PREPA faces uphill battle to close Tranche 1 green energy contracts

Tomás Torres Placa, a member of the Puerto Rico Electric Power Authority governing board

By The Star Staff

With little time left, the Puerto Rico Electric Power Authority (PREPA) governing board recently approved amendments to facilitate and accelerate the closing of some 23 renewable energy contracts, nine of which will expire this week unless they are closed.

The projects make up the first of six renewable energy tranches that Puerto Rico is tendering. The first tranche, which was put out for bids in February 2021, called for the procurement of 1,000 megawatts (MW) of renewable energy capacity and 500 MW of battery storage capacity. However, the closing of the contracts, 18 for renewable energy and five for battery energy storage systems, has been delayed because of different situations.

PREPA blamed LUMA Energy, the private operator of the authority’s electricity transmission and distribution system, for failing to perform certain interconnection work needed to close the contracts. In addition, some of the service providers wanted to make changes to the agreements to accommodate rising costs due to inflation, including increasing the capacity for some of the projects.

The Puerto Rico Energy Bureau (PREB), the sector’s regulator, blamed PREPA for the delay and on April 4 ordered the utility to close the power purchase and operating agreements (PPOAs) within a 60-day extension period the regulator had previously granted. PREPA officials insist they need more time. Some of the contracts are expiring this Wednesday (April 26) unless they are closed before that date, and others expire in June.

Last Thursday, PREPA’s board met to discuss all the power purchase and operating contracts and to approve a resolution that would ease the “levelized cost of energy” to allow for flexibility in the negotiations to close the contracts. The levelized cost of energy (LCOE) is a number that calculates the present value of the total cost of building and operating a power plant over an assumed lifetime.

PREPA board member Tomás Torres Placa said it is an average number throughout the 20 years of the contract.

So far, PREB has declined to grant more extensions even though PREPA has warned that some of the service providers might drop out.

In an informational motion submitted to the PREB last week, PREPA said it was working “tirelessly” to comply with the energy public policy that calls for the transformation to renewables so the projects can move forward, but “we are warning that neither the Authority, nor its staff nor any government entity can obligate resource providers to sign and close the contracting process established by the PPOAs.”