Sunday, August 18, 2019

AES Ready for a More Renewable Future

By on April 18, 2019

(Screen capture of www.aespuertorico.com)

In Conversations With Prepa to Convert Guayama Powerplant to Other Fuel Sources

Editor’s note: The following was first published in the April 18-24, 2019, issue of Caribbean Business.

Within the framework of a stockholders’ meeting, in which Puerto Rico is one of the topics on the agenda, AES, which has a coal-ash powerplant in Guayama, is ready to help the island move toward a more renewable future following a technical and commercial analysis of the feasibility of such a change.

AES’ Executive Vice President & Chief Operating Officer Bernerd Da Santos said AES is the first public energy company that not only accepts the climate change report but has also agreed to move to renewables by reducing its carbon portfolio by 70 percent in 2030 and 50 percent by 2022. “We have made these transitions with different companies and in different markets,” he said.

Gov. Ricardo Rosselló has said he would like to see AES convert its Guayama coal-ash plant to use renewables by 2020. Santos said AES has already engaged in preliminary discussions with José Ortiz, the executive director of the Puerto Rico Electric Power Authority, to discuss the technical and commercial feasibility of converting the Guayama plant to use other fuel sources to produce energy. “To be able to do the conversion of the plant, we have to do all the technical analysis. I say this because converting the plant has to be done responsibly, with a focus on grid reliability,” he said.

Transforming the plant in Guayama also has to be done without impacting costs to consumers in a multistep transition process, he said. “We are in discussions right now and no decisions have been made. On the feasibility of converting the plant by 2020, I think it is too soon,” he said.

While an AES white paper obtained by Caribbean Business notes the importance of ensuring the reliability of the grid and avoiding adverse impacts on costs during the transition of the Guayama plant, it also says that even after the transition, there could be an impact on costs. What are the paradigms you expect while making the transition? Caribbean Business asked.

Da Santos said that while making the transition, there has to be sustainable sources of energy operating in the meantime to ensure power service is not interrupted. “The Puerto Rico plant represents 15 percent of the island’s energy production. The plant represents energy costs of 8 cents per kilowatt-hour. There are no other powerplants that can distribute energy at that cost,” he said.

What is the impact that AES sees resulting from the transition of its coal plant to renewable? By Dec. 31, 2027, Puerto Rico must have sustainable investments in renewables so there is capacity and reliability in the power system. “If there is no reliability of the system, we could have power interruptions,” he said.

With respect to the economic impact, without the AES plant operating as it undergoing conversion, consumers could see an impact on their utility rates of 20 percent. “So, if a family is paying $100 a month for energy, it will end up paying $120 because the power-producing plants that exist today in Puerto Rico are more costly than the Guayama plant. Our Puerto Rico plant was built with the lowest levels of emissions and is even lower than the plants that are in Puerto Rico,” he said.

Da Santos said that while transforming the AES plant can be done, he noted that if by Dec. 31, 2027, the energy capacity is not available in Puerto Rico, AES would have to shut down regardless, because by 2028, energy production with coal will be banned.

Natural gas on horizon

Ortiz said at a recent U.S. House Committee hearing in Washington that it needed about $2 billion in funding to be able to prepare the system to handle renewables. He also said he was in discussions with AES about the transformation of its Guayama plant to either produce energy through natural gas or biomass. Da Santos said officials are also discussing a third option, which is to use solar energy. AES already has a solar farm in Puerto Rico. He said AES transformed a coal plant in Hawaii to operate with biomass and another coal plant in Argentina is using natural gas.

In response to a Caribbean Business question, Da Santos said that while AES has changed powerplants around the world to add renewables, and is a leader in battery storage, the company is also competitive in the use of natural gas because it has two natural gas terminals, in Panama and the Dominican Republic. AES currently has contracts with Total to supply the natural gas. AES participated and lost the bid to transform San Juan units 5 and 6 to natural gas. The contract went to New Fortress Energy. He said that any contract to use natural gas for energy supply must also contain information on such technical aspects as the gas pipelines that are needed.

What do stakeholders think of the change? Da Santos said AES has the capability to change its thermal plants to use renewables because it has already done that in the United States and other parts of the world. “It is a matter of what is technical and commercially feasible. Because, again, one thing is what you want to do and another is whether it is technically best for the system,” he said.

The AES plant can be converted, he said, but it must be within a process in which other sources of energy are being developed—because the systems do not operate in isolation—and to ensure the reliability of the system and a hike in costs.

The question, then: What is the multistep process needed to change the local AES plant to use natural gas?

Da Santos said that while Puerto Rico has been discussing the distribution of energy through some seven microgrids across the island, it should use natural gas to provide capacity. He reiterated that the company will work with Puerto Rico to achieve its renewable goals through the “green, blend and extend” form of transition.

Regarding its stockholders’ meeting, Da Santos said that in addition to nominating the board of directors, there will be discussion of strategies moving forward, the achievements of the company and its goals. “We have operations in 15 countries, and Puerto Rico is part of that market, so it is part of the agenda,” he said.

Asked if stakeholders were concerned about the fact that Puerto Rico lacks a robust energy regulator and that Prepa has not achieved its benchmark, Da Santos said that level of detail does not happen at such meetings but there are more discussions about growth.

On the issue of a consensus in the direction AES is taking, Da Santos said there is a discussion on the use of coal ash. He reiterated that the AES plant is one of the cleanest in Puerto Rico. He denied allegations that ash produced at the Guayama plant is toxic, adding that the plant is supported by the U.S. Environmental Protection Agency. He said the ash is combined with cement in many jurisdictions for construction work.

–Executive Editor Philipe Schoene Roura contributed to this story.

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