by Emma Foehringer Merchant
March 16, 2020

Last April, Puerto Rico became the third U.S. state or territory to mandate 100 percent renewables, with legislation that aims to reach that goal by midcentury. Lawmakers put the law through final votes around the same time the island's electricity was fully restored, 18 months after Hurricanes Maria and Irma. At the time, calls for a distributed grid reached a fever pitch.

But nearly a year later, and with recent earthquakes again roiling the island with blackouts, the road to realizing that future remains riddled with uncertainty.

The Puerto Rico Electric Power Authority (PREPA), the utility that serves the entire island, filed its integrated resource plan (IRP) in June (its second attempt at a plan after the first was rejected). Prepared by Siemens, the plan included increased solar and storage targets while also proposing further build-out of natural-gas infrastructure.

That latter point has ignited criticism from clean-energy advocates on and off the island who say that dropping money into natural gas will just defer the island’s transition to cleaner resources. A group of nonprofits has rallied behind an alternate plan that relies on customer-sited solar generation and reaches 50 percent renewables by 2035.

With the IRP process underway, PREPA, clean energy advocates and external stakeholders are split on a course of action — with Puerto Rico’s grid hanging in the balance.

Puerto Rico's grid plan

Hurricanes Maria and Irma decimated Puerto Rico’s electricity system in the fall of 2017. The disasters left the island in the dangerous and unusual position of needing to rebuild its grid from scratch. Environmentalists and clean-energy companies seized on the situation as an opportunity to build out a distributed grid that relies on “prosumers”: customers that produce their own electricity, in this case with solar sited on their homes.

In spring 2019, lawmakers and Governor Ricardo Rosselló (who resigned in July amid protests calling for him to step down) affirmed their support for that vision, passing a bill that requires 100 percent renewables by 2050, with interim targets before that date. The bill also insulated net metering against potential changes and eased interconnection procedures.

The law was a significant step. But the path to 100 percent is still very much uncertain; Puerto Rico remains far from meeting even the previous version of its renewable portfolio standard of 20 percent by 2035.

The flurry of attention around Puerto Rico’s energy transition has meant outsize importance for the utility IRP process, generally a wonky regulatory proceeding that’s now become a barometer of commitment to clean-energy plans.

Siemens oriented its proposed IRP around eight “mini-grids” across the island, which in the event of a disaster could be isolated to keep power running. The system would be powered with the addition of 1.8 gigawatts of solar, 920 megawatts of storage and 18 small gas turbine peaking units of 23 megawatts each. Siemens also suggested adding two larger 302-megawatt gas plants, arguing that thermal power is necessary for resiliency.

Public comments on the proposal were due early this month. The island’s energy bureau — analogous to a regulatory commission on the mainland — told Greentech Media that it may decide on the future of the IRP anytime after March 16.

But what Puerto Rico's final resource mix will actually look like is still very much unclear. 

At the end of February, the bureau asked PREPA and stakeholders participating in the process to reexamine the potential for rooftop solar to play a more significant role in the updated system. Regulators also asked the utility to consider hydroelectric power and virtual power plants.

Those measures match up with what environmental organizations and clean energy advocates would like to see in Puerto Rico; those groups have called for regulators to reject the current plan.

“We think they do need to go back to the drawing board in terms of their long-term plan,” said Raghu Murthy, an attorney at environmental law organization Earthjustice, which is representing local environmental organizations in the proceeding. Murthy added that Siemens and the utility appear “indifferent” to concrete planning for the build-out of renewables.

“Distributed generation has resiliency benefits that are really critical on this island to power critical loads right after a storm, or right after an earthquake or some other type of event," Murthy said.

Neither Siemens nor PREPA responded to a request for comment on the IRP.

"A battle of ideologies"

The conflict is not new. Puerto Rico's plans to move to 100 percent renewables have been mired in divisions since the electricity planning process got started.

In 2018, Cathy Kunkel, an analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), put it bluntly: “if your goal is to get to 100 percent renewables by 2050, you should start investing in them now.”

Over a year later, the former chair of the energy bureau, José Román Morales, wrote that the planning process had “become a battle of ideologies.”

“PREPA has framed the path forward through the lens of its own perceived advantage — promoting natural gas over renewable energy,” he wrote in a December blog post.  

Román Morales, who is now an IEEFA consultant, argued that PREPA’s concept of a decentralized grid is far from what such a system should actually look like because the mini-grids still rely on “big, centralized natural-gas plants” and significant transmission and distribution.

“A truly decentralized system would rely instead on small generators, in this case solar generators, dispersed throughout Puerto Rico,” wrote Román Morales. “Simply calling a system ‘decentralized’ does not make it so.” 

Clean energy advocates have also criticized Siemens' analysis of solar and natural-gas costs.  

“We think they badly underestimated the real costs that these gas plants are actually going to have,” said Murthy. “And on the other side of the coin, we think they significantly overestimated the cost of renewables, especially distributed generation.”

The PREPA plan includes a natural-gas delivery cost ranging between $7.48 and $8.89 per MBtu (1,000 British thermal units). Actual delivery costs in 2019 hit $12 per MBtu, according to testimony from local environmental organizations. Those groups say PREPA and Siemens’ calculation of levelized cost of energy for residential solar, at 15.3 cents per kilowatt-hour (AC), is nearly double the 7.8 cents per kilowatt-hour cost those groups calculated for the island using data from the National Renewable Energy Laboratory (GTM reached out to NREL to confirm these numbers but did not receive the data before publication of this article).

Advocates see residential solar as a good deal compared to the island's current generation: They calculate solar-plus-storage prices at 21.6 cents per kilowatt-hour, lower than the 22 cents per kilowatt-hour (AC) price for PREPA’s residential electricity. And grid defection, which was on the rise post-Hurricane Maria according to anecdotal reports, could continue.

For that reason, advocates believe the IRP “significantly underestimates the amount of distributed, customer-owned generation that will be integrated into the grid over the next two decades,” said Agustín Irizarry-Rivera, an electrical engineer and professor of power system dynamics at the University of Puerto Rico-Mayagüez. 

For solar customers connected to the grid, electricity prices may get more expensive. The Financial Oversight and Management Board, a body Congress mandated to manage Puerto Rico’s debt, approved a restructuring services agreement in 2019. If lawmakers in Puerto Rico also approve the agreement (an unclear outcome in an election year) it would add several cents per kilowatt-hour to solar customers’ bills, eroding savings from installing solar and potentially turning more customers off PREPA’s services.

“These solar taxes penalize these customers and push them to further hate PREPA,” Javier Rúa-Jovet, director of public policy in Puerto Rico at residential solar installer Sunrun, told GTM in October. “As prices come down — and they are quickly coming down for solar and storage — leaving the grid will be less and less difficult as time passes.”

Rather than begrudgingly accepting customer-sited solar and storage, the utility should be taking advantage of it for demand reduction and peak-demand aggregation, advocates contend.

The rift between those competing visions leaves unknowns for Puerto Rico’s plan throughout the duration of the IRP, which runs through 2038, and in the longer term as it works toward 100 percent renewables. PREPA is not alone in that uncertainty — utilities such as Duke Energy and Southern Company are at risk of missing self-imposed carbon-reduction goals, according to a report released last week

In the case of Puerto Rico's transition, Laura Arroyo, another attorney at Earthjustice, said several aspects are not hazy at all. “The legislation is clear,” she told GTM. “The people are clear.”

“It’s up to the folks at PREPA and up to the people in charge to implement the will of the people on the island,” added Murthy.