Puerto Rico: Black Start 2019

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El huracán María devastó el sistema de energía de Puerto Rico. Después de la tormenta, la isla esencialmente ha tenido que reactivar su sistema energético del equivalente de lo que en la industria se llama un “blackstart”, que es el término técnico que describe el proceso de reactivar el sistema de generación energética luego de un apagón total.

A la misma vez, el sector de energía en todo el mundo está cambiando rápidamente a medida que nuevas tecnologías que son incompatibles con el paradigma centenario de generación, transmisión y distribución de energía entran en funcionamiento. Debemos aprovechar esta coyuntura, la destrucción casi total del sistema de energía en Puerto Rico y los adelantos tecnológicos en este sector, para traer al siglo 21 el anquilosado sistema eléctrico de la isla. Dicho de otra manera, debemos utilizar el “blackstart”, no para reconstruir el sistema energético a su estado al 19 de septiembre de 2017, sino para dar un salto cualitativo de envergadura.

Para que el sector de energía lleve a cabo con éxito la transición a un nuevo modelo de hacer negocios será necesario desarrollar una nueva visión del sistema, enmendar leyes y reglamentos, actualizar las redes de transmisión y distribución y fomentar el uso eficiente de la energía por parte de los consumidores. Esta es una tarea difícil, pero afortunadamente abundan los recursos para orientar a los legisladores, reglamentadores y las compañías de energía en este proceso.

El primer paso …una nueva visión

El primer paso en este complicado camino es desarrollar una nueva visión para el sector energético de Puerto Rico. Desarrollar esta visión requiere pensar más allá de los confines de la isla, pero tomando en consideración y entendiendo a fondo las limitaciones y retos que enfrenta Puerto Rico. Además, se necesitará legislación de avanzada para implementar esa visión y establecer lineamientos claros para los reglamentadores con respecto a los objetivos ambientales, los estándares de energía renovable, la eficiencia energética y el manejo de la demanda por energía.

El modelo de reglamentación también tendrá que evolucionar de uno basado en planes de recursos integrados a largo plazo a uno basado en una supervisión más proactiva con respecto a la utilización eficiente de los recursos y más dinámica en relación a los distintos actores y participantes en el sector energético. Esto significa que los reglamentadores deberán implementar un modelo de reglamentación basado en el desempeño (“performance-based regulation”), establecer parámetros transparentes para la rendición de cuentas, así como incentivos (y sanciones) para lograr los objetivos de la política energética.

Nuevas estructuras tarifarias

Las nuevas estructuras tarifarias deben diseñarse para: (1) enviar las señales de precio correctas tanto a los generadores como a los consumidores; (2) promover la eficiencia energética; (3) manejar eficientemente la carga base y la demanda pico; (4) fomentar la transición a la interacción bi-direccional entre los operadores de la red y los clientes que instalen capacidad de generación distribuida; y (5) implementar tarifas basadas en el momento del uso de la energía para fomentar la eficiencia y la optimización del uso de los recursos. Además, se deberá promover la implementación de nuevas normas energéticas para el diseño de edificios, facilitar el financiamiento para la retro-adaptación de estructuras existentes para fomentar la conservación de energía y promover el uso de enseres electrodomésticos eficientes para estabilizar el consumo residencial.

La generación de energía

En términos de generación, las grandes instalaciones de generación con ciclos de recuperación de la inversión de más de 30 años son cada vez más una cosa del pasado. Mientras, la construcción de unidades de generación tradicional más pequeñas y altamente eficientes, ampliamente distribuidas en las áreas de servicio para suplir la carga base, se está convirtiendo rápidamente en una alternativa tecnológicamente factible y rentable. Complementar este modelo con soluciones de generación renovable y tecnologías de almacenamiento para proveer reservas, otros servicios auxiliares y carga adicional en las horas pico, no solo es eficiente, sino que puede ayudar a proporcionar un servicio con menos interrupciones y más costo-efectivo para todos los clientes.

