How will Puerto Rico’s private energy system deal with climate change?

"Puerto Rico’s public energy utility has officially been privatized for at least the next 10 years. Politicians who allowed the privatization claimed it would bring about the restoration of the neglected and battered electrical grid. But has it happened? A stable electric system that meets the basic needs of the population and can handle the effects of climate change remains a key pillar of climate justice the world over, but specifically in the Caribbean, where the effects of a warmer world will be felt particularly harshly. Photo credits: Carlos Berrios"

With the transfer of control over Puerto Rico‘s power distribution and transmission to the U.S.-Canadian firm LUMA Energy in 2021, and Puerto Rico’s power generation now in the hands of Genera PR, the islands’ once-public energy utility, the Puerto Rico Electric Power Authority (PREPA), has been privatised for at least the next 10 years.

 

Politicians who supported the privatisation claimed it would restore a neglected electrical grid. But has it happened, and at what cost to the people of Puerto Rico?

 

Access to electricity has become a basic necessity of modern life. After the COVID-19 pandemic struck in 2020, many civil processes like schools and government organisations moved towards a completely digital model. But for Puerto Ricans, whose access to electricity has remained in a perpetual state of instability for decades, reliable and affordable energy seems more out of reach than ever.

 

 

In addition, hotter temperatures and stronger tropical storms caused by climate change will put a significant strain on the archipelago’s electrical infrastructure in the coming years. Average temperatures in the Caribbean have risen by 1.5°F since 1950 and are likely to increase by as much as 9°F by the end of the century. People are more likely to use cooling appliances like fans or air conditioners to escape the heat, which in turn places more strain on the electrical system.

 

Meanwhile, the intensity of tropical cyclones is likely to increase, causing more destruction of the grid unless it is reinforced. Predictions about the 2023 hurricane season have already likened it to those of 2017 and 2022, which saw hurricanes María and Fiona, respectively, leave the archipelago completely without power.

 

A stable electrical system that can handle the effects of climate change remains a key pillar of climate justice the world over, but specifically in the Caribbean, where the effects of a warmer world will be felt particularly harshly.

 

After announcing it could not pay its debts, the Puerto Rican government, alongside the Financial Oversight and Management Board for Puerto Rico (FOMBPR) —an unelected board that controls the archipelago’s finances— began strategically selling off pieces of PREPA and imposing crippling austerity measures to settle the debt.

 

Massive debt has afflicted numerous countries throughout the Global South—and Puerto Rico, an unincorporated territory of the United States, is no different. The archipelago exited bankruptcy in 2022, but PREPA’s $9 billion debt still remains and is currently being negotiated in federal court.

 

Debt typically leaves little space for public spending by forcing governments to funnel money towards debtors instead of climate justice programs, as has been the case in Puerto Rico.

 

private energy
Photo credit: Carlos Berrios Polanco

Private energy, higher cost of electricity

Before exiting bankruptcy, Puerto Rico’s power transmission, distribution, and repair were auctioned off to LUMA Energy, a U.S.-Canadian consortium of Houston-based Quanta Services and Alberta-based ATCO. Its takeover in the summer of 2021 was followed by archipelago-wide blackouts, some of which have still not been fully explained, and a series of increases in the price of electricity.

 

“How long does it take a company, which was sold (to us) as having worldwide quality, to adapt to the electrical system of an island?” Agustín Irizarry-Rivera, a professor of electrical engineering at the University of Puerto Rico-Mayagüez, told Latino Rebels. 

 

Since assuming control, LUMA Energy has been consistently criticised for its operation of the island’s power grid. Puerto Ricans pay nearly double for electricity compared to their U.S. counterparts. Over 40 percent of the archipelago’s population lives in poverty, according to the U.S. Census Bureau, which makes it incredibly hard for many to deal with the multiple price hikes that have been imposed since LUMA took over.

 

“LUMA has never raised tariffs on clients,” Luma Energy wrote in a press release.

 

private energy
Photo credit: Carlos Berrios Polanco

The FOMBPR has proposed a $5.7 debt restructuring plan that would impose a “hybrid charge” on customers, which would result in double-digit increases, according to the Institute for Energy Economics and Financial Analysis.

