by Elizabeth Arnold
Here is a brief introductory exploration of the role of microgrids in Puerto Rico’s energy landscape. First let’s start with the basics.
What is a microgrid?
The Microgrid Institute defines a microgrid as:
a small energy system capable of balancing captive supply and demand resources to maintain stable service within a defined boundary.
The Department of Energy defines two-types of microgrids:
[the] two types of microgrids: grid-tied and remote. Grid-tied microgrids can run in parallel with the grid or remain islanded for a certain duration of time. The key feature is that these microgrids have access points to the grid which are connected. Grid-tied microgrids vary significantly in size and sophistication, while remote microgrids serve small isolated populations often not served by the main grid.
Microgrids serve a discrete geographic footprint, such as an office, neighborhood, business complex, hospital, college campus, or manufacturing facility. Within a microgrid are one or more distributed energy resource (DERs). Examples of DERs in a microgrid are solar panels, wind turbines, combined heat & power, generators, and now often energy storage as well. If a microgrid is grid-tied then there is the option of buying and selling electricity, which could create more revenue depending on local policies.
What is a nanogrid?
Nanogrids are smaller and simpler microgrids, typically serving a single building or a single load. Some define nanogrids and microgrids by what they serve as opposed to by a specific size. However, the Institute of Electrical and Electronics Engineers define a nanogrid as being less than 50 kW.
What are the benefits of microgrids to communities that use them?
Microgrids provide the same thing the traditional larger grid works to deliver-- safe, affordable, reliable electricity. However, as witnessed in the aftermath of Hurricane Maria, sometimes a large centralized grid cannot deliver to meet communities needs. Microgrids add resilience through their ability to island (disconnect from the larger grid) when other parts of the grid are down.
U.S. Global Change Research Program's Fourth National Climate Assessment (NCA) discusses the benefits of microgrids in resilience in the face of more frequent extreme weather events.
Microgrids can also provide greater affordability in electricity price by relying predominantly on renewable energy that is not subject to the price volatility of oil and gas markets. In the case of Puerto Rico and other places where the utility is not aggressively investing in clean energy generation, microgrids are a way for the community to start investing in renewable energy for their community. Clean energy, which reduces reliance on diesel generators, benefits public health and climate stability.
There is greater possibility for local ownership and even greater profit generation for a community if they are able to sell electricity to the larger grid. If the microgrid owned by the community profits can be reinvested back into the community for economic development initiatives. The assurance of reliable energy both keeps and attracts businesses to locate within the microgrid service area. The construction and maintenance of microgrids create jobs, which can be sourced locally and regionally. Microgrids also offer higher efficiency because they can use DC (direct current) power, and whether AC or DC they have less ‘line loss’, which refers to power lost when electricity travels through transmission lines over a long distance. The longer the distance traveled the more power that is lost.
There is equity and economy of scale in microgrids – instead of each household needing to finance a solar project, find a quality solar installer, and reconstruct their roof if it is made of metal, they can get power sourced from local renewable sources without the roadblocks and hassles.
Many of these benefits are also shared by community solar subscribers, but microgrids deliver added resilience that being connected to the larger grid does not provide in Puerto Rico.
How prevalent are microgrids in the world?
According to Navigant Research’s Microgrid Deployment Tracker, as of the last quarter of 2018 there were 2,258 projects representing 19,575.0 MW (19.5 GW) of planned and installed microgrid power capacity. North America is leading the microgrid market in terms of total installed capacity.
How prevalent are microgrids in Puerto Rico?
Without knowing the exact current project count (expensive research services probably have that figure) we can do some estimation. There were dozens of temporary and permanent microgrids deployed in Puerto Rico (PR) after hurricane Maria hit. Ten temporary emergency microgrids were donated by Sonnen and were deployed in the mountain region near Utuado. U.S. Army Corps of Engineers and Tesla both installed over a dozen total temporary microgrids. Resilient Power Puerto Rico’s microgrid program will have installed thirty community-based microgrids by this year. There are at least two or three large community-scale microgrid projects underway and another three or four in the planning stage. There is no lack of desire for community and business-scale microgrids in Puerto Rico.
Puerto Rico is home to a number of pharmaceutical companies and they have invested in securing their own power supplies, so as not to suffer losses incurred when the power goes out. Small businesses are also looking for reliable and affordable electricity service. People, like businesses, want to avoid losses suffered with disruptions in electricity service.
Many of the twelve thousand owners of solar installations that existed in Puerto Rico before hurricane Maria did not realize that their solar system could not be utilized when the grid is down. Needless to say, they were angry to find that their solar array was not able to provide them with power once the electric grid was down, because it was interconnected and did not have a battery. Nanogrids, microgrids, as well as simple battery backup, prevent solar owners from losing use of their system when the main grid goes dark.
In addition to the high public interest in resilience, affordability, and safety, the price of electricity in Puerto Rico makes a particularly compelling business case for microgrid development. Currently the cost of electricity is the highest in the U.S. at ~23 cents/kWh. Despite the already high price of energy in Puerto Rico, there are two forecasted rate hikes slated for the coming years.
The demand for microgrids is there, a business case for building microgrids is there, the remaining question is who will supply the capital and financing necessary to build the microgrids communities so desperately want? There are a variety of financing and business models for microgrids: energy as a service (EaaS), social impact investors, traditional investors, government funding, owner financing, utility rate base, grants and more.
