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Prepa’s Integrated Resource Plan Bereft of Rate Certainty

By on March 15, 2019

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Energy Experts: $1 Billion Construction of Natural Gas Terminals, Infrastructure Would Result in Higher Energy Costs

Editor’s note: The following originally appeared in the March 14 – 20, 2019, issue of Caribbean Business.

The integrated resource plan (IRP) proposed by the Puerto Rico Electric Power Authority (Prepa) is a step backward in the vision for renewables for the island and would result in higher energy costs to consumers, according to two energy experts.

Tomás Torres Placa, executive director of the Institute of Competitiveness & Economic Sustainability, says that while Chapter 8 of the IRP does not determine costs, it does determine the impact on costs. The impact of the scenarios selected by the government would result in energy rates of 24 cents per kilowatt-hour (kWh) in 2019 and an increase to 25 cents per kWh for the next. “The IRP does not determine rates but the estimated impact on costs,” he said.

The IRP, prepared by Siemens, presents several strategies and scenarios for energy supply long-term. The document supports a generation portfolio identified as “Scenario 4 Strategy 2 (S4S2)” because it meets the criteria for the least cost, resiliency and viability in terms of installation of solar and battery storage, as well as flexibility provided by local thermal generation on a minigrid level in Puerto Rico. The Strategy 2 used for the formulation of the portfolio calls for at least 80 percent of peak-demand needs to be supplied locally. This strategy provides a distributed system of flexible generation and minigrids that are more resilient and closer to the customer. The portfolio generation mix was also confirmed to be able to supply the levels for the forecast critical load.

Scenario 4 considers the option of developing liquefied natural gas (LNG) terminals at Yabucoa (on the east coast) and Mayagüez (on the west coast) through ship-based LNG. The scenario also includes gas to the north through land-based LNG at San Juan, which could achieve permitting approval. The scenario assumes solar and storage costs and availability based on reference-case assumptions.

The IRP includes a chart titled “7-5 fuel infrastructure options assessments,” which includes the estimated costs. “The construction of the gas port terminals and infrastructure for natural gas is about $1 billion,” Torres said, adding that the costs will have an impact on rates.

Jeffrey Tannenbaum, a former solar energy entrepreneur—who built more than 70 solar powerplants that provide 1.3 gigawatts of energy for 250,000 homes in less than five years on the U.S. mainland—insisted Puerto Rico can reach the 100 percent renewable energy level in a decade. The 2019 IRP, which provides for Prepa’s energy supply resources for a 20-year period (2019 to 2038), calls for an increase of 50 percent in renewables. The plan calls for building three gas port terminals and the use of natural gas, which would put Puerto Rico far from the use of renewables and more dependent on shipments.

Achieving the 100 percent renewables vision will happen when officials sit down again and do another IRP for the period between 2038 to 2050, Torres said. “By the time we do this session, we should be at 50 percent renewables,” Torres said.

Tannenbaum, who said he has no energy interests on the island, indicated that to achieve the goal to use 100 percent renewables is more possible now than in the past because of technological advances. Instead, the plan calls for 1 gigawatt of solar, or 20 percent, by 2025. He said a realistic target of four gigawatts of energy from renewables can be set for 2030.

Why? Tannenbaum believes the culture on the island is so entrenched in fossil fuels that it cannot conceive of creative ways to achieve the vision for renewables. “Who is writing this plan? The old guard, as well as the fossil fuel industry, which makes money transporting fossil fuels to the island, is very powerful,” Tannenbaum said. “The fossil fuel industry, much like the cigarette industry, is very powerful. I have the scars from it.”

He noted that Applied Energy Services Corp. (AES) has already said it can transform its coal-fired powerplant to produce energy through renewables by 2028, when its contract expires, so “it can be done. AES is doing this all around the world,” Tannenbaum said. AES also built one of the largest solar powerplants in Hawaii.

While he knows Puerto Rico’s permitting process is traditionally slow, he also said Prepa is biased against clean energy and very much politically driven. “The energy utility should not be in the way of the future,” Tannenbaum said.

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