Collaborating for Puerto Rico’s Energy Transformation

More than a year after Hurricane Maria passed by, Puerto Rico’s energy system does not fully meet the needs of the 3.4 million American citizens who live on the island. It is also not sufficient to sustain local commerce, which is worth $105 billion of GDP annually, and which includes high-tech manufacturing companies that have entrusted their operations to the island. Today, the energy system remains unreliable, vulnerable to future disruptions, costly, and unpredictable. Its revitalization requires not only technical and financial solutions, but also collaborative engagement and a defined common vision for the future.

In addition to the devastating impact of Hurricane Maria, the Puerto Rico energy system has suffered from the effects of a decade-long economic recession and ongoing debt crises on the part of both the government and the electric utility. After the hurricane, Puerto Rico went through the largest blackout in US history. Power was restored to almost all customers by the time 328 days had elapsed, but the electric grid remains a patchwork of both new and dilapidated infrastructure. Attention has now turned to the long-term changes needed to revitalize the system to achieve the goals of resilience, affordability, equity, and sustainability. Early in 2018, the governor of Puerto Rico proposed the privatization of the government-owned utility, and later, in June 2018, enacted Act 120, which provides for the privatization of Puerto Rico’s electricity generation assets and the granting of concessions for electricity transmission and distribution (T&D). A new energy policy and regulatory framework is also being considered in the Puerto Rican legislature. Those changes present a golden opportunity to redesign the Puerto Rico electrical system.

In the past months, Rocky Mountain Institute (RMI) and the Institute for Competitiveness and Sustainable Economy for Puerto Rico (ICSE-PR) have partnered to support a collaborative approach to reforming the energy system. We have convened over 40 leading stakeholders in Puerto Rico’s energy system in a series of workshops that engage participants in a co-creative process. The output of this work, The Public Collaborative for Puerto Rico’s Energy Future provides a vision for the future energy system coupled with policy and regulatory recommendations addressing how to support an independent energy regulator, augment the resource planning process, and ensure a greater role for cooperatives and municipalities.

Through an iterative process that lasted over four months and included interviews and working sessions, stakeholders produced a compelling vision for a self-sufficient energy system. Diverse participants represented Puerto Rico’s business, manufacturing, engineering, renewable- and traditional-energy sectors, community and environmental groups, government, and academia. ICSE-PR and RMI hosted the event with the support of an expert faculty. Although there were areas of disagreement among participants, the report resulting from this effort was endorsed by 26 stakeholders and presents four opportunities for change:

1. The Promotion of a Vision for Self-Sufficiency and Credibility

A vision of a future with a consistent public policy should include transforming the energy sector from one focused on the management of large assets to one focused on the management of technology with small generation resources coexisting with large assets. This future should be freely developed by autonomous consumers (called “prosumers”), and supported by base generation that is highly flexible and reliable. The base generation should have enough spare capacity to be used as backup during a period of rapid increase in renewable penetration.

To change the focus of public policy to put the common good and the people at the center of the energy transformation will require focusing on an energy sector based on distributed, local, clean, renewable energy that is affordable, promotes efficiency, ensures equity, encourages ample public engagement and capacity building, and creates local wealth while maximizing local ownership. This transformation will entail increasing the current renewable portfolio standard (RPS) to ensure that 50 percent of electricity comes from renewable sources by 2035 and 100 percent comes from renewable sources by 2050—meaning a fully renewable future. The transformation will also include mechanisms for funding and ensuring equitable access.

2. An Independent Regulator with Enforcement Powers

The legal impunity of the Puerto Rico Electric Power Authority (PREPA) must be removed in order to ensure that an independent regulator with enforcement powers can provide oversight of the utility. A predictable legislative and regulatory regime that allows for real-world finance and economics will create investor confidence and bring more projects to Puerto Rico. This will bring about a healthy prosumer energy sector and make way for public policy that reflects and supports the people of Puerto Rico.

3. A Modern Regulatory Framework and Integrated Resource Plan (IRP)

The regulatory framework must be sufficiently flexible to examine and incorporate the benefits of continued innovation. New local legislation will prevent the IRP’s requirements from being circumvented, incentives will be provided for renewable energy, and a program of local research and development will be implemented.

4. The Involvement of Cooperatives and Municipalities in the Energy Transition

The energy generation sector will be made democratic by enabling nontraditional companies such as energy cooperatives to participate. A regulatory framework will be created to incentivize this transformation via participatory public-private partnerships (PPPs), multisectoral proposals, and business models.

ICSE-PR and RMI are proud to have created this collaborative opportunity and are inspired by the efforts of all the participants to work together in new ways to create a shared vision. We appreciate all participants’ effort in producing the report, which 24 stakeholders have formally endorsed. As the Puerto Rican government debates new policy legislation, PREPA completes its long-term resource plan, initiatives including the Southern States Energy Board’s seek to refine the regulatory framework, and communities continue local actions to take greater control of their energy future, we hope this report and the connections forged through this collaborative process will guide decision-making and help illuminate the path to a better energy future for all Puerto Ricans. Steps taken now will shape Puerto Rico’s energy future for the coming decades, and only by collaborating in new ways will all voices be heard and the best solutions be found.

Download the report, The Public Collaborative for Puerto Rico’s Energy Future here.