Puerto Rico Wants Microgrids. But Will its Rules be too Rigid?

Jan. 12, 2018
Energy insiders say they appreciate Puerto Rico’s quick and strong push for microgrids. At the same time, they worry that recently issued draft rules are too rigid, especially when it comes to pricing and fossil fuels.

José Román Morales, president of the Puerto Rico Energy Commission (PREC), is clear: Microgrid development is welcome in hurricane-ravaged Puerto Rico — even before the commission’s just-released draft rules are finalized.

“Right now, we need to get the country back on its feet,” he said, referring to the fact that in the wake of Hurricane Maria’s destruction in September, only about half the island has power.

“We are working toward building a better system for all Puerto Ricans and utilizing the best technologies available,” he said, in an interview with Microgrid Knowledge.

Any microgrid projects submitted now should meet the draft rules (Case No.  CEPR-MI-2018-0001) issued last week by the commission, he said. Those rules were created at record speed for an energy commission. Next, the commission will solicit public comment, and then submit the rules to the State Department for approval, he said.

The new rules will apply to the integrated resource plan that’s expected to be completed in July, Morales said.

In the meantime, microgrid developers should move forward, he said.

“Right now, anyone who wants to build microgrids should register with the commission, tell us what kind of ownership they are pursuing and move forward,” he said.

Too rigid?

While industry members praise the commission for developing the rules, they’re not completely happy with some of the provisions, and say the rules are too rigid.

“The proposed regulations take great steps towards expediting the development of clean and resilient microgrids in Puerto Rico, which will be critical to restoration efforts,” said David Jones, senior associate at ICF, a global consultant.

“However, I would like to see more attention paid to PREPA-owned microgrids, which are currently outside the scope of the regulations,” he said. PREPA is the Puerto Rico Electric Power Authority, a government-owned utility that is charged with generation, distribution and transmission. (The draft rule lists PREPA as an allowed owner of microgrids, but says that requirements for systems owned by PREPA are outside the scope of the proceeding.)

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Give developers more room to innovate

“The rules that are being proposed for microgrids are a bit rigid, however we appreciate the hard work and commitment that PREC has shown in overseeing the island’s energy markets,” said Kelsey Smith, communications manager for Sunnova Energy, a large provider of residential solar on the island.

She called for a better balance between government regulation and giving developers room to innovate. “We recognize that governments try to err on the side of caution, however they must be careful not to stifle innovative and creative solutions by doing so.”

Anna Pavlova, vice president of government relations for Schneider Electric, said the company is pleased that the commission decided to release the microgrid rules and pleased that the commission didn’t include microgrids owned by PREPA.

“We see community, critical infrastructure, and industrial microgrids as essential to robust electrical system on the island,” she said.

But the company has reservations about some of the components of the rules, especially price restrictions and limits on the amount of fossil fuels that can be used in a microgrid.

Schneider: Pricing needs to be more flexible

Schneider has problems with the energy prices established by the draft rules, Pavlova said. The rules say that the average rate shall not exceed PREPA’s average rate of 20.22 cents/kWh. While it makes sense that microgrids should yield rates that are comparable to average consumer rates, there should be some exceptions, especially if the use of fossil fuels is restricted, as proposed in the draft, said Pavlova.

“There may be an exception for a critical infrastructure facility in a particularly remote area where there are no transmission lines. If a microgrid is built in such a critical facility and there is a 25 percent restriction on oil and gas input, then cost may exceed the average rate (hard to tell right now),” she wrote in an email response.

The key, she said, is for the commission to provide more flexibility, “given the numerous challenges in terrain, the nature of the connection to the main grid, the proposed restriction on the use of fuel and gas, and other considerations.”

The commission’s calling for a blanket 25 percent limit on oil and gas poses challenges, she said.

“An assessment will have to do be done for individual sites to determine if renewables or natural gas or a combination make sense for an individual area, but it seems dangerous to apply a blanket maximum to natural gas. Perhaps, the requirement instead should be to consider renewables first, but in areas where natural gas would have significant economic advantage, allow for gas to have a higher input into the system,” said Pavlova.

Flexibility is a key advantage, and the draft rules lack the needed flexibility, especially related to pricing restrictions, she said.

What about third-party owned microgrids?

In addition, the draft rules seem to allow non-cooperative third-party microgrids, but there’s only a dedicated section for cooperative systems, not the third-party systems.

“We want to ensure that third-party owned systems that are not in a co-op structure are fully allowed under the proposal,” said Pavlova.

“Similarly, the fee structure for PREPA infrastructure within the bounds is for small/large cooperative systems. We assume that a third-party microgrid system that is not a co-op will have to abide by the same fees? We need clarification on third-party owned non-cooperative systems,” she added.

May not work elsewhere

While some say the commission’s draft rules may become a model for other jurisdictions, Pavlova said that’s unlikely — and not a good idea because each state has its own specific attributes and needs.

Puerto Rico is unique because its rates are high and depends on fuel for four percent of its supply. What’s more, some communities have no grid electricity and there are financing challenges. It makes more sense for each state to develop its own programs, rather than to adopt rules like Puerto Rico’s, she said.

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About the Author

Lisa Cohn | Contributing Editor

I focus on the West Coast and Midwest. Email me at [email protected]

I’ve been writing about energy for more than 20 years, and my stories have appeared in EnergyBiz, SNL Financial, Mother Earth News, Natural Home Magazine, Horizon Air Magazine, Oregon Business, Open Spaces, the Portland Tribune, The Oregonian, Renewable Energy World, Windpower Monthly and other publications. I’m also a former stringer for the Platts/McGraw-Hill energy publications. I began my career covering energy and environment for The Cape Cod Times, where Elisa Wood also was a reporter. I’ve received numerous writing awards from national, regional and local organizations, including Pacific Northwest Writers Association, Willamette Writers, Associated Oregon Industries, and the Voice of Youth Advocates. I first became interested in energy as a student at Wesleyan University, Middletown, Connecticut, where I helped design and build a solar house.

Twitter: @LisaECohn

Linkedin: LisaEllenCohn

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