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Prepa consumer advocate says renegotiated contracts are ‘a good first step’

By on May 26, 2020

(USDAgov on Visualhunt)

Urges faster implementation of renewables to meet legislated goals; calls for better pricing

SAN JUAN – The consumer representative on the Puerto Rico Electric Power Authority (Prepa) Governing Board welcomed the public utility’s announcement last week that it had renegotiated 23 renewable energy contracts with private companies to obtain better pricing and start building generation that had been held up for years, calling the action “a good first step,” but cautioning that much still needed to be done to reach renewable energy goals legislated last year.

Gov. Wanda Vázquez and Prepa Executive Director José Ortiz announced that the utility completed contract renegotiations for 23 solar and wind energy projects, including 16 contracts for still unbuilt solar generation projects that had been held up since 2012. These projects, which should generate some 593 megawatts (MW), are scheduled to start running within 24 to 36 months, they reportedly said.

The renegotiated contracts set the price for renewable power at 10 cents per kilowatt-hour (kWh), below the 14.28 cents per kWh it costs Prepa to generate power, Ortiz reportedly said, while acknowledging that the contracts retained the 1 percent to 2 percent annual riders to guarantee a return on investment for these companies, but clarified they were limited to a 14.1 percent cap.

The governor reportedly claimed that the renegotiated contracts for seven operating renewable energy projects, generating 291 MW, will save the utility some $200 million during their five-year term, while another $1 billion will be saved for the 16 newly built projects. In addition, the new projects will avoid the release of 1.1 million pounds of carbon dioxide into the atmosphere, she said.

“This is a good first step, but it only adds 593 MW of new renewable energy,” Tomás J. Torres Placa, consumer representative on the Prepa governing board, told Caribbean Business. “To achieve the 20 percent goal for renewables in 2022 you will need 2,200 MW. So even to achieve the first 20 percent of renewables is still a big goal that needs to be worked on.”

Tomás J. Torres Placa (Screen capture of

Ortiz reportedly said that renewable energy generation would total 1,106 MW after adding up existing and proposed renewable energy projects, including 210 MW of distributed energy generated by renewables located in homes and businesses.

The Puerto Rico Energy Public Policy Act of 2019, or Act 17, requires all retail energy providers on the island, including Prepa, to increase their share of renewable energy-produced electricity sold to customers to 100 percent by 2050. In-between goals include increasing this share to 20 percent by 2022, 40 percent by 2025, and 60 percent by 2040.

“Looking ahead, we have a great opportunity because we barely have 1,100 MW, and to reach 20 percent we need to double that,” Torres said. “For 40 percent we will need 4,200 MW. Every 20 percent represents about 2,000 MW.”

Dropping costs

Moreover, the latest Prepa contracts offer the opportunity to obtain “better and more competitive prices” for the remaining megawatts needed to reach the first renewable goal in two years, Torres said. Prepa’s integrated resource plan (IRP), the 20-year roadmap mandated by the Puerto Rico Energy Bureau (PREB), contemplated the cost of renewables between 6 cents and 7 cents per kWh, he said.

Ortiz reportedly did not rule out pricing below 10 cents per kWh, noting that the costs of renewable energy equipment such as solar panels and storage batteries have fallen by 80 percent and 22 percent, respectively.

Torres said that in regions with large expanses of land and many hours of sunlight, the price of solar-generated energy could be as low as 2.5 cents to 3 cents per kWh. However, he acknowledged that Puerto Rico’s relatively high population density, the bankruptcy of Prepa and economic situation on the island constitute obstacles to negotiating better deals

“What should the goal be? To achieve the 6 cents proposed by the integrated resource plan or a better price, as the financial situations of the government and Prepa improve,” he said. “So in terms of pricing, we could do better, and in terms of scale we have long road ahead to traverse.”

Torres said distributed energy should play a key role in achieving renewable energy goals, noting that the government “should take advantage of” the use of home and business rooftops to install solar to “make the best use of land.” He stressed, however, that Prepa needs to publish a breakdown of renewable energy production by source to ensure a balance between large-scale systems with contracts with Prepa, and small-scale systems installed by customers and which are included in the utility’s net-metering program.

“I think that to promote distributed energy consumers need to know how much of it has been connected to the grid by reporting such data on Prepa’s web page, as is required by Act 17,” he said. “To better monitor these goals, including distributed energy produced, that information must be posted as soon as possible on Prepa’s web page. This is because we need a balance between centralized energy and distributed energy to make the best use of the land, including impacted space such as the roofs of our homes and businesses.”

Torres said that annual rider costs for renewables are included in Prepa customers’ bills, under the so-called “adjustment for purchases of power” item.

“Inflation is about 1 percent a year, so [an annual rider rate] more than that should be verified,” he said.

On lookout for obstacles

Meanwhile, Julián Herencia, president of the Association of Renewable Energy Producers of Puerto Rico (APER by its Spanish acronym), said in a statement that his organization “feels very proud to have contributed to the development of the Country [Puerto Rico] through the agreements that were achieved.” The organization lobbied in favor of Act 17 and has denounced and worked to eliminate bureaucratic obstacles holding up renewable energy projects.

“After several years of continuous and arduous effort…[w]e have broken the wall of paralysis and opened a window to the future, giving way to various new large-scale renewable energy projects,” Herencia said.

“The projects will provide Puerto Rico with an ample source of clean energy at just prices,” he said, adding that the contracts are a “significant step forward, not only economically, but [also] terms of health and ecological wellbeing.”

Herencia said Prepa’s renegotiated renewable energy contracts “send a clear message to the national and international markets that Puerto Rico is on its feet and that investments can be made on the island with security and certainty.” The resulting multimillion-dollar investments that will be made will “create employment opportunities through construction, operation and maintenance of these projects”

However, Herencia stressed the importance of monitoring the “procedural challenges that begin and that could hinder the realization of the projects.” He said that with the start of the project approval process involving the Prepa governing board, the Puerto Rico Financial Oversight and Management Board, PREB and federal bankruptcy court, the agreements should be “firm, binding and exclusively subject to approval of the aforementioned entities.”

APER’s head said the organization will make sure additional renewable energy projects are evaluated while those in the pipeline are built and become operational, to ensure the island meets renewable energy goals.

“We cannot allow the next projects to take seven years to materialize,” he said. “APER remains on guard and vigilant to [ensure] more frequent advances in this front and that they are achieved in a more immediate way.”

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