September 26, 2017 Read More →

In Wake of Devastation, Opportunity for Puerto Rico

Utility Dive:

Puerto Rico was devastated by Hurricane Maria — it could be months before some residents get power. Its system was already weakened by Hurricane Irma, but Maria’s direct hit this week means the grid will need to be rebuilt.

Now, a week after Maria hit the island, electricity still remains out for most of the territory. Reuters on Monday reported 80% of the island’s power lines are down, and the island is on the brink of a humanitarian crisis.

“The situation in Puerto Rico in the wake of this hurricane is horrible,” said Tom Sanzillo, finance director at the Institute for Energy Economics and Financial Analysis. But “attached to it is an opportunity to rebuild for a better future,” he added.

Puerto Rico is now largely reliant on oil and gas for electricity generation, but Sanzillo said that if it maintains that mix “it will be to the hindrance of its economy.” Acccording to the U.S. Energy Information Administration, last year almost half of Puerto Rico’s electricity came from petroleum, more than a third from natural gas, and 17% from coal. Just 2% came from renewable energy.  

Modernization has been difficult, as the utility has struggled to manage billions in debt.

“A far more sensible approach — and one that will help the commonwealth recover from its broader financial and fiscal problems while modernizing its costly and outdated electricity system — would be for Puerto Rico to embrace the potential in its abundant solar resources,” said Sanzillo. “Solar energy is cheaper and more resilient. It is a natural fit for a sunny island, and it offers a level of energy security to the commonwealth that it has historically lacked.”

More: Mission impossible? How utilities are minimizing disruptions from inevitable storms

 

Wall Street Journal:

Prepa’s problems have been decades in the making. Early in its history, it earned praise for powering Puerto Rico’s industrialization efforts in the 1940s and 1950s. But over time, it became less efficient, energy analysts say.

Its generating plants, which rely on imported oil for about 60% of their energy production, are mostly obsolete and require major upgrades or outright replacement, said Miguel Soto-Class, president of the Center for a New Economy, a nonpartisan think tank in San Juan that has done in-depth analyses of the utility’s finances.

Power outages are common. A fire at one of the utility’s plants in September triggered a blackout across the island that left many customers without power for days.

Yet prices are high. In April, Prepa’s average electricity rate was 20.1 cents per kilowatt-hour, down from 25 cents in 2013 but still close to double the average mainland U.S. rate of about 12 cents, according to Moody’s.

Island residents have complained in interviews in recent years about the lengths to which they must go to keep their electric bills in check. Some said they limited use of air conditioners as much as they can tolerate. Others said they shut off circuit breakers, except for the one controlling the refrigerator, before heading to work.

For years, Prepa enjoyed easy access to bond markets and borrowed regularly, accumulating enormous debt. Yet it failed to make important capital investments, such as transitioning to natural gas from oil to generate power, analysts say. Analysts say the money went to a bloated payroll, among other things.

When the island sank into recession, Prepa’s finances suffered even more, as business and residential demand for power declined. The exodus of Puerto Ricans to the continental U.S. is shrinking the island’s population, depleting the utility’s customer base. And austerity measures that the utility implemented as it headed toward bankruptcy resulted in cuts to the workforce it now needs to make repairs.

“All these things have compounded, one on top of the other,” Mr. Soto-Class said. They “will severely limit the ability of Prepa to come back quickly.”

The utility likely will need many resources, such as power poles and lines, that typically aren’t stored on the island, said Brock Long, administrator of the Federal Emergency Management Agency. And “even if the power grid is back up and running, getting power to the house is a whole other situation,” since homes may have flooded and sustained damage to their electrical systems, he said.

Given that President Donald Trump declared a major disaster in Puerto Rico, the utility could receive federal disaster funds to help finance repairs.

“They’re going to need help,” Mr. Donner said. “This really is a big task.”

More: ($) Puerto Rico’s Power Woes Are Decades in the Making

 

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