La transmisión y distribución

Por el lado de la transmisión y distribución, la red deberá evolucionar para incorporar de manera eficiente y confiable la generación distribuida, el uso de baterías a nivel de la red, así como al detal, para permitir el almacenamiento de electricidad cuando no se requiera su uso inmediato y así promover y aumentar el valor de los recursos de generación intermitente. Además, el rápido crecimiento del mercado de automóviles eléctricos crea el potencial de demanda adicional, presumiblemente fuera de las horas pico, lo que ayudará a estabilizar la demanda por una carga base que se proyecta a la baja en los próximos años. Los automóviles eléctricos también funcionarían como una solución de almacenamiento y podrían descargar energía a la red cuando surjan usos más valiosos para esa carga. Ahora bien, todo esto implicaría hacer inversiones de capital en áreas no-tradicionales dado que los automóviles eléctricos necesitarían estaciones de carga ampliamente disponibles y accesibles a través de toda la isla.

Flexibilidad

Por último, dados los efectos previsibles del rápido e inminente cambio climático, la red del siglo 21 tiene que ser lo suficientemente flexible para incorporar micro y mini-redes que puedan conectarse y desconectarse de la red principal, según sea necesario, para asegurar que las instalaciones de infraestructura crítica (hospitales, bombas de agua, telecomunicaciones etc.) tengan un respaldo adecuado en caso de desastres para proteger a las comunidades aisladas de interrupciones prolongadas de esos servicios y limitar los impactos a la salud y al medio ambiente.

Estos temas los estaremos explorando durante la conferencia sobre El Futuro de la Energía, convocada por el Centro para una Nueva Economía para principios del 2019. Además, analizaremos el rol de las instituciones académicas en la transformación energética de Puerto Rico; la necesidad de atraer capital en condiciones competitivas; así como oportunidades de investigación y desarrollo y el impacto del rediseño del sector energético de Puerto Rico sobre el desarrollo económico de la isla.

El autor es el Director de Política Pública del Centro para una Nueva Economía

Esta columna fue publicada originalmente en El Nuevo Día el 17 de junio de 2018.

Pendientes a Puerto Rico: Black Start 2019, si aún no lo ha hecho puede registrarse aquí.

 

 

 

Hurricane Maria devastated Puerto Rico’s energy system. After the storm, the island essentially has had to re-activate its energy system from the equivalent of a system-wide “blackstart”, which is the technical term for restarting an energy system from a complete shutdown.

At the same time, the energy sector world-wide is rapidly changing as new technologies come online and challenge the existing 100-year old model of generating, transmitting, and distributing energy to various classes of customers with different needs. Puerto Rico should take advantage of this synchronicity—the almost total destruction of its energy system and the technological advances in this sector—to upgrade its ankylosed electric system to 21st century standards. In other words, we should use the current blackstart-like situation to make a quantitative jump, instead of just restoring its energy system to its pre-Maria status.

In order to successfully make the transition to a new business model for the energy sector, it will be necessary to develop a new energy vision, amend several laws and regulations, upgrade transmission and distribution systems and encourage the efficient use of energy by end customers. This is a tall order, but fortunately resources abound to guide policymakers, regulators and utilities in this process.

The first step … a new vision

The first step in this complicated pathway is developing a new vision for the Puerto Rico energy sector. Charting this vision requires thinking beyond the confines of Puerto Rico, but with a clear understanding of the island’s limitations and challenges. In addition, new legislation will be needed to mandate the implementation of that vision and to set clear targets for regulators regarding environmental objectives, renewable portfolio standards, energy-efficiency goals, demand response and peak load management.

Regulation models will also have to evolve from long-term planning cycles to more proactive supervision regarding the efficient deployment of new resources and more dynamic oversight of the growing number of stakeholders in the energy sector. To accomplish these objectives, regulators will need to shift to performance-based regulation and set transparent accountability metrics, as well as incentives (and penalties) to achieve policy objectives.

