Puerto Rico’s Governor Ricardo Rosselló recently spoke at the annual Canadian Council of Public Private Partnership Conference in Toronto, Canada where he encouraged the audience which consisted of executives from many international construction firms to bid on projects to renew Puerto Rico’s infrastructure that was destroyed by Hurricane Maria in September 2017. The CCPPP conference tackles some of the greatest challenges confronting the P3 sector. The Governor talked about how his government was working with the private sector to rebuild the island with innovative infrastructure designed to withstand more extreme weather in the future. P3s are an important part of these rebuilding efforts.
This year U.S. Congress approved $140 billion for Puerto Rico, Texas, Florida, California and the U.S. Virgin Islands to rebuild after devastating natural disasters. Governor Rosselló told his audience that the Buy America Act does not apply to this funding but did not provide a specific reason. (There are exceptions allowed by the Act for reasons of unavailability, unreasonable costs and inconsistency with public objectives.)
In Puerto Rico, one of the worst affected victims of the storm was the island’s electricity system. The majority of Puerto Ricans were without power for many months. The island is now in the process of slowly rebuilding its power generating capabilities but not by replacing its former traditional electricity system but rather with off grid renewable power — mainly solar panels.
Prior to Hurricane Maria, Puerto Rico’s generating capacity, which was produced and distributed by the government-owned Puerto Rico Electric Power Authority (PREPA), was mostly provided by traditional sources of power. About half of the electricity was generated by ten oil fired power plants. Roughly a third of the remainder of the island’s electricity was produced by two natural gas power plants. A coal plant provided approximately 15 percent of the island’s energy. All oil, natural gas and coal were imported to the island. Renewable energy, which included seven solar farms, two wind farms and seven hydropower sites, constituted only 2 to 3 percent of total power generated on the island.
The restoration of Puerto Rico’s power grid is a lesson with respect to the vulnerabilities of modern electrical networks and how such issues can be minimized by turning to emerging technology and renewable energy. Power experts are now not just repairing Puerto Rico’s grid but doing so in a way that prepares the island’s electrical grid for storms of increasing intensity and frequency. Instead of recreating the previous traditional power sources, Puerto Rico is incorporating microgrids, emphasizing energy storage capability and building distributed and renewable generation.
A storm the size of Maria would have devastated any electric system in its path, but Puerto Rico’s power grid was extremely vulnerable to such a natural disaster. Several decades of mismanagement and questionable practices, such as providing power at no charge to state enterprises and municipal governments, had resulted in the utility accumulating $9 billion US in debt. In addition, the utility’s revenues were continuing to shrink year after year because of an economy in recession, a shrinking population as people left to seek greener pastures on the mainland and a declining manufacturing sector. The island’s energy situation was further exacerbated by PREPA reducing its workforce as a way of minimizing its costs. A smaller work force caused routine maintenance to be even further deferred. In July 2018, PREPA declared bankruptcy.
In December 2017, a consortium of U.S. and Puerto Rican energy labs, agencies, and utilities published report entitled “Build Back Better”, a report that lays out a ten year plan for strengthening the island’s transmission, distribution, and generation systems. The report promotes distributed renewable energy as well as a heavy reliance on microgrids which operate in isolation and combine solar power, batteries, backup generators, and control equipment.
The group identified sites where microgrids could be most efficiently deployed, including hospitals, fire stations, and wastewater treatment plants. In June, Elon Musk revealed that Tesla was working on numerous solar and battery powered projects on the island, many of which are centered on community centers that have become important hubs for necessities in the aftermath of the hurricane. Tesla has, in fact, referred to Puerto Rico as one of its “flagship” projects. In July, Siemens published a report in which it envisions the construction of 10 mini-grids across Puerto Rico that would depend on renewable energy.
Unlike microgrids, mini-grids are larger and can use the current distribution infrastructure but can operate more independently than one central grid. Another German company, Sonnen, donated solar microgrids to help power laundromats, schools, community centers and medical clinics across the island. Such additions to the island’s power supply point to a future system that has far more independence i.e. there is less risk of the entire grid being disabled and therefore reducing the probability of down time and higher maintenance costs in the case of an adverse weather incident.
Although these new renewable energy measures still constitute a small percentage of the island’s total generated power, the trend is a shift away from traditional centralized power plants powered by traditional energy sources towards more distributed renewable sources of energy. The other major change is that in January 2018 Governor Rossello announced that PREPA’s assets would be sold in a general privatization of PREPA. In July, the Governor criticized the board for agreeing to pay the incoming CEO $750,000, stating that it was not in keeping with the financial condition of PREPA. Five of the seven board members resigned as a result of the Governor’s position on the CEO’s financial compensation. All these changes being made by the Governor and being advocated by international companies point to a privatized utility that places a greater reliance on renewable energy and a more distributed power grid as well as less of an emphasis on traditional imported energy sources and government.
Beverly Brooks, MA, MBA, President, Brooks Communications, develops and implements investor and media relations strategies for companies in a wide range of sectors.”