Puerto Rico's Hurricane-Stricken Power Industry Faces Long Road to Recovery
Long before the one-two punch from hurricanes Irma and Maria, the Puerto Rico Electric Power Authority (PREPA-Autoridad de Energia Electrica) was struggling. Earlier this year, PREPA had estimated the price tag to upgrade its aging generation fleet to be in the $4 billion range. Several of those plants are 44 years old or more.
Currently, roughly half of electricity for the island is generated from oil, while other plants use natural gas, coal, hydro and other renewables. In fact, Puerto Rico has been moving slowly toward more renewable energy resources. There have been two utility-scale windfarms built and as many as six solar power facilities, including the largest photovoltaic power station in the Caribbean.
By July this year, PREPA had declared bankruptcy, citing more than $9 billion in debt, but more literal storms were on the horizon.
On Thursday, September 7, Hurricane Irma, a Category 5 storm, brushed the Island's northern coast. It wasn't a direct hit, but was enough to leave more than a million people without electricity. Then, just days later, while thousands were still waiting for service to be returned, Puerto Rico took a direct hit from Maria, a Category 4 hurricane.
According to PREPA Chief Executive Officer Ricardo Ramos, at least three-fourths of the island's electrical infrastructure was lost to the storm. This includes more than 2,400 miles of transmission lines and 31,000 miles of distribution lines that delivered power to homes and businesses. Looking at the larger picture, the time to completely rebuild will be three years or more, by some accounts.
Due to communication lines still being down, it has been very difficult to reach plants to confirm details, but it appears the generation side of the business hasn't been hit as hard as the transmission and distribution sector. Privately owned plants by AES Corporation (NYSE:AES) (Arlington, Virginia) and EcoElectrica LP (Peñuelas, Puerto Rico) are not operating, but it was not clear as to whether their status was due to damage or lack of transmission support. PREPA's Mayaguez facility appears to not have sustained damage, but there was no communication with the plant. All indications were that the Palo Seco plant sustained partial damage, but the full extent was not known. Assessments were still being conducted to determine the full extent of damage on the generation side.
For now, top priority is to provide electricity to hospitals, water treatment plants and other vital services. PREPA is working with the U.S. Army Corps of Engineers, which is assisting with providing power to key locations.
It remains to be seen how the electricity sector will move forward in the wake of the disaster. There is no doubt substantial investment is needed to rebuild a system that already was in need of modernization before the hurricanes. Heavy dependence on oil as a fuel source had driven power prices to 23 cents per kilowatt/hour. Expectations are that there will be more focus on developing renewable energy resources, such as wind and solar power. This could potentially open the door for micro-grid and battery storage projects. Of course, there have been discussions in the past about increasing reliance on natural gas as a primary energy source, but that move would depend on the construction of liquefied natural gas (LNG) terminals and natural gas pipeline infrastructure.
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