Jan | Feb 2014


Puerto Rico Implementing Cleaner, Leaner Energy Plan

By Mary Branham, CSG Managing Editor

Puerto Rico Gov. Luis Fortuño has taken steps to lower energy costs and
decrease the island’s dependence on foreign oil. He also sees benefits in
working with other U.S. territories in the Caribbean to address
energy challenges.

 

Like other states, Puerto Rico is dealing with challenges posed by high
energy costs. How would your proposal to convert Puerto Rico’s oil-fired
plants to natural gas benefit the island?

"Puerto Rico faces some of the highest energy costs in the country, with electricity costs more than twice that in the rest of the nation. The main driver is a 68 percent dependence on oil for power generation vs. 1 percent in the states.
"The cost of electricity is a significant drag on the Puerto Rico economy. According to the U.S. Energy Information Administration, Puerto Rico’s (kilowatt hour) cost in 2009 was 21.69 cents, compared to the U.S. average of 10.2 cents. The price differential has become even more pronounced in the recent spike in oil prices, reaching up to 29 cents per kwh in late 2011.
"Puerto Rico’s extreme reliance on oil is clearly bad for the environment as well. That is why we launched a comprehensive energy reform plan to replace dependence on oil with cleaner alternatives, including renewable energy resources, particularly solar, wind, waste-to-energy and natural gas.
"Puerto Rico’s energy diversification efforts, especially the transition to natural gas, will cut environmental emissions by 79 percent and will save individuals and businesses as much as $1 billion per year when the transition to natural gas is complete in the next four to five years."

Explain the environmental benefits of Puerto Rico’s energy strategy and
how it will move the island toward compliance with federal regulations?

"The transition to natural gas represents the biggest environmental protection effort in Puerto Rico’s history. Burning dirty oil for 68 percent of existing power needs, as Puerto Rico is currently doing, is what is bad for the environment. Transitioning to natural gas will cut emissions of criteria pollutants by 79 percent and cut greenhouse emissions by up to 30 percent. How many other projects underway in America would offer such dramatic environmental benefits?
"Puerto Rico, just as other U.S. jurisdictions, must comply with the EPA’s new emissions regulations, the Mercury and Air Toxics Standards and changes to the National Ambient Air Quality Standards. Due to our extreme reliance on burning oil for power generation, Puerto Rico faces up to $1.7 billion in initial compliance costs to install expensive pollution control equipment, followed by significant yearly reoccurring costs. To prepare for the onset of these new standards, I initiated a government-wide working group to look at all feasible energy alternatives to achieve compliance. Our conversion to natural gas, already underway at several of the island’s main power plants, is central to our energy strategy. The significant reduction in polluting emissions from natural gas will enable Puerto Rico to provide cleaner energy at a far reduced cost to electric consumers on the Island."

While the transition to natural gas is underway, what are Puerto Rico’s
near-term strategies for addressing the cost of energy?

"One strategy we are implementing immediately to bring down energy costs is improving the way Puerto Rico purchases oil and natural gas in the marketplace. Previously, the public utility in Puerto Rico had a very inefficient bidding process that involved strict one-year contracts tediously negotiated for each separate power plant through a variety of third party traders—making it very difficult to get the best prices in the market. We are transitioning to direct purchases from oil suppliers and diversifying purchase contracts to get the best price, a strategy that when combined with other measures underway should help cut energy bills for consumers in the coming months.
"These efforts will augment Puerto Rico’s transition to natural gas, which has already begun with the conversion of the Costa Sur power plant, a major energy plant in the southern region of the island, enabling it to burn natural gas. Also underway is the permitting process for an offshore (liquefied natural gas) terminal that would supply natural gas to Puerto Rico’s biggest power facility, the Aguirre plant. We expect to finalize the financial arrangements for the infrastructure of this new off-shore terminal in the coming months."

Renewable energy is a major part of your comprehensive energy plan.
What are your goals with regard to renewable energy?

"Puerto Rico’s diversification strategy incorporates renewable sources, including wind, solar and waste-to-energy, as key elements of our comprehensive energy reform.
"New energy reform laws that I signed in 2010 lay out incentives for alternative energy development and commit the government to ambitious goals for the growth of renewable energy. Through the Energy Diversification Act, the government’s new targets for energy generation are: 12 percent of power generation through renewable and alternate sources by 2015, 15 percent by 2020 and 20 percent by 2035. The law also created a renewable energy certificate market to help finance utility-scale renewable generation."

You announced the Caribbean’s largest wind farm and largest solar energy
project would be located in Puerto Rico. What will that mean to Puerto Rico’s
energy future?

"Puerto Rico is in the process of developing multiple renewable energy projects, with our high energy costs actually making renewables more economically feasible than in many parts of the United States. Two of the largest projects that are currently being developed include a 24 megawatt solar project by AES Solar and a 75 megawatt wind turbine project by Pattern Energy, which would be the largest wind project in the Caribbean to date. Another planned project by the company Energy Answers would use waste-to-energy technology in a 58 MW energy plant. These and other projects in the pipeline will play a key role in Puerto Rico’s broad-based energy diversification strategy."

The solar project is the first to benefit from a renewable energy incentives
law signed in 2010. How is Puerto Rico incentivizing renewable energy and
what have been the successes of those incentives?

"Puerto Rico’s new Green Energy Fund, created in 2010, will enable the government to co-invest $290 million in renewable energy over the next 10 years. The Green Energy Incentives Act also creates several special tax exemptions for companies engaged in renewable energy generation. The first round of funding from the clean energy fund provided $20 million for 114 small and medium scale renewable energy projects.
"To date, our public utility, the Puerto Rico Electric Power Authority--or PREPA--has signed contracts for the purchase of over 600 megawatts of renewable energy, primarily solar, wind and waste to energy. PREPA is also in the process of evaluating projects that would use bio-gas, bio-diesel and microalgae. Currently, more than $1 billion in potential private sector investment is being pursued for a portfolio of wind, solar and waste-to-energy projects."