New tariff structures

New tariff structures need to be designed to send the right price signals to both generators and customers, promote energy efficiency, manage baseload and peak demand, encourage the transition to bi-directional interaction between grid operators and customers deploying distributed energy resources and to establish block and time-of-use rates to encourage efficiency. In addition, new building design standards, access to finance energy-conservation retrofitting, and the adoption of consumption-reduction technology for households should also be widely encouraged.

Energy Generation

Large generation facilities with 30-plus-year investment recovery cycles are increasingly a thing of the past. On the other hand, building smaller, highly efficient traditional generation units, widely-distributed across the service areas to support baseload demand is quickly becoming both technologically feasible and cost-effective. This model, coupled with increased renewable generation/storage solutions to provide reserves, other ancillary services and additional load at peak times, is not only efficient, but can provide extremely reliable service, with lower outage rates, and lower costs for all customers.

Grid designs will also have to evolve to efficiently and reliably incorporate distributed generation, grid-scale and customer-owned battery storage units to allow the storage of electricity when not required for immediate use and thereby promote and enhance the value of environment-friendly intermittent generation resources. In addition, the rapidly growing market for electric cars creates the potential for additional demand, presumably at off-peak hours, therefore stabilizing baseload requirements that are forecast to decline in the coming years. Electric cars are also a storage solution that could discharge energy back to the grid when that charge has other more valuable uses. However, this would also entail making capital improvements outside the traditional utility paradigm, given that electric cars would need widely available and accessible charging stations throughout the island.

Flexibility

Finally, given the foreseeable effects of rapid and impending climate change, the grid of the 21st century has to allow for the incorporation of micro and mini-grids that can connect and disconnect from the main grid as needed to ensure critical infrastructure has adequate back-up in the event of natural or man-made disasters, to protect isolated communities from prolonged service outages, and to limit health and environmental impacts.

These are some of the themes we will be exploring during the “Future of Energy Conference”, convened by the Center for a New Economy for the first quarter of 2019. In addition, we will analyze the role of academic institutions in Puerto Rico’s energy transformation; the need to attract new capital at competitive terms; as well as research and development opportunities and the economic development impact of redesigning Puerto Rico’s energy sector.

The author is Policy Director for the Center for a New Economy

This column was originally published in El Nuevo Día on June 17th, 2018

Lookout for Puerto Rico: Black Start 2019, if you haven’t register to receive information please do so  here.

 

Restoring Growth: Forging the Road Ahead – 2017 CNE Conference Proceedings

Growth

CNE’s 2017 Conference was unique in many ways. Puerto Rico’s debt crisis provided an exacting but precious backdrop for a much-needed and multifaceted discussion on the current fiscal policies and the prospects for future structural change.

The two-day Conference consisted of seven events designed to bring the conversation about debt, uncertainty, austerity and growth to a wide variety of groups.

The highlight: the launch of the CNE Growth Commission for Puerto Rico and its first convening in San Juan.

Debt, Austerity and Growth – Joseph Stiglitz in San Juan

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A variegated audience of over one thousand people gathered on April 6, 2017 at the San Juan Symphonic Hall to listen and reflect on Nobel Prize winner Joseph Stiglitz’ words of caution and forward-looking advise regarding Puerto Rico’s economic predicament. Stiglitz is one of 17 experts who conform pro-bono the CNE Growth Commission for Puerto Rico.

Click here to access a complete recording of the event.

Watch the following summary videos:

In introducing Stiglitz, CNE’s President and Founder Miguel A. Soto-Class stressed the need for ample involvement in the process of economic recovery and made an urgent call-to-action.

Stiglitz cautioned against the contractionary effects fiscal austerity measures will have on the island’s economy…

…and urged for growth measures as anchors of any fiscal and debt restructuring plans.

