistrust, bankruptcy

Puerto Rico’s private sector has big dreams for a clean energy transition. But the path toward making those dreams come true is clouded by the reality of regular power outages, mistrust of bankrupt electric utility PREPA, and natural disasters destroying the island’s energy grid.    

On January 7, a 6.4-magnitude earthquake struck the territory. Its impact and that of aftershocks continued through February, wreaking havoc on the southern part of the island, including around Guayanilla where many power plants are located. Puerto Rico was still working to rebuild from the category 5 Hurricane Maria, which lashed the island in September 2017.  

“This year, 2020, is a critical year for the Puerto Rico energy transformation,” Tomás Torres, executive director of the Puerto Rico Institute for Competitiveness and Sustainable Economy, said in a recent webinar hosted New Energy Events in the lead-up to its 3^rd Puerto Rico Grid Revitalization Forum on March 24-25 in San Juan. 

For its part, PREPA sees Puerto Rico moving toward a renewables future first by using natural gas as a transition fuel. Then it forecasts that electricity generation will become decentralized, with further enhancements to make the electricity grid more flexible. 

PREPA is inching in that direction with plans to submit an RFP for mobile generation, for example. Its broader aims are contained in an integrated resource plan (IRP) that lays out how power will be provided over the next 20 years. 

And PREPA counts powerful allies in its bid to realize a greener, more resilient electricity grid. 

“There is an opportunity for the expertise, both from [our] department as well as national laboratories, to help support these efforts,” said US energy department senior advisor Jennifer Decesaro. 

“Since early to mid-2018, the department has done a fair amount of modeling and analytical work … to help assess potential recovery solutions that are being looked at,” she said. 

MISTRUST OF PREPA

But Puerto Rico’s manufacturers are increasingly fed up with PREPA, both because of the frequency of blackouts and a lack of transparency by the utility.   

“The major manufacturers of Puerto Rico have the option to move to another location with better energy stability and costs,” said Carlos Rodríguez, president of the Puerto Rico Manufacturers Association (PRMA). “Energy stability is by far more important and necessary than costs … In order to be competitive, they need both.”

These challenges could result in a trend toward self-generation. “We already have some members going that route,” said Rodríguez. Overall though, simply relocating can appear an easier option. 

That frustration with the stability of electricity supply is being compounded by PREPA’s scandal-ridden past, which now threatens to curtail recovery efforts. 

“Without transparency, there will be very little funds that reach our needs,” Rodríguez said. Recovery funds from US agency FEMA are conditioned on transparency. 

BANKRUPTCY

Ultimately, the IRP must put Puerto Rico on a path toward sustainable electricity supply that is affordable, ideally generated from renewables – and affordability is all the more complicated for a company in the midst of bankruptcy proceedings.  

PREPA’s bid to exit the bankruptcy it declared in 2017 involves an unpopular restructuring support agreement (RSA) that, among other measures, would see the territory’s already elevated electricity rates rise significantly. 

The RSA would see rates rise to US$0.26kWh from about US$0.21/kWh in December and keep rising over the next 40 years, according to the US-based Institute for Energy Economics and Financial Analysis.

Adding to the uncertainty, a hearing on the RSA has been pushed back to June, the same month as Puerto Rico’s legislative session ends. 

“If legislation is not approved to implement the RSA, then it simply doesn’t work,” said Carlos Fernández, chair of the environmental law practice at McConnel Valdéz. “I think they [PREPA] are taking a second look to see if there are any other possibilities at revisiting the agreement ....If these laws are not revised or modified, I don’t see a path forward.”