How to fix Puerto Rico’s power system

By Geoffrey Heal
This piece originally appeared in Politico

Months after Hurricane Maria struck Puerto Rico, most of the island’s population is still without power, an unprecedented outcome for a territory in the world’s most advanced nation. The destruction is so great that Puerto Rico effectively needs to rebuild its electric power system from the ground up, an overhaul that will cost billions of dollars.

The storm’s devastation is tragic, but it also provides a rare chance to reimagine the Puerto Rican power system, currently so expensive and unreliable that it has become a major obstacle to the island’s economic growth. Instead of rebuilding its current system, based heavily on outdated oil-burning plants, Puerto Rico should take advantage of the island’s geographic position, recent technological advancements and billions of dollars in federal funding to rebuild its future around renewable energy. Such an overhaul would deliver cheap, reliable energy to Puerto Rico’s residents and businesses for a generation. Puerto Rico should not pass up this opportunity.

Until the system’s failure during Hurricane Maria, Puerto Rico obtained approximately 48 percent of its electric power from oil-fired power stations, 33 percent from natural gas, 17 percent from coal and the balance, about 2 percent, from wind and sun. Burning oil is one of the most expensive ways to generate electricity, costing 15 to 20 cents per kilowatt hour. It’s so expensive that no other state or territory uses oil as its main source of power. Consequently, Puerto Rico’s electricity prices are a whopping 80 percent to 100 percent higher than those of the rest of the country, which imposes extra costs on businesses and consumers, curtailing growth on the island.

The island could dramatically reduce its electricity costs by switching its power sources from oil to solar and wind. In Puerto Rico, the sun shines an average of 7.44 hours per day and the trade winds are plentiful, making the island perfectly situated to obtain its energy from renewables and cutting electricity costs by up to 80 percent. In the Caribbean, wind and solar power are the least expensive ways of generating electricity, costing as little as 3 to 5 cents a kilowatt hour. Hawaii used to be in the same position as Puerto Rico, generating expensive electricity from oil, but it recently invested in an all-renewable system, which is set to be completed in 2045.

The benefits would touch every corner of the island. Lower energy costs would cut power bills for Puerto Rico’s citizens, who are some of the poorest people in the U.S., and give them extra money to spend on restaurants and retail outlets. It would also attract more businesses to the island, where stratospherically costly and unreliable power supplies are a major disincentive to economic development. Clean air would also improve the island as a tourist destination, providing another boost to its struggling economy.

Solar power could also increase the resilience of power supplies in Puerto Rico. Rooftop and land arrays near users would minimize the need for long-range power lines, which are inevitably damaged in the Caribbean’s frequent storms. Short low-voltage power lines can even be buried underground, making them immune to storm damage. Because solar and wind power must be stored for use when neither is available, storage capacity is needed to smooth out power fluctuations, an argument that critics often use against renewables. But recent technological improvements have enabled cheap, easy storage of solar and wind power, an approach now being used in Hawaii. California is also following this model as it pushes hard toward an energy system dominated by renewable power. Tesla recently supplied the world’s biggest lithium-ion battery to South Australia to smooth out its intermittent wind power, and it has publicly offered to do the same for Puerto Rico.

Critics argue that renewable energy is very capital-intensive relative to fossil fuels, imposing huge upfront costs on states and territories. But these capital costs are manageable since wind and solar power have no subsequent fuel or operating costs. Building a solar or wind power station is like prepaying your electric bills for the next quarter-century: You pay everything upfront and then enjoy a financial respite for the life of the plant. Any extra capital costs will be recouped from fuel savings.

In addition, Puerto Rico has a ready source of funds to rebuild its power system: the federal government. The Federal Emergency Management Agency and other federal agencies are likely to distribute billions of dollars of aid to the island in response to the hurricanes. If the funding is properly structured, Puerto Rico could invest that money in renewables, modernizing its failing power system without imposing huge costs on the cash-strapped island, which, due to its huge debt levels, is unlikely to be able to raise the necessary capital in financial markets.

A smart administration could even leverage the resources of the federal government to jump-start this energy transformation, providing Puerto Rico with a grant or loan to finance the new power system. On November 28, Sen. Bernie Sanders introduced a bill to do just that, calling it a “Marshall Plan” for Puerto Rico. If congressional Republicans reject his proposal, they could instead encourage independent power producers to set up new power stations by providing favorable tax treatment for their earnings, such as a tax exemption for the first 10 years.

The entire cost of the project would be around $10 billion, a large amount but relatively small compared with the $100 billion losses from Hurricane Maria. After all, Puerto Rico must spend billions of dollars to replace its destroyed power system anyway. Investing in renewables would not only provide affordable power to Puerto Rico but also provide security against future storms that inevitably, and increasingly, batter the islands and would make the island a model for successful next-generation technologies.

This piece originally appeared in Politico