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A better future, a better grid: Puerto Rico’s IRP may show the way

The future of Puerto Rico’s still-recovering electricity system remains uncertain and clouded with unanswered questions. Will this year’s hurricane season bring one or more Category 4 or 5, island-flattening storms? Now that Gov. Ricardo Rosello has signed a new law calling for restructuring the Puerto Rico Electric Power Authority (PREPA), what options might emerge for the utility’s future? And, what kind of planning process is needed to build the resilient, clean and modern power system that everyone agrees the island must have going forward.

In many jurisdictions, including 2/3rds of the States across the US, required the development, review, and approval of integrated resource plans, or IRPs, by utilities since the 1980’s to help ensure that the power system keeps up with the changing needs of their economies. In theory these plans, updated at regular intervals, are the basis for ensuring cost-effective, reliable resource adequacy that complies with environmental and other regulatory and statutory demands. But the traditional approach to IRP development may no longer be sufficient to meet our evolving expectations from our electric power utilities.

Members of the public participate in breakout groups during the stakeholder meeting in San Juan, Puerto Rico on June 5, 2018

IRPs were developed during a time when the design objectives were safety, reliability, cost minimization, and risk management, with constraints being a relatively straightforward set of power quality considerations and environmental regulations. However, today’s consumers, policymakers, and other stakeholders are expecting more from our power grid: superior environmental performance, new options and consumer choice, economic considerations, and enhanced grid resilience. In order to meet these new expectations electric power utilities and their regulators will need to develop and deploy innovative new approaches to the IRPs.

Nowhere in the country is this more apparent and urgent than in the territory of Puerto Rico. Faced with unprecedented destruction following Hurricanes Irma and Maria, an equally daunting level of pre-existing debt, and underdeveloped operational capabilities, the Puerto Rico Electric Power Authority (PREPA) is and remains in a grim situation. Given how critical electricity is the modern economy, however, failure to adapt and recover is simply not an option. As the leadership and personnel at PREPA work with stakeholders and policymakers to turn the power system and associated institutions around, there exists an unprecedented opportunity to begin the reform of the power sector through an innovate IRP, with increased input from and transparency to stakeholders, tools for planning for enhanced resilience, and portfolio options and include customers- and community-centric technologies and deployment models.

 

What is an IRP?

An Integrated Resource Plan or “IRP” is a utility plan for meeting forecasted annual energy demand (including reserve margins) over a specific future period – say 20 years. It identifies potential resource options to meet future energy demands, and determine an optimal mix of resources through combining supply-side and demand-side resources. These resources typically include central-station (or bulk power system) power generation, but may, and in this case, will, also include distributed generation, transmission assets, and distribution system assets.

The output from the IRP process will consist primarily of a set of potential resource portfolios, scored across the evaluation criteria deemed important by the jurisdiction for which it is being performed, for a number of potential future scenarios. A “preferred” or recommended portfolio is often designated by the utility based on the direction provided by the participating stakeholders, policymakers, and the utility experts themselves, for consideration by the governing regulatory body (i.e. public utility regulatory commission.)

Steps taken in the creation of an IRP include forecasting future loads, identifying potential resource options to meet those future loads, determining the optimal mix of resources based on the goal of minimizing future electric system costs. In order to complete the IRP, various modelling tools are developed and deployed, including economic forecasting tools and production cost models. The input for these models are based on specific quantitative datasets researched and synthesized by experts, but also more quantitative inputs provided by policymakers, regulators, and in some cases, directly from stakeholders.

 

Puerto Rico’s IRP Process

The prior IRP submitted by PREPA to their regulator, the Puerto Rico Energy Commission (PREC) was completed in 2015, and reinforced the historical approach of focusing on central, large scale, fossil fuel generation to provide the electric power for the island. It did not include a significant role for renewable energy, energy storage, or distributed energy resource (DER) additions, in part due to concerns about the capability of existing generation resource to integrate renewables, the cost of energy storage, and the reliability of DER as a power system resource. Unfortunately the accelerated time frame for IRP completion resulted in very little input solicited from stakeholders and transparency in the rationale behind the scenarios and options evaluated.

In 2018 PREC ordered an update to the island’s IRP be completed and submitted by PREPA by October 1, 2018. In consideration of the feedback from the 2015 IRP, the new urgency in the wake of the 2017 hurricanes, and the understanding of the emerging capabilities of new technologies and deployment models, PREPA determined a new approach would be necessary. After a competitive solicitation for technical assistance, Siemens was re-engaged to serve as the technical consultant.

 

An Enhanced Approach

This IRP will be differ from PREPA’s previous IRP, and the established standard practice of IRPs across the industry, in that it will pull to the center of the process the several innovative elements.

First, it will including significant role for resources not part of the traditional generation supply stack, such as bulk solar and energy storage resources, customer-deployed and sited (i.e. “behind the meter”) distributed energy resources, including diesel, combined heat and power, solar PV, and battery storage, energy efficiency, and demand response. These resources will be considered on a stand-alone basis, organized as island-able microgrids, aggregated as virtual power plants, or designed as non-wires alternatives.

Second, a key objective will be a power system designed with enhanced priority and optionality on system and individual customer level resilience. Siemens has identified an approach for scoring all loads based on criticality and vulnerability to determine where resilience investments may be necessary, and develop representative solutions as listed above to mitigate power system disruption risks and impacts.

Third, the IRP inputs will be developed based on an unprecedented level of public and expert stakeholder engagement ahead of the IRP model development. PREPA will work to proactively engage customers, technology solutions providers, the industrial sector, academics, environmental groups, creditors, local governments, owners of critical infrastructure, and the PREPA unions to gather input on the objectives, constraints, scenarios, strategies, and options for the Puerto Rican power system.

Finally, stakeholders will be consistently updated so they can understand, guide, and buy-in to the process and the outcome of the IRP. To achieve this, stakeholders have to see an outcome that is understandable, accessible, and transparent, to have the confidence that the power systems will meet the PREPA board’s vision.

 

A Better Power Grid, A Better Future

The IRP, no matter how innovative in its approach, no matter how aligned by the needs and desires of Puerto Ricans, and no matter how robust in its analysis, is only the first step in transforming the power sector for the island. It is, however, a critical step, both in how it sets up the range of portfolios to deliver the needs of electricity consumers, and also in the tone the process itself sets amongst the stakeholders.

Within the scope of demand forecasting and resource planning this IRP process will likely not incorporate every innovation that one might conceive of; especially given the tight timeframe and limits on data availability. The IRP team has already identified areas, such as energy efficiency potential and distribution resource portfolio flexibility, where given more time more sophisticated analysis, and therefore more robust scenario and option development, could be completed.

Nonetheless, the IRP can represent a significant step forward in best practice resource planning for the electric power system, and will be a significant improvement over the previous effort. How transformative it will ultimately be will depend on the consistent, comprehensive, and constructive engagement input from stakeholders and experts. To that end, all those interested in a better power grid for the Puerto Rico, or a better approach to power system planning in the age of cost effective distributed energy resources, should join in the effort.

To learn more about SEPA’s efforts in Puerto Rico, please visit www.sepapower.org/PuertoRico. To engage in the 2018 PREPA Stakeholder process, please visit www.aeepr.com

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