 

“People have had to cut back and make really impossible choices about whether they pay their electrical bill or pay for food or medicine,” says Cathy Kunkel, energy program manager for CAMBIO PR, a non-profit organisation that promotes change in public policy.

 

LUMA’s contract was originally provisional, with the company meant to sign a 15-year contract when PREPA finished restructuring its debt. But since PREPA has entered its third round of negotiations with bondholders without any clear agreement as to when the debt will be settled, the Puerto Rican government signed an indefinite contract with the company for $122 million per year until the debt restructuring is finished—at which point the 15-year contract will be signed.

 

LUMA officials have warned that their proposed 2024 budget may not allow the company to operate “prudently.” A recent report by the company revealed it only used 38.7 percent ($55.8 million) of its $144 million federally-funded reconstruction budget. Meanwhile, the Puerto Rico Energy Bureau (NEPR) fined the company $25,000 for not sticking to its 2022 budget.

 

LUMA Energy relies heavily on federal funding from the Federal Emergency Management Agency (FEMA) for repairs to the electrical grid, and the funds are distributed slowly, according to Mario Hurtado, chief regulatory officer for LUMA Energy. Part of the reason for the delays has been bottlenecks in the distribution of materials for repair, says Hurtado. There are currently over 300 FEMA-backed LUMA projects currently either approved or in process.

 

“I agree that these (projects) should be quicker, but these are the limitations when working with federal funding. And overall, you have to remember that this is the largest reconstruction project in the history of FEMA,” Hurtado told Latino Rebels in February.

 

The electrical grid, which suffered decades of mismanagement and lack of repair under PREPA, was never particularly resilient. It often failed and caused large-scale blackouts, but there was a spike in the duration and amount of blackouts after LUMA took control. Although such incidents have decreased in recent months, many in Puerto Rico remain wary of how the company will handle increased heat waves or another hurricane like María.

 

Hurtado assures that LUMA is working to make the system more resilient against hurricanes and other natural disasters.

 

A few months after exiting bankruptcy, between December 2022 and January 2023, the Puerto Rican government held a series of closed-door meetings that eventually led to the privatisation of electrical generation by Genera PR, a subsidiary of New Fortress Energy, which currently sells liquefied natural gas (LNG) to Puerto Rico. Electrical generation had been the last publically-owned section of PREPA.

 

“I think the government keeps making decisions that go in the wrong direction, the most recent of which is the decision to award the generation and privatisation contract to Genera,” Kunkel told Latino Rebels.

 

private energy
Photo credit: Carlos Berrios Polanco

Multiple people have told Latino Rebels that they feared energy generation would be in a vulnerable position if Genera’s takeover were similar to LUMA’s. The Electrical Industry and Irrigation Workers Union (UTIER), whose members refused to work with LUMA in 2021, is currently attempting to negotiate with Genera to work with union members if the company will respect labor rights. Josue Mitja, president of the UTIER, claims Genera has not come to the bargaining table.

 

New Fortress hired two subcontractors, PIC Group and Black and Veatch, to do “everything” for the company, according to Luis Raúl Torres Cruz, president of the Puerto Rico House of Representatives Energy Commission.

 

PIC Group will be in charge of evaluating employees and operating generation plants, while Black and Veatch, which has expertise in decommissioning power plants, will be in charge of maintenance and repairs.

 

As far as the integrity of the electrical grid itself, President Joe Biden announced the formation of the Puerto Rico Grid Recovery and Modernisation Team when he visited the country after Hurricane Fiona tore through the islands. 

 

Missing renewable goals

According to the landmark Puerto Rico Energy Public Policy Act passed in 2017, Puerto Rico is supposed to receive all of its energy from 100 percent renewable sources by 2050, with interim goals of 40 percent by 2025 and the phasing out of coal-fired generation by 2028, among others. Currently, however, only between three and four percent comes from renewables, and many believe the archipelago will not reach its 2025 goal.

 

“I think we’re going to get to 100 (percent) but the important thing is to focus on going from three to four right now to 10 percent as fast as possible,” Hurtado told Latino Rebels.

