A Resilient and Cost-Effective Energy Future for Puerto Rico

Busting Three Myths About the Role Renewables and Distributed Energy Resources Can Play

Hurricanes Irma and Maria caused extraordinary damage to Puerto Rico, especially to the electrical grid. Approximately half of Puerto Ricans were still without power over two months after the storms, leading to the longest sustained outage in the history of the United States by far. Renewable and distributed energy resources (DERs) could play an important role as Puerto Rico looks to rebuild the electrical grid to be more cost-effective, sustainable, and resilient. However, many common misconceptions about the cost, resilience, and long-term role of these technologies stand in the way of their broad acceptance and quick adoption. RMI’s latest insight brief addresses these myths and demonstrates that these emerging technologies can play an important role in the reinvestment in Puerto Rico’s grid.

Myth #1: New Energy Technologies Are Not Cost-Effective

In reality, due to steep price declines in recent years, renewable energy is cost-effective. Over the past decade, policies driven by industrialized nations have been successful in building a robust global competitive business environment that has both stimulated demand and significantly advanced the technology, greatly dropping prices for renewables. This has made the manufacturing, distribution, sale, installation, and operation of new energy technologies competitive, and in many cases cheaper and more readily available than fossil fuels.

Likewise, energy storage is cost-effective for many applications and is trending downward in price. Costs have come down 70 percent from 2010 to 2016, and the trend is expected to continue with another 50 percent reduction projected by 2020. As a result, even at today’s prices, combining a renewable energy system with batteries can be less expensive than many fossil fuel alternatives, while providing numerous other benefits including reduced carbon emissions, resilience to fuel-supply or grid disruptions, and reduction in exposure to fuel price risk.

And although microgrids—smaller-scale community systems that are typically connected to the grid but can disconnect safely and continue operating when the grid goes down—can be more expensive, they often provide significant additional value. By avoiding resilience-related costs in other areas of the grid, microgrids can cost-effectively improve grid resilience to outages.

And finally, energy efficiency is the largest and most cost-effective energy resource. Investing in energy efficiency programs and technologies allows utilities to avoid the need to build conventional, supply-side alternatives to generate and deliver power. In fact, average total resource costs for energy efficiency programs across the United States are less than $0.05/kWh, significantly lower than Puerto Rico’s existing marginal generation costs.

Myth #2: New Technologies are Neither Resilient Nor Reliable

In reality, a growing number of demonstration projects have shown that renewables can support a reliable grid. The U.S. Department of Energy (DOE) 2012 Renewables Electricity Future Study found that up to 80 percent of U.S. electricity could be provided by renewable energy resources with no impact on reliability, and other more recent and detailed DOE studies have similarly shown a reliable grid with high levels of renewable energy. This has been practically demonstrated in Hawaii: the islands of Oahu, Maui, and Hawaii currently achieve 11 percent, 25 percent, and 40 percent renewable energy respectively, with reliability much higher than Puerto Rico’s primarily oil-based grid.

Renewable energy and storage can also improve grid resilience. The 2017 hurricanes demonstrated that while the transmission and distribution networks in Puerto Rico and other Caribbean islands lacked resilience, the renewable energy generators were actually generally durable. In Puerto Rico, 90 percent of utility-scale solar photovoltaic and wind capacity on the island is operating or ready to operate, with only two utility-scale renewable energy sites damaged. Approximately 75–95 percent of residential solar systems across the island remained physically intact, with even rarer damage to power inverters.

Myth #3: New Energy Technologies Do Not Have a Role in the Short- or Long-term Rebuilding Effort

Actually, renewable energy and storage can be installed and commissioned quickly, and in the past two years developers have completed a number of projects in record time. Tesla, Greensmith Energy, and AES Energy Storage collectively deployed more than 70 MW of large-scale lithium-ion storage in six months in the first half of 2016 in response to a grid emergency. In just five months in late 2016, AES built what was at the time the world’s largest lithium-ion battery to service a utility grid (120 MWh) for San Diego Gas & Electric. And in Puerto Rico, companies restored power to several businesses and communities on the island with combined solar and storage projects, completed in a matter of days or weeks.

There are net benefits in the long term from deploying new technologies even after restoration is complete. In addition to being resilient to disruption of the island-wide grid, distributed energy resources can provide low-cost power (e.g., the long-term price of new renewable projects is less than the operating cost of existing generation assets) and reliability (e.g., microgrids and energy storage can provide firm capacity and/or peak-shaving services to the island’s main grid).

What’s Next?

While the Puerto Rico Electric Power Authority (PREPA)—the island’s monopoly electric utility and the largest public power agency in the United States—and the U.S. Army Corps of Engineers (USACE) lead the reconstruction efforts and currently estimate it may take more months to provide power to the entire island and perhaps several years to rebuild the entire grid to pre-storm conditions, there is now a considerable opportunity to rebuild the electrical grid to be more sustainable, cost-effective, and resilient to future extreme weather conditions.

In the last five years, the technological capability and economics of deployed new energy technologies such as utility-scale, distributed, and community-scale renewable energy; microgrids; energy storage; and demand flexibility have rapidly improved, and have been deployed and tested at scale across the world. At their current level of maturity, these technologies can play a crucial role in Puerto Rico’s short- and long-term energy future, capable of supporting a better electricity system for Puerto Ricans. What is needed is a coordinated effort by the Puerto Rico government, regulatory commission, and utility to catalogue, prioritize, and competitively procure potential renewable and distributed energy projects in order to ensure that the best opportunities are fast-tracked, while supporting the least cost and highest value in the long run.

Download The Role of Renewable and Distributed Energy in a Resilient and Cost-Effective Energy Future for Puerto Rico insight brief here.