Puerto Rico is working to develop a market for electric vehicles. What kind of
infrastructure and development plans will Puerto Rico—and other states—
need to make electric vehicles a viable option?

"Puerto Rico is working to develop a market for electric vehicles, and an MOU we signed with Nissan last year includes exploring the creation of a battery recharge network to support electric vehicles, as well as possible incentives for using it. This effort is part of a larger economic development strategy to create a new ecotourism destination in the eastern region of Puerto Rico.
"The so-called Green Triangle, created by Law 118, began the development of a tourist triangle in eastern Puerto Rico that connects the El Yunque Rainforest with the soon-to-be redeveloped former U.S. Naval Station Roosevelt Roads, and the islands of Vieques and Culebra. The development project is a key element in our strategy to create jobs and reignite the economy in the region, underpinned by growing demand in the marketplace for ecotourism destinations. Developing clean transportation options like electric vehicles will help position the region for smart growth through a sustainable tourism plan."

State policymakers across the country, including yourself, are touting the
benefits of conservation as part of an energy plan. Why is that an important
strategy for policymakers to be involved in?

"Puerto Rico’s Energy Affairs Administration has made energy efficiency a top priority. One of (the administration’s) most exciting initiatives is the new partnership with energy-savings companies as a result of Puerto Rico’s recently passed Energy Savings Performance Contracts law (Act 19), which authorizes government units to use (energy-savings companies) to implement large capital investment projects that will conserve energy and water. The (energy-savings companies) perform audits of public buildings and help secure financing to make energy efficient upgrades—which are ultimately paid for by energy savings. In addition to spurring energy savings, these projects stand to create as many as 3,000 jobs. In March 2012, Puerto Rico held its first Energy Savings Performance Summit to match 10 participating (energy-savings companies) with public and private sector officials planning energy efficiency upgrades through the program."

The Puerto Rico Federal Affairs Administration is working with the
Departments of State, Energy and other federal agencies to identify funding
sources for underwater transmission lines that could connect Puerto Rico’s
power grid to the U.S. Virgin Islands and other islands in the Caribbean. 
Why is that important to not only Puerto Rico, but also other U.S. territories
in the Caribbean?

"As islands not connected to a national grid, both U.S. territories (Puerto Rico and the U.S. Virgin Islands) rely heavily on imported oil and have smaller, isolated energy markets that inhibit our ability to take full advantage of the wind, solar and geothermal resources throughout the Caribbean region. In 2009, we proposed using undersea cables to connect the electrical grids of the two territories and ultimately, island nations in the Caribbean, to expand the size and economic viability of our energy market for renewable energy, natural gas and other energy resources. Because Puerto Rico isn’t connected to a grid, our utility--the Puerto Rico Electric Power Authority--must produce excess energy to meet unexpected surges in demand. This excess generation could be sold to the U.S. Virgin Islands, which is grappling with electricity costs even higher than in Puerto Rico.
"This interconnection is a high priority for Puerto Rico and the U.S. Virgin Islands, and both territories are working with the U.S. Departments of Energy, State, Agriculture and Interior and other agencies to identify funding sources for the project. Last year, a feasibility study was done on the project that identified two connections. The first would be between Puerto Rico and St. Thomas in the U.S. Virgin Islands. The second connection would be between Puerto Rico and St. Croix, U.S. Virgin Islands, with a possible extension to tap into the nation of Nevis and St. Kitts, which has huge geothermal energy capacity. "

Voters will be asked to consider the political status of Puerto Rico in
November. How important is this vote to Puerto Rico? What would a change
to statehood, independence or maintaining the current status mean?

"Puerto Rico has been a U.S. territory since 1898, and we have been U.S. citizens since 1917. Yet as an unincorporated territory, the island’s ultimate status has not been determined. The 3.7 million American citizens residing in Puerto Rico have no votes in our national government and are only represented in the U.S. Congress by a single member of the U.S. House of Representatives, who can only vote in committees but not on the floor of the House. Under the current territory status, island residents are often treated unequally in federal programs, where we tend to receive less federal support than the states and their residents. This affects almost every aspect of our daily lives, including employment opportunities and health services as well as our very rights as American citizens. Beyond that, our men and women in uniform serve on foreign battlefields proudly wearing the American flag, but ironically cannot vote for their commander-in-chief as long as they remain Puerto Rico residents.
"The upcoming plebiscite vote will enable our citizens to take a critical step in resolving the most significant and transcendental issue of the territory. In November, citizens in Puerto Rico will take their first ever up-or-down vote on their support for the island’s current status as a U.S. territory. The ballot will pose two questions to the island’s electorate. Voters will first be asked if they agree with maintaining the current unincorporated territory status, to which they can answer either yes or no.
"Voters will also be asked to express their preference for one of the three nonterritorial status options recognized by Congress, and Republican and Democratic presidential administrations: statehood, full independence or independence with free association to the United States. If there is a majority for one of the possible alternatives to the current territory status, this would generate a petition to the federal government to begin the process of granting that status.
"By virtue of this consultation, we will know clearly, first, whether or not our citizens wish to maintain the current territorial status and second, which of the nonterritorial alternatives enjoys the most support among Puerto Ricans. Once the people make their choice in November, it will then be the turn of elected officials—both in San Juan and Washington—to act upon that mandate. The moment has arrived to act decisively to resolve the question of Puerto Rico’s ultimate status."