Puerto Rico Climbs the Rocky Road toward Resilience

Alejandro Uriarte

Since Hurricane Maria, Puerto Rico has been a productive location for entrepreneurs who are eager to get involved in installing solar power and energy storage. One of them is Alejandro Uriarte, CEO of New Energy Consultants & Contractors. In this interview, he describes the rocky road that the island territory has encountered as it seeks to build out clean energy. 

CEFF: How would you describe the solar-energy market's current successes and challenges in Puerto Rico?

Uriarte: The market has changed dramatically since Hurricane Maria.

Before, customers’ main focus when changing to solar was to save on electricity costs. [Average electricity] rates in Puerto Rico are $0.23/kWh. In contrast, they are $0.12/kWh in the United States.

Also, deployment of storage or batteries was almost nonexistent as prices were still high and justifying the investment was difficult.  

After Maria hit, some areas of Puerto Rico spent from 3-6 months without electricity. [These areas, if they had the budget, were] depending on standby generators.

[The generators] are not made for such extended use. They required hard-to-find, expensive diesel plus weekly oil and filter changes. [The diesel became easier to access later.]

Now, customers are looking for resilience and ease of maintenance.

Before the hurricane, interconnecting with the utility was a 280-day process. But after the hurricane, Governor Ricardo Rosselló issued an Executive Order allowing systems with storage which do not export more than 10 percent of their production to the grid to be interconnected without permits.

This allowed companies like ours to install [systems] quickly for the benefit of the end users.

It also opened the market for many new companies to set up shop. That has led to many faulty installations. It has also led to misinformation in the market.

But, in general, it has been a learning experience for all. It is a blessing for the industry and for the market.

Every important battery company is here. The industry has deployed more storage in 12 months here than in any other place with the exception of Hawaii and Australia.

This knowledge is very valuable.

New Energy Consultants & Contractors has already taken advantage of this by opening operations in Florida. We have a long way to go, but the market is ready for it. We just need the right incentives and financing options to take us to a significant penetration of renewable energy in the foreseeable future.

CEFF: What is your perspective on the energy efficiency market's successes and challenges at this time in Puerto Rico?

Uriarte: This is a very interesting question, as energy efficiency has never been a priority for the average consumer.

When they decide to change to solar, they want it now. They do not want to go through the process of an energy audit [followed by] lights, HVAC or equipment replacement and then [followed by] solar. They want solar and the rest is irrelevant.

This was a shock to all of the storage companies who came after the hurricane since in other markets, batteries are made to run "critical loads" which usually do not include air conditioning.

They were met with the fact that for a typical Puerto Rican, having two or three air conditioners connected to the battery was very important.

We have a big challenge ahead to improve efficiency.

Given that most Puerto Rican houses or businesses are located in concrete buildings, we do not have central air systems. We mainly have individual split units. This means [we have] more consumption. We have less ability to control all devices centrally to manage consumption.

Also, this type of construction lends itself to less-insulated windows and doors, so we are not energy-efficient at all.

One interesting thing we have seen is that many families are installing solar+storage systems that might be a little smaller than what they need because of budget reasons. But because batteries have monitoring apps, they have readily available access to their consumption. After understanding this, they adjust "down" to make the system meet 100 percent of their demand.

So, batteries are finally helping with energy efficiency.

CEFF: What stakeholder decisions would catalyze forward movement in these two markets in Puerto Rico?

Uriarte: We need a couple of key things if we want solar or renewables to go mainstream.

One is to have incentives to make these systems more accessible. In the United States, you have the 30-percent Income Tax Credit (ITC), which we do not have here. So we need to lower the cost of equipment for the average customer. [Editor’s note: The ITC is scheduled to decrease incrementally over the next few years.]

Second, our average income is around $16,000 per year. And our savings rate is lower than [is typical] in the United States. But we do have a high percentage of home ownership.

So we need financing options or loan guarantees to attract investors to provide long-term loans for this equipment.  

Very few people have the cash to pay for these systems or the FICO scores to get loans. We have long-term lease options with Sunrun, which recently entered the island, but the credit requirement still leaves many people unqualified.

If we had incentives to bring the cost of the equipment down or some type of loan insurance like we have in mortgages with Federal Housing Administration (FHA), Fannie Mae, or Mortgage Guaranty Insurance Corporation, more lenders would be willing to lend in the island, as risk would be minimized.  

Another important option is to implement a program similar to property-assessed clean energy (PACE), where homeowners can finance their systems through their property-tax payments.

Puerto Rico has many local specifics which makes this difficult, but… it is not impossible.

We should also pass legislation to make solar-powered and energy-efficient systems mandatory in new construction. There is no better way to finance these systems than in a 30-year mortgage.

Last but not least, we need to have a grid that is friendly to renewables and that is "transactional."

This means than in the future, solar+storage systems that are not being used or are not being used to capacity can sell energy to the grid.

This turns these systems into revenue-generating assets which increase ROIs for end users and help the utilities to lower cost of generating power at peak times.

Note: Emma McDonald contributed research to this article.

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