 

The One-Year Progress Summary of the PR100 study by the U.S. Department of Energy alongside the National Renewable Energy Laboratory found that converting to solar energy could be a key part of moving towards the 100 percent goal. While many believe that the archipelago will not achieve the first 40 percent milestone by 2025, there is hope that the goal of 100 percent renewable energy could be reached if a concerted effort is made.

 

When Gov. Pedro Pierluisi announced the takeover of PREPA’s power generation assets by Genera PR, he claimed the company had incentives to decommission legacy generation assets from PREPA and switch them to renewable energy. However, the contract makes no mention of renewable energy.

 

“The contract leaves the door wide open for Genera to convert existing PREPA power plants to natural gas or build new natural gas plants in Puerto Rico… Frankly, I think it’s pretty egregious that the contract doesn’t penalise Genera for not meeting renewable energy targets,” Kunkel said.

 

In 2019, Genera PR’s parent company, New Fortress, won a contract to convert two San Juan generation units to burn LNG and fuel oil as well as sell gas to said units through an LNG import terminal. PREPA is currently looking for $34 million from New Fortress as compensation for times when the company failed to deliver gas to power plants, forcing PREPA to buy more expensive diesel fuel.

 

Some fear New Fortress will convert the stations they will take over later in the year to LNG, which many fossil fuel advocates highlight as the “cleanest” fossil fuel.

 

“(A renewable energy revolution) is not going to come from top down. The Americans are not coming here to save us. We need social organising to see the change this country needs,” Arturo Massol Deyá, associate director of the energy watchdog Casa Pueblo, told Latino Rebels.

 

Much of the push for renewables, mostly solar, has come from individual citizens wealthy enough to afford solar panels and community groups like Casa Pueblo, which is currently undertaking multiple projects meant to create solar energy microgrids in their hometown of Adjuntas.

 

There have been more than 50,000 solar installations connected by LUMA Energy over the last two years, according to data provided by the company. But while the archipelago is taking steps towards renewable energy, there remains a divide between centralised and decentralised renewables.

 

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Photo credit: Carlos Berrios Polanco

Most solar installations are rooftop solar, meaning small solar arrays on individual roofs that likely only feed power to a single building and possibly batteries. But the government is currently proposing solar installations that span huge tracts of land and then connect to individual homes through the current transmission and distribution lines.

 

While rooftop solar could be the key to reaching the 100 percent renewable goal, it would also greatly aid in ensuring that electricity does not get cut off because it only has to travel from rooftop solar panels to the building they’re installed on.

 

“We’re moving in that (rooftop solar panels) direction in spite of the government,” Irizarry-Rivera said. 

 

When Hurricane Fiona struck Puerto Rico in September 2022, Puerto Ricans in the southwest of the archipelago lost electricity for weeks because their electricity came from the Acacias substation, which floods every time a storm passes through the area. Though residents had expected the blackout, it did not make the situation any less difficult.

 

This is the state that many Puerto Ricans must deal with, being prepared for the lights to go out constantly. And many fear things will continue to get worse if the electrical grid remains unchanged, which is why they’re clamoring for systemwide reform.

 

As the effects of climate change worsen in the Caribbean, the inequities in Puerto Rico’s electrical system will continue to affect low and middle-class communities the most, while those wealthy enough to install solar panels on their roofs will still have electricity when the system is overloaded. 

 

For now, Puerto Rico’s electrical system will likely remain private for at least the next 1o years, and the possibility of even higher costs of electricity looms over the heads of millions of Puerto Ricans. Access to stable electricity remains cost-prohibitive if not completely inaccessible when the grid is overloaded, but many everyday Puerto Ricans are attempting to implement systems that can stabilize their access to power so they can stop living in fear that their lights will go out if a large hurricane strikes or temperatures rise.

 


 

This story was published with the support of the Caribbean Climate Justice Journalism Fellowship, which is a joint venture of Climate Tracker and Open Society Foundations.

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Carlos Berríos Polanco

Carlos Berríos Polanco

Carlos is a freelance journalist, mostly focused on covering public unrest, political corruption, and the climate crisis.

Born and raised in Puerto Rico with a Dominican mother, he is keenly interested in reporting the ways in which the Caribbean responds to global warming and the ways people adapt.

He enjoys hiking and reading during his off time.

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