Puerto Rico utility asks for another resource plan extension

The Puerto Rico Electric Power Authority’s headquarters in San Juan (CB file)

Regulator threatens Prepa with $25,000 fine per day if Friday deadline not met

SAN JUAN — After the head of the Puerto Rico Electric Power Authority (Prepa), José Ortiz, said he would submit the utility’s integrated resource plan to the Energy Bureau (PREB) by May 31, he has requested an extension until Friday.

On Wednesday, the regulator granted Prepa’s request as well as to provide updated testimony in support of the IRP filing by June 14. However, PREB warned the utility that any further delays would result in $25,000-a-day fines.

The 20-year IRP is to transform the island’s energy production, and presents several strategies and scenarios for long-term supply. Prepa sent the document to the Energy Bureau in February, but the regulator gave the utility 30 days to revise it after identifying numerous deficiencies, but granted several extensions for the updated plan.

PREB Assistant Commissioner Lillian Mateo Santos said that after the bureau evaluates the document, it will be put through hearings before making a final determination.

The regulator had ordered Prepa to justify certain “fixed decisions” and explain the need for preselected natural gas resources and limitations on solar power and storage. This year, the government enacted a law that would require the island to generate all of its power needs from renewable energy sources.

Along with proposing solar and storage projects, the IRP, which was developed by Siemens, the German engineering conglomerate, also recommends a variety of natural-gas infrastructure, compromising the island’s legislated public policy to only use renewables by 2050.

The resource plan proposes to divide the island into eight mini-grid regions for a distributed system that can operate independently in the event of a disaster. It also calls for smaller microgrids in geographical areas that make repairs difficult.

The original IRP supported two scenarios for the provision of energy. 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 and distribution. It calls for the option of developing ship-supplied liquefied natural gas (LNG) terminals at Yabucoa on the east coast and Mayagüez on the west coast.

The scenario also includes an LNG terminal in San Juan, which could obtain permitting approval. The scenario assumes solar and storage costs and availability based on reference-case assumptions.

However, the IRP also proposes a scenario called Energy System Modernization (ESM), which according to Prepa, is based on several generation expansions.

“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.

The bureau sought clarification from Prepa as to why it created a scenario containing the so-called fixed decisions for projects.




Puerto Rico utility to submit revised integrated resource plan

A Puerto Rico energy regulator hearings in November 2016 to investigate Prepa’s rate hike. (Agustín Criollo/CB)

Energy regulator gave Friday deadline; Prepa chief says power could be restored in months after future hurricane

SAN JUAN — The head of the Puerto Rico Electric Power Authority (Prepa), José Ortiz, said he will comply with the Energy Bureau’s deadline and submit by Friday a revised version of the utility’s integrated resource plan.

He made the remark in an aside during a Puerto Rico Manufacturers Association convention Thursday.

The 20-year IRP is to transform the island’s energy production and presents several strategies and scenarios for long-term supply. Prepa turned over the document to the Puerto Rico Energy Bureau (PREB) in February, but the regulator gave the ultility 30 days to revise it after identifying numerous deficiencies. The regulator later extended the deadline to Friday.

PREB Assistant Commissioner Lillian Mateo Santos said that after the bureau evaluates the document, it will be put through hearings before making a final determination.

The regulator ordered Prepa to justify certain “fixed decisions” and explain the need for preselected natural gas resources and limitations on solar power and storage. This year, the government enacted a law that would require the island to generate all of its power needs from renewable energy sources.

Along with proposing solar and storage projects, the IRP, which was developed by Siemens, the German engineering conglomerate, also recommends a variety of natural-gas infrastructure, compromising the island’s legislated public policy to only use renewables by 2050.

The resource plan proposes to divide the island into eight mini-grid regions for a distributed system that can operate independently in the event of a disaster. It also calls for smaller microgrids in geographical areas that make repairs difficult.

The original IRP supported two scenarios for the provision of energy. 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 and distribution. It calls for the option of developing ship-supplied liquefied natural gas (LNG) terminals at Yabucoa on the east coast and Mayagüez on the west coast.

The scenario also includes an LNG terminal in San Juan, which could obtain permitting approval. The scenario assumes solar and storage costs and availability based on reference-case assumptions.

However, the IRP also favored a scenario called Energy System Modernization (ESM), which according to Prepa, is based on several generation expansions.

“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.

The bureau sought clarification from Prepa as to why it created a scenario containing the so-called fixed decisions for projects.

Better off

On Thursday, Ortiz also said the island’s electrical system is better prepared to recover after a natural disaster and assured that, instead of a year, it will only take three to four months to bring power back up if a hurricane similar to Maria strikes the island again. Hurricane season starts June 1.

