Friday, May 24, 2019

Puerto Rico gov’t issues request for qualifications for energy partnership projects

By on April 26, 2019

Prepa Director José Ortiz, COR3 Director Omar Marrero and Gov. Ricardo Rosselló (Courtesy)

Involve peak-period, hydroelectric generation

SAN JUAN – Puerto Rico’s government has issued requests for qualification for two public-private partnerships (P3s) for the development, management and operation of peaking units as well as hydroelectric power plants.

The announcement was made by Gov. Ricardo Rosselló; José Ortiz, the executive director of the Puerto Rico Electric Power Authority (Prepa) and Omar Marrero, director of the Public-Private Partnerships Authority (PPPA).

Rosselló said both projects, and a third one underway that consists of the installation of battery storage systems, will allow the island to move toward the legislated objective of renewable energy generation.

“It is an ongoing PPPA effort and we expect it to have four or five [public-private partnerships] before the end of this year. The transformation of the energy model continues through the renewable path that will allow for a more resilient network,” Rosselló said.

Private firms had suggested the partnerships via unsolicited proposals.
Marrero explained that the P3 model starts with the qualification process of firms interested in becoming partners with the government and can design, operate and manage the projects.

The proposal to install mobile power generation units to address peak period is for the provision of 450 megawatts via a 25-year contract.

The government is interested in generation units that can be moved to existing powerplants when needed or to new locations in the future.

Initially, they would be installed in power complexes or facilities such as Aguirre, Costa Sur, Daguao, Jobos, Palo Seco and Vega Baja.

“It’s a long-term contract to provide that energy through a power-purchase and operating agreement. We are looking for a private entity that can offer a complete solution,” Marrero said. The units should be in place by 2020.

COR3 Director Omar Marrero, Gov. Ricardo Rosselló and Prepa Director José Ortiz (Courtesy)

The official added that “If this project had been undertaken prior to the hurricane [Maria], the response would have been more effective.”

In fact, the project was submitted as an unsolicited proposal by a consortium comprising ARG Precision Corp., PW Power Systems Inc. and Bostonia Partners LLC on June 15, 2017.

“One of the characteristics we are looking for is for each unit to be able to run both diesel and natural gas,” Marrero said.

The second partnership was described by Marrero as “cool and sexy” for its resilience, or “black start.” It involves the design, management and operation of 16 generation units and turbines at nine hydroelectric plants. The project also entails the management of federal disaster funds, which are also managed by Marrero, as also director of the Central Office for Recovery, Reconstruction & Resiliency (COR3).

The idea was initially submitted as an unsolicited proposal by Cube Hydro Partners LLC and CSA Architects & Engineers LLP on May 25, 2017.

The project to manage and operate Toro Negro hydroelectric plants 1 and 2 was left out because several mayors want to operate them as a consortium.

This project would materialize as a long-term rental agreement for facilities or a long-term operation and maintenance contract.

Ortiz said these projects lay the foundations to reach 100% use of renewable sources to provide electricity service. The transformation of the electrical system would consist of eight “macro grids” composed of mini-grids in which peaking units could be transported where needed to stabilize the system.

Prepa Director José Ortiz (Courtesy)

Ortiz said that if Prepa were to invest in peaking units, it would have to pay about $17 million for each. In this case, a private entity would be responsible for making the investment, which would be paid back through a lease of the facilities or a power-purchase operation contract.

When the current peaking units are lit, the cost of energy is 34 cents per kilowatt-hour (kWh) because they operate using older technology and costlier diesel, thus Prepa is seeking new peaking units that can produce energy at a lower cost and operate with natural gas or diesel.

The contract for the hydroelectric plants entails modernizing current facilities including the installing of new turbines. The cost of the energy produced by these plants is about 7 cents per kWh.

Ortiz could not say how much it would cost to renovate the hydroelectric plants, but made clear these are “in very bad condition,” especially their penstocks, or channels from mountain lakes.

The Puerto Rico Aqueduct and Sewer Authority (Prasa), which owns some hydroelectric plants, has expressed objections to expanding Prepa’s use of hydroelectric power, citing its own energy needs as well as water conservation.

Although in its fiscal plan Prasa seeks to obtain the title of other hydroelectric plants to produce its own power, Ortiz said Prepa first has to conclude its bankruptcy-like process to be able to make decisions regarding its generation assets.

Prasa hopes that with the energy savings obtained from producing its own energy with the hydroelectric plants, lakes can be dredged to increase water reserves. There is a priority project, however, to dredge lakes using federal funds.

The most recent integrated resource plan (IRP) submitted by Prepa to the Energy Bureau is still under evaluation. However, Ortiz said the newest proposals submitted had been considered under the modified IRP approved several years ago.

“We are all consulting this with the Bureau,” he said.