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IEEFA U.S.: Biden administration has historic opportunity to rebuild Puerto Rico electricity grid

January 27, 2021

January 27, 2021 (IEEFA) — The devastation caused by Hurricane Maria in 2017 highlighted Puerto Rico’s “antiquated, expensive and fossil fuel-dependent” electricity grid, providing the Biden administration with an historic opportunity to transform a vital part of the island’s economy.

The Institute for Energy Economics and Financial Analysis (IEEFA) recommends in a new policy brief that the administration battle entrenched interests that have served Puerto Rico poorly with four basic steps to meet its campaign promise of “low-cost, reliable and clean electricity” for the island.

It should immediately halt the use of federal funds that encourage costly and unnecessary natural gas infrastructure. The Puerto Rico Electrical Power Authority (PREPA) wants to use $850 million in federal money to build natural gas projects around the island, despite objections from its regulator, the Puerto Rico Energy Bureau.

The Biden administration should push hard for the release of federal grants to be used for projects that strengthen resiliency, such as small-scale solar and battery systems that can provide power during prolonged outages.

Given Puerto Rico’s long history of contracting scandals, expenditures of more than $10 billion in federal money that have been promised to modernize its grid should be monitored closely. IEEFA recommends the use of an Independent Private-Sector Inspector General to oversee the project, similar to the office used to supervise contracts for debris removal from the World Trade Center site after the Sept. 11, 2001, attacks.

The Biden administration needs to audit a restructuring agreement that covers $8.3 billion in legacy debt. The deal will require Puerto Rico to cover at least two-thirds of the amount owed, an unsustainable sum even before the global coronavirus pandemic and a series of earthquakes rattled the island’s economy.

“Deep reform of Puerto Rico’s antiquated, expensive and fossil fuel-dependent electrical system has been needed since long before Hurricane Maria devastated the grid,” said Cathy Kunkel, an IEEFA energy finance analyst who developed the recommendations with Tom Sanzillo, the institute’s director of financial analysis. “A new electrical system driven by renewable energy will support the goals of reliance, affordability and fiscal stability.”

Full report: The Biden Administration Has An Opportunity to Rebuild Puerto Rico’s Electrical Infrastructure

Author contact

Cathy Kunkel ([email protected]) is an IEEFA energy finance analyst.

Tom Sanzillo ([email protected]) is IEEFA’s director of financial analysis.

Media contact

Vivienne Heston ([email protected]) +1 (914) 439-8921.

The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

Cathy Kunkel

Cathy Kunkel is an Energy Consultant at IEEFA.

Cathy also served as an IEEFA Energy Finance Analyst for 7 years, researching Appalachian natural gas pipelines and drilling; electric utility mergers, rates and resource planning; energy efficiency; and Puerto Rico’s electrical system. She has degrees in physics from Princeton and Cambridge.

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Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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