The private sector can rarely play on the scale of government budgets, so not surprisingly much of the conversation at the recent Puerto Rico Grid Revitalization and Investment Forum in San Juan last week was about how much can be done once the Community Development Block Grant Disaster Recovery Program (CDBG-DR) are released. CDBG-DR is billions of dollar that have been slated for hurricane recovery in Puerto Rico. No one knows when, or even if, the CDBG-DR money will ever be released. In the meantime, resourceful developers and driven communities are pursuing microgrid financing via other channels. One of those projects is highlighted below.
Microgrid Project Highlight: Pirucho Power in San Salvador, Puerto Rico
San Salvador, Puerto Rico lies in the Southern Part of Caguas, as was unfortunately directly in the path of Hurricane Maria. It is a community of eight hundred homes and 3,100 people. Low-income households comprise a sizeable part of the community. Communities like San Salvador are vulnerable to blackouts due to their location and a lack of planning. Electricity transmission to remote communities goes through challenging terrain and PREPA (the power company) cut back on maintenance over the years prior to Maria.
This community, like many others across Puerto Rico, will benefit immensely from the construction of a microgrid with renewable power generation. Even freshly rebuilt transmission lines could be damaged in the next storm, so localizing power production and being able to put distribution lines underground will provide the community with electricity that could survive a disaster or be repaired much more quickly if it were to sustain damage.
How did they get a microgrid project underway?
Knowledge, community organizing and relationships got the ball rolling. Comunidad Orgnizada de San Salvador (COSS), founded in 1973 and incorporated as a community association in 1997, is sponsoring and will manage the microgrid enterprise. The community knew they did not want to suffer another black out, so they started to investigate their options. A local community member was formerly a professor with community development experience and knew angel investors that would potentially be interested in funding a microgrid project in Puerto Rico. He called Carlos Alberto Velazquez Lopez of Energy Solutions Puerto Rico (ESPuR), a Puerto Rican company that has been around for seven years. Carlos Alberto put together a plan for the microgrid project in San Salvador. We learned about the project when we met Carlos Alberto at the Community Workshop on Social Recovery in Vieques.
In a follow up interview with Carlos Alberto I learned more about the project. According to preliminary engineering studies the total development cost to serve 800 homes is estimated at $10 million. $8 million will come from private investment. Pirucho Power LLC was formed to facilitate project financing and is named after a mountain in the community. Pirucho Power is using Tax Equity financing. The remaining $2 million will be met by philanthropic grants or below-market equity. Investors are slated to be paid back within seven years and ownership of the microgrid will revert to the community. The microgrid will employ underground distribution to reduce the possibility of damage from storms. Fowley and Lautner Law Firm is providing pro-bono legal assistance on the San Salvador project, a project that is disrupting the status quo of energy generation and delivery in Puerto Rico.
After years working on residential and commercial solar projects Carlos Alberto of ESPuR did not feel that solar was making headway fast enough. ESPuR brought others together to chart a path for community-level solar projects. The Pirucho Power Project is the first community microgrid project in Puerto Rico.
COSS and project partners held a solar installation training for local electricians in San Salvador, installing 2.7 kW of solar panels and 356 amp-hours/24V of battery storage at a single homeowner’s residence in February of 2018. Since then, the ‘test family’ has been able to meet all of their basic energy needs (lights, refrigerator, and small air conditioner), even on cloudy and rainy days. COSS has also installed a solar and storage facility at its headquarters, which serve as the community’s resiliency center during an emergency, providing residents with access to power, potable water, and meeting other basic needs.
This microgrid could be replicated a hundred times over throughout the islands of Puerto Rico. ESPuR is very invested in making sure this microgrid sets a standard for other communities. At each stage of development, Pirucho Power is emphasizing technical and financial replicability, so that other vulnerable communities can more easily implement comprehensive renewable energy solutions. The City of Caguas has already asked the Pirucho Power team to replicate the project in additional neighborhoods in the city, and community leaders in four other municipalities have requested help, creating a pipeline of over 10,000 households that could be assisted.
Microgrids hold a lot of promise in Puerto Rico. More funding is needed and the Community Development Block Grant Disaster Recovery Program could provide a significant piece of the funding needed. Let your representatives know that our neighbors in Puerto Rico are ready to rebuild better, but many are still awaiting the funds promised by the federal government for disaster recovery.
There are changes in regulation and utility planning underway that will impact the future of microgrids in Puerto Rico. Three things to watch are: 1) the implementation of the Regulation on Microgrid Development (Reglamento para el Desarollo de Microredes); 2) PREPA’s microgrid interconnection rule; and 3) PREPA’s Integrated Resource Plan (IRP), which was just released the first week of February.
Puerto Rico Energy Bureau Chairman, José Román Morales, understands the power of microgrids to provide greater resiliency to Puerto Rican communities and the Energy Bureau has heard from a variety of stakeholders on the topic. Hopefully, the four-year-old Energy Bureau’s regulatory oversight of PREPA will be robust in putting Puerto Rican energy consumer’s interests ahead of politics and it is important that the Energy Bureau’s regulatory authority is sidelined by politics.
Between debt, population loss, and Puerto Ricans going off-grid PREPA is in a precarious revenue situation. It is yet to be foreseen what the future of the utility holds, however, we know there are renewable power producers ready to serve Puerto Rican communities.
The Puerto Rico Renewable Microgrid Toolkit from Rocky Mountain Institute
Navigant articles and research on microgrids
Energy-as-a-Service (EaaS) [Finance option for microgrids]