“The transmission is better than before Maria but the distribution still has problems,” he said.

He noted that Prepa has 33 memorandums of understanding signed with other utilities to provide a response, and has drafted contracts with established fees to avoid paying too much for repairs.

More than $100 million worth of inventory is available in staging yards around the island, he said, adding that the utility is also implementing a comprehensive vegetation management plan to reduce the number of outages caused by fallen trees or vegetation.




IEEFA, Cambio sue Puerto Rico utility for info on privatization efforts

(Screen capture of aldia.microjuris.com)

Say ‘process is taking place behind closed doors’ and may threaten transition toward renewable energy sources

SAN JUAN – The Institute for Energy Economics and Financial Analysis (IEEFA), a U.S.-based clean energy think tank, and Cambio, a Puerto Rico-based environmental nonprofit, filed Thursday a mandamus action in the Court of First Instance in San Juan to obtain information about the Puerto Rico Electric Power Authority’s (Prepa) system and the ongoing privatization process.

The legal action is aimed at filling the gaps in information related to the privatization of Prepa, including any cost-benefit studies that have been conducted to justify the proposed transmission and distribution concession, as well as various new powerplant proposals.

“Very little information has been provided about the underlying studies or plans related to the government’s decision to privatize Prepa. We are determined to get answers to some of the pressing questions about Prepa’s structure in order to better inform the people of Puerto Rico about their future,” said civil engineer Ingrid M. Vila Biaggi, founder of Cambio, which is part of the Queremos Sol coalition.

“It is imperative that Puerto Rico move towards, not away from the transition to renewable energy,” she stressed.

The law that would privatize Prepa has allowed Puerto Rico’s government to not disclose much of the information regarding the companies vying to get a piece of the utility. In April, the government enacted public policy that included targets to use renewable energy sources exclusively by 2050.

“Much of the privatization process is taking place behind closed doors,” IEEFA energy analyst Cathy Kunkel said. “There are justified concerns that, under the privatization proposals being discussed, Puerto Rico will not be moving towards solar and other renewable options anytime soon.”




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

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.




AES Ready for a More Renewable Future

(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.




Puerto Rico Manufacturers Association calls for special session to address energy policy

SAN JUAN – The Puerto Rico Manufacturers Association (PRMA) called on the legislature to immediately convene a special session for the Senate-passed energy framework to also be passed by the House of Representatives.

“We exhort the Governor, Hon. Ricardo Rosselló Nevares, to convene an extraordinary session of the Legislature, including as part of its agenda Senate Bill 1121, which proposes a new energy regulatory framework to govern the transfer of assets and concessions of the Electric Power Authority [Prepa] and to include other public energy policy criteria that allow transforming, modernizing and making our electrical system more efficient,” PRMA President Rodrigo Masses said in a statement.

The bill would require the government to eliminate fossil fuel sources and use 100 percent renewable energy by 2050. In addition, it would empower the Energy Commission to regulate the sector and eliminate Prepa’s monopoly.

Masses stressed that S.B. 1121 is the product of a legislative process, led by Senate Vice President Larry Seilhamer and Minority Speaker Eduardo Bhatia, “where there was broad participation of the various business, professional, union, civic and governmental sectors,” the PRMA said.

“Puerto Rico deserves to have already adopted the regulatory framework that will delimit and guide every PREPA asset-transfer process, to have the certainty, confidence and security that said process will reflect the…public interest of achieving an efficient, safe, stable system, responsive to the needs and challenges of the different residential, industrial, commercial sectors and citizens in general,” Masses added.

The House postponed its vote on the measure after claiming it needed time to evaluate it thoroughly.

“We do not think waiting for the next ordinary session is the most appropriate while Act 120 allows the transfer of assets under the current state of law, which does not provide the standards, criteria and a robust and adequate regulatory framework so said process fosters the economic development Puerto Rico deserves and demands,” Masses continued.

The PRMA said it has been meeting with House Economic Development Committee Chairman Víctor Parés and his technical team, and that it is sure the House lawmakers and Speaker Carlos “Johnny” Méndez would address the measure “in a thorough, diligent manner and with the sense of this matter’s urgency, if an extraordinary session were convened” to consider it.

“We trust that the Governor can consider this recommendation favorably, and that under the leadership of Engineer José Ortiz at the head of PREPA and the Governor’s team, the transformation of the electric system can be directed under an advanced regulatory framework, worked on in an exemplary manner by the Legislative Assembly of Puerto Rico and the majority and minority leadership,” Masses concluded.

Puerto Rico energy policy bill does not make it through session