by Emma Foehringer Merchant
August 31, 2020

Hurricane Maria left Puerto Rico with snapped utility poles, twisted transmission lines and the longest blackout in U.S. history.

Over the past three years, Puerto Rico’s grid has been caught in an ideological battle over whether the island electricity system should be rebuilt by conventional standards or remade to emphasize distributed generation, solar PV and storage resources.

A recent regulatory order suggests the distributed vision is winning out.

The Puerto Rico Energy Bureau will require the island’s utility, the Puerto Rico Electric Power Authority (PREPA), to acquire thousands of megawatts of solar and storage and put a pause on most new natural-gas additions, while considering the potential for networked distributed generation. The decision follows legislation passed last year that mandated 100 percent renewable energy by 2050 alongside more small-scale solar and storage.

“All of that work and that input [from intervenors] into the process did result in an integrated resource plan that is working more in that direction,” said Ruth Santiago, a lawyer with Comité Diálogo Ambiental, a local environmental group.

The decision wasn’t completely radical, however. Though regulators rejected hundreds of megawatts of new gas build-out, commissioners agreed that PREPA can continue converting one plant, called San Juan, to burn natural gas rather than oil. The utility will also be permitted to spend up to $5 million on initial siting and permitting work for a potential gas plant at the site of the Palo Seco Power Plant, to make sure it will be ready to go if renewables can’t swoop in to provide capacity. And the bureau will allow an existing AES coal plant to stay online until 2027.

The continued reliance on fossil fuels worries environmentalists, but the plan hews much closer to the future they hope for than did the previous versions.

“It leaves some flexibility, but it puts renewables investments front and center,” said Roy Torbert, a principal with the Islands Energy Program at the Rocky Mountain Institute.

Alongside Hawaii and the District of Columbia, Puerto Rico is one of just three U.S. jurisdictions striving for 100 percent renewable energy. While Hawaii has already made significant progress toward a future that relies on distributed storage and solar, Puerto Rico is just beginning that process.

If two islands can get there, and without larger grids to draw from when renewable resources are in a lull period, it will be seen by many as a sign of things to come for gas plants on the mainland as well.

Puerto Rico's "balanced view" on natural gas

In preparing PREPA’s integrated resource plan, Siemens examined a dizzying number of scenarios — 87, to be exact.  

After more than a year of negotiations and one previously rejected plan, the Puerto Rico Energy Bureau settled on a modified version of what the utility itself proposed. But rather than accepting PREPA’s preferred plan, commissioners ordered the utility to pursue a “Modified Action Plan” modeled largely on one of Siemens’ scenarios called S3S2, for Scenario 3, Strategy 2.

The plan includes at least 3.5 gigawatts of new solar and more than 1.3 gigawatts of storage in the next five years, a huge increase over PREPA's preferred proposal of 1.8 gigawatts solar and less than 1 gigawatt of storage — let alone what the island has today.

“It takes a balanced view on the tricky question of gas...if the availability or the cost of renewables are not as projected, but makes clear that renewables and efficiency are the primary, least-cost resources for the Puerto Rico grid,” said RMI's Torbert. “There’s not a lot I disagree with.”

Tempered praise also came from a group of local clean energy experts and academics that published a report in 2018 outlining a path to all-renewables, called Queremos Sol. Ingrid M. Vila Biaggi, a civil engineer who founded local environmental group Cambio P.R. and contributed to the report, said the decisions regarding natural gas at San Juan and the continuation of another gas power-purchase agreement with local natural-gas company EcoEléctrica are “regretful.” Still, the “resolution presents important wins for environmental organizations and community groups.” 

Renewables are increasingly edging out natural gas in U.S. utility proceedings, most notably in California. Last year, community-choice aggregator East Bay Community Energy contracted to replace a jet-fuel-burning peaker plant with solar and storage. Batteries are also replacing gas plants at California’s Moss Landing site and in Oxnard. And the trend is spreading geographically. Regulators in New Mexico recently favored solar and storage replacements over gas for closing coal capacity in the state.

Utility-scale solar or distributed systems?

Alongside Puerto Rico's focus on renewables over gas, there’s also a growing emphasis on small-scale generation over the big solar and storage projects that are more often undercutting peaker plants on the mainland.

Because Puerto Rico is so vulnerable to natural disasters — climate change has made intense hurricanes more frequent and the island has also been rattled by devastating earthquakes in 2020 — many local clean energy groups say a central grid is no solution, whether fossil-fueled or otherwise. As an island, importing electricity is also an expensive option.

Solar installations can withstand many hurricanes, but transmission and distribution equipment often sustains damage in storms. For that reason, some local engineers argue that siting generation close to consumption is preferable in Puerto Rico.

But envisioning a grid based not just on solar and storage but on distributed solar and storage stretches the imaginations of many traditional utilities and regulators. The bureau acknowledged that the precise number of customers who will elect to go solar is an "uncertainty" for PREPA when it comes to planning.

Commissioners noted that distributed solar has both advantages and downsides compared to utility-scale solar. Distributed solar has few line losses and requires no upfront utility capital to build. But net metering at the full retail rate in Puerto Rico, where electricity rates are high, means PREPA will pay more for customer-produced electricity than it likely would if it developed utility-scale resources.

A growing focus on minigrids

Many utilities, including PREPA, argue that gas is needed as a bridge fuel to provide baseload power that complements variable renewables. In its integrated resource plan, PREPA proposed breaking the island’s system into eight minigrids capable of isolating themselves if portions of the grid are damaged. The utility planned to support them using, in part, fossil fuels.

Commissioners split the difference. In its order, the bureau said PREPA could move forward with one minigrid to test the concept. But regulators also asked the utility to more thoroughly investigate how customer-sited solar and storage will impact its service territory in the near future and consider other, possibly cheaper resilience options.

Commissioners said PREPA must consider “the central role that customers can play through provision of energy supply and [demand response]” and examine the potential for virtual power plants in Puerto Rico, while modeling possible distributed solar and storage adoption and potential grid defection by its customers. 

Hawaii may serve as an example for PREPA on how to use customer-sited resources. Hawaiian Electric, which serves 95 percent of that state's customers, is now close to 30 percent renewables. Last year the utility opened up a request for proposal asking for bids from customer-sited resources. The utility also has a demand response pilot program. 

Puerto Rico regulators ordered PREPA to account for how energy efficiency measures may impact energy projections in its next integrated resource plan. The bureau is currently at work on efficiency and demand response regulations, which the utility must incorporate into its planning when they’re finalized.

Though the new plan highlights a new level of consensus that has been achieved — regulators, legislators and many clean energy groups are now all advocating for renewables, energy efficiency and demand response programs in the short term — getting to higher penetrations of renewables will still be a significant challenge for Puerto Rico. The island’s electricity system is much older than the U.S. industry's average. Puerto Rico's population has been declining, and load is expected to drop in the coming decades. Struggles wrought by natural disasters and the coronavirus pandemic are exacerbated by the island’s debt restructuring process, which some experts characterize as a result of U.S. colonialism.

Puerto Rico is also already significantly behind on its existing renewable portfolio standard, with just 2 percent renewables currently in operation compared to a required 15 percent in 2020. To ensure progress, regulators asked PREPA to submit quarterly reports. 

“The concern here is we already have in place a very ambitious renewable portfolio standard,” said Santiago. “We’ll see how this pans out.”