Thursday, April 18, 2019

Regulator: Utility plan misses mark on green energy policy

By on April 8, 2019

Two plans use different criteria to transform Puerto Rico’s energy needs; PREB requests explanation for preselected gas resources

Editor’s note: The following originally appeared in the April 4-10, 2019, issue of Caribbean Business.

SAN JUAN – Although Gov. Ricardo Rosselló recently enacted a green energy policy that would require Puerto Rico to meet its energy needs entirely from renewables by 2050, the P.R. Electric Power Authority’s (Prepa) integrated resource plan (IRP) paints an entirely different scenario.

The IRP, which is a 20-year plan to transform the island’s energy needs, presents several strategies and scenarios for long-term energy supply. Earlier this month, the Puerto Rico Energy Bureau (PREB) gave Prepa 30 days to fix the IRP after identifying numerous deficiencies.

The IRP, prepared by Siemens, supported a hybrid of two different plans. The first is a generation portfolio, identified as “Scenario 4 Strategy 2 (S4S2),” which meets the criteria for least cost, resiliency and viability in terms of installation of solar energy storage, as well as flexibility provided by local thermal generation on a minigrid level. Strategy 2 provides a distributed system of flexible generation and minigrids that are more resilient and closer to the customer.

Scenario 4 considers the option of developing liquefied natural gas (LNG) terminals at Yabucoa (on the east coast) and Mayagüez (on the west coast) supplied by ships. 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.

However, the IRP also included a scenario called Energy System Modernization (ESM), which according to Prepa, is based on several generation expansion additions. “The purpose of the ESM Plan is to expedite the implementation of a preferred plan, utilizing procurement options presented by the Public-Private Partnerships Authority, identify the pricing structure  necessary to retain existing natural gas-fired generation in the south, consider location alternatives for new large-scale [combined-cycle gas turbines] and ensure reliable capacity in the San Juan area,” the IRP reads.

The ESM is based on “fixed decisions” that include the building of a natural gas import terminal and gas plant in Yabucoa, a new land-based natural gas import terminal and gas plant in the San Juan area, a ship-based natural gas import terminal and conversion to natural gas of existing units in Mayagüez, and a new powerplant in San Juan. The economic simulation of the ESM case results in 900 megawatts of utility-scale photovoltaic additions over the plan’s first four years.

Contending there is a $9 million difference, Siemens recommended that Prepa follow the ESM resource plan and add preliminary activities from selective elements of the S4S2 plan that will provide greater flexibility than either plan alone.

Why did the Energy Bureau reject the Prepa IRP? The regulator ordered Prepa to justify its “fixed decisions” and explain the need for preselected natural gas resources and limitations on solar power and storage. The plan, PREB projects, would achieve 15 percent renewable energy by 2038.

“The Energy Bureau’s order comes at a time when other political forces in Puerto Rico are pushing hard for natural gas development as part of Prepa’s privatization. It is encouraging to see the bureau pushing back against these politically driven deals,” noted Cathy Kunkel, an energy analyst for the Institute for Energy Economics & Financial Analysis (IEEFA).

As a matter of fact, on March 21, the Puerto Rico Convention Center was the site of two energy conferences. The first was a Center for the New Economy activity that mainly focused on the advantages of renewable energy. The second was the 2019 American Liquefied Natural Gas Summit, which was attended by Prepa’s executive director, José Ortiz. The LNG Summit was organized by Congressman Ted Yoho (R-Fla.) and Resident Commissioner Jenniffer González (R-P.R.), who in an interview with Caribbean Business noted there was no reason Puerto Rico could not become an LNG hub for the region.

Yoho and other industry officials supported the proposed Small-Scale LNG Access Act of 2019, which would expedite the approval of U.S. natural gas exports equal to or less than 51.1 billion cubic feet per year to serve Caribbean and Latin American markets. The United States only exported about 3 billion cubic feet to the region in 2016.

González and Ortiz insisted they support the island’s current policy on renewables despite promoting the use of natural gas. Ortiz said the use of natural gas for energy was a temporary measure to reduce the cost of energy to consumers and take advantage of reductions created through technology that makes renewables possible.

“We are doing both. From the current 3 percent, we are going to be at 39 percent for the use of renewables in five years, and that is very aggressive. Because the costs of renewables go down each year, if you were to change the system to fully use renewables tomorrow, in three years you are going to ask why am I now paying so much,” he said.

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