Puerto Rico regulators set island on a 5-year course to procure renewables, storage

Dive Brief:

The Puerto Rico Energy Bureau (PREB) has ruled on the Integrated Resource Plan (IRP) proposed by the Puerto Rico Electric Power Authority (PREPA), partially rejecting the utility's grid modernization plan and gas-heavy approach while directing the procurement of at least 3.5 GW of solar and 1.36 GW of battery storage by 2025.
Clean energy advocates were pleased to see regulators reject PREPA's plan for a new liquefied natural gas terminal and gas-fired generation, instead directing the utility to utilize an all-source procurement to speed development of carbon-free resources.
PREPA's plan for eight mini-grids to maintain island resilience was slated for more study, with the utility authorized to begin developing just one of the grids around the San Juan and Bayamón region. Regulators also directed PREPA to explicitly include analysis of virtual power plants (VPP) and distributed resources in its next IRP.

Dive Insight:

Puerto Rico's embattled utility has faced numerous challenges in recent years, including bankruptcy, devastating storms, earthquakes and now COVID-19. Hurricane Maria, three years ago, destroyed the island's grid and left some without power for the better part of a year.

PREPA is still working on how to fully modernize and strengthen the system, and the finalized IRP will ultimately work alongside direction from the Financial Oversight and Management Board for Puerto Rico and the U.S. Federal Emergency Management Agency. But the IRP proposal gives the utility a direction with a strong push to utilize renewables for resilience, say experts.

Regulators largely accepted PREPA's analysis, but rejected the utility's conclusions, according to Rocky Mountain Institute Principal Roy Torbert. Rather than utilizing PREPA's preferred scenario, which included significant new gas capacity, regulators chose another option: specifically, Scenario 3, Sensitivity 2, which anticipates lower costs due to a greater availability of renewable energy. There is some natural gas in the plan, but it is not prioritized the way PREPA originally did in its Energy System Modernization plan.

"PREPA argued to shut down older fuel plants and replace then with new natural gas," said Torbert. "PREB said it wanted to first seek renewables." RMI has previously worked with the Institute for Competitiveness and Sustainable Economy for Puerto Rico to develop a vision for reforming the island's energy system.

"Just focusing on fossil fuel was not a good idea," said Agustín Carbó, Environmental Defense Fund's senior manager of microgrids. The board did allow for some gas peaking units, but generally is requiring all technologies be considered in a public procurement process.

The final IRP also includes $2 billion for improvements to transmission and distribution assets.

In five years, PREPA is supposed to be at 40% renewables. Today, the island uses less than 2% renewables, said Carbó. The modified action plan approved by PREPA could have been "a little more aggressive," he said. And he worries if PREPA appeals the regulator's decision it could slow the process.

"It will take more than six months to get through the RFP procedure. It needs to happen soon," said Carbó.

PREB's resolution calls for the procurement of 3,500 MW to 3,900 MW of new solar and 1,360 MW to 1,480 MW of new batteries by 2025. The range is there to reflect that the pace of improving energy efficiency may vary, said Torbert.

Efran Paredes, interim CEO for PREPA, in a statement said the utility is "evaluating the document and our options to determine the next step." The final resolution is more than 300 pages.

PREB will hold a separate hearing on the mini-grids idea and says it wants to see PREPA do more analysis on distributed resource potential.

"The regulator said it was a powerful concept and wanted to know more," Torbert said. "It's an interesting way to think about resilience."

The resolution orders PREPA to develop a demand response resource projection, and to account for distributed storage resources as demand resources, part of a virtual power plant, or both. And, it directs the utility to "quickly pursue VPP approaches to capture the grid value of distributed resources through RFPs, tariffs, rates, and/or direct utility programs."

"I like the idea of having a separate hearing for just that," Carbó said. EDF in its briefs recommended PREPA test only one of the mini grids.

Ultimately, Torbert said the IRP resolution is a win for Puerto Rico's clean energy future.

"In this instance, the regulator did what it's really supposed to and protected customer interests," he said. "The regulator has found that when done properly renewables can be resilient." Getting the IRP finalized might have taken longer than some liked, but "the result is worth it," he said.