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  • Writer's pictureThe San Juan Daily Star

First tranche of clean storage contracts will cost island $5 billion over 25 years

The Puerto Rico Electric Power Authority plans to procure a total of 3,750 megawatts of renewable energy and 1,500 megawatts of energy storage resources through the power utility’s six requests for proposals.

By The Star Staff

By 2047, when the first tranche of renewable energy and battery storage contracts is set to expire, Puerto Rico will have paid some $5 billion, or about $200 million a year, for close to 1,000 megawatts (MW) of clean energy.

The Puerto Rico Electric Power Authority’s (PREPA) first of six procurement rounds of renewable energy projects, launched in 2021, sought close to 1,000 MW of energy capacity and 500 MW of storage capacity. The contracts for the so-called Tranche 1 were ratified recently.

Since then, PREPA has launched two other procurement rounds out of a total of six. The plan is to procure a total of 3,750 MW of renewable energy and 1,500 MW of energy storage resources through the power utility’s six requests for proposals.

However, the costs for some of the more than a dozen power and purchase and operating agreements (PPOAs) could mean Puerto Rico residents may end up paying more, according to the contracts examined by the STAR.

For instance, the cost of a 10-year contract with Sunrun, a firm that is slated to provide 17 MW of energy, would total $18.3 million, according to the contract.

A 25-year contract with Clean Flexible Energy, which is developing several solar facilities, will total $516.4 million for 120 MW of energy. Another 25-year contract signed with CS-UR Juncos, which will provide 100 MW of solar power, totals $591.2 million.

For years, experts have said that switching to cleaner power — such as wind or solar — would be costly.

In the case of the Tranche 1 projects, they were amended or renegotiated to take into account inflation and other costs.

In a Sept. 14 statement, the Financial Oversight and Management Board expressed concern about PREPA’s procurement process for renewable energy, and particularly about the amendments to the agreements for the first of PREPA’s six tranches.

In March 2022, the oversight board conditionally approved 18 proposed PPOAs to provide 844 MW of renewable energy tranches. Seven of those PPOAs have since been withdrawn or were rejected by the Puerto Rico Energy Bureau (PREB); 11 were amended to adjust for inflation, supply chain pressures and sharply rising interest rates on potential loans to finance the renewable projects.

“The amendments increase the cost of the PPOAs by 34%. Notwithstanding this increase in contract prices, these amended agreements would reduce the cost of power generation dramatically by 2035,” the oversight board said. “The Oversight Board reviewed those amendments in accordance with its contract review policy to ensure competitive bidding and compliance with the PREPA Fiscal Plan. The amendments had already received approval of PREB, the independent regulator, and had been executed in violation of the Oversight Board’s review policy.”

While the oversight board said such increases are not unique to Puerto Rico, the reviewed amendments lead to renewable contract cost escalation increases in Puerto Rico that, in some cases, are above the average annual increase experienced in the U.S. overall.

A report by the International Renewable Energy Agency notes that the price of renewables has come down.

In 2022, 86% of newly commissioned renewable energy capacity was cheaper than fossil fuel-generated power, the entity said.

The report found that the average cost of electricity from newly commissioned onshore wind projects fell by 5% from 2021 to 2022, from $0.035/kilowatt-hour (kWh) to $0.033/kWh. The average cost of electricity from newly commissioned utility-scale solar PV projects decreased by 3% in 2022 to $0.049/kWh.

In contrast, the average cost of electricity from newly commissioned offshore wind projects increased by 2% in 2022, from $0.079/kWh to $0.081/kWh.

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