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Growth Amidst Uncertainty: A Free Market Perspective – A Conversation with Steven Davis

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“Historically, the Puerto Rican tax code and regulatory system abound with provisions for special business interests…The result is a complicated web of policy-induced financial incentives that helps sustain a rent-seeking business culture and an overly intrusive role for the government.”
Steven Davis

On April 6, 2017, Steven Davis, Professor of Entrepreneurship and Global Economics and Management at the Sloan School of Management of the Massachusetts Institute of Technology, led a conversation with Puerto Rico entrepreneurs and business leaders on how free markets can help Puerto Rico create a healthier economic climate and foster growth. Davis, who is a pro-bono member of the CNE Growth Commission for Puerto Rico, argued in favor of simplifying regulations affecting the island’s business environment.

Select a thumbnail to view full-size images.

Charting a Path Towards Growth – CNE Growth Commission All-Day Convening

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The CNE Growth Commission for Puerto Rico convened for the first time in San Juan and began to craft an agenda focused on helping the island devise economic development opportunities and strengthen execution capabilities.

The Commission’s vision is based on the premise that – given the demands of a rapidly changing knowledge-based economy and heightened global competition – long-term sustained economic growth is a result of a country’s capability to move into higher value-added activities. Therefore, the Commission understands that any new economic strategy for long-term growth in Puerto Rico ought to be focused on:

  1. Speeding up the process of economic structural change by advancing the economy’s insertion in high-value niches, investing in innovation, and adopting new knowledge and technologies.
  2. Creating the institutional framework to promote this structural change; that is, revamping the institutions whose mission is to promote this transformation.
  3. Devising public policies that help raise the wellbeing of society in an inclusive manner, so that most of its members can benefit from the gains of improved economic performance.

Access the CNE’s Growth Commission Workplan

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Prompting a Far-Reaching Dialogue About Economic Recovery

With the objective of prompting a far-reaching dialogue about the process of economic recovery, the CNE 2017 Conference included also a series of workshops, presentations and meetings with Puerto Rico and US media, University of Puerto Rico students and the general public.

Select a thumbnail to view full-size images.

Is a Federal Fiscal Control Board the Only Option for Puerto Rico? – Event Recording

March 2nd 2016 CNE National Press Club nathan mitchell photography-36 copy

Sparking a New Conversation about Puerto Rico in Washington D.C.

On March 2, 2016, the Center for a New Economy (CNE) broke new ground by hosting the conference “Is a Federal Fiscal Control Board the Only Option for Puerto Rico?” in Washington D.C. The forum sought to generate a balanced discussion on options for achieving fiscal balance for Puerto Rico beyond the current binary debate over the imposition of a federal control board.

The conference explored the concept of a Fiscal Responsibility Law (FRL) for Puerto Rico as a policy proposal that could lay the groundwork for the stabilization of Puerto Rico’s public finances and prompt a broad overhaul of Puerto Rico’s fiscal infrastructure. FRLs are mechanisms that allow for the establishment of monitorable fiscal targets and policy reforms. The panel discussed the benefits of enacting and implementing a FRL as the basis for a strong fiscal regime for Puerto Rico, and how it might fit within the broad framework of any federal policy that addresses the island’s current fiscal and economic crisis.

Miguel A. Soto-Class, President of CNE, introduced the discussion stressing that solutions to the Puerto Rico crisis need to have legitimacy within the island and seek to rebuild its fiscal institutions for the long-term.

Andrés Velasco, Former Finance Minister of Chile and Professor at Columbia University’s School of International and Public Affairs, discussed how Fiscal Responsibility Rules are being successfully applied throughout the world; while Tracy Gordon, Senior Fellow, Urban-Brookings Tax Policy Center, explored how they are applied in the United States and the type of oversight mechanisms with which they interplay.

Sergio Marxuach, Policy Director of CNE, discussed how a Fