A step on the road to energetic transformation
The renegotiation of renewable energy contracts announced by the government of Puerto Rico is emerging as a key step in the agenda to modernize the power grid, which includes the transition to a cleaner fuel.
We hope that once confirmed, the agreements renegotiated by Puerto Rico Electric Power Authority (PREPA) with 23 solar and wind power generation companies will help curb the instability of a system that too often exposes customers to interruptions and blackouts.
These efforts must respond to transparency and accountability processes as part of the initiative to create sustainable and competitive energy production. This is a key step to attract capital investment and, therefore, Puerto Rico's economic recovery.
In the short term, the contract renegotiation should be thoroughly examined by the Energy Bureau and the Oversight Board. If these were validated for the island´s benefit, approvals should be issued to guide alternative energy sources seeking to eliminate fossil fuel burning as the main mechanism for energy generation in Puerto Rico.
According to PREPA projections, 16 of the 23 solar or wind generation companies will be able to begin operating within a period of 24 to 36 months. Seven production companies with these renewable sources were already operating but were included in the renegotiation, following a decision by the utility's Board of Directors in 2019.
Those that are already operating generate a total of 290.5 megawatts, and the other 16 would produce 593 megawatts together. The utility´s projection, which has a debt of $9 billion, is to pay 10 cents per kilowatt-hour to these generators. PREPA has 1.5 million customers with a current rate including a charge of 21 cents per kilowatt-hour of energy.
PREPA put the contracts of 16 renewable energy projects on hold to assess aspects regarding reasonable return per project and other savings issues. The renegotiation addressed interconnection costs, as well as changes in the price of solar panels and backup batteries, among other issues. Over the past five years, the cost of these panels dropped by 80 percent and the cost of batteries by 22 percent, according to the public corporation, which invests at least $1.5 billion in oil purchases annually.
Along with addressing initiatives related to renewable energy generation, in the short term, it will be important for PREPA to work on price relief to customers as a consequence of the drop in oil prices due to the impact of COVID-19. Although social distancing may be linked to increased energy consumption by residential customers, the fuel purchase charge should reflect a decrease. PREPA projected a reduction for June.
The company faces many challenges related to the debt restructuring agreement, subject to legislation, and other procedures. Besides, they still have to work on repairs and improvements following damage caused by the impact of Hurricane María in 2017. In this sense, there are projects approved by the Federal Emergency Management Agency (FEMA), but they have not been able to be executed, which suggests that vulnerabilities remain just when another hurricane season is about to begin.
It will be key for the utility to keep developing improvement projects focused on more efficient and sustainable practices and technologies in the process of reaching a power grid based on cleaner sources, with modern infrastructure and less vulnerable to the impact of atmospheric events.
The goal is to build a robust energy system that is at the heart of Puerto Rico’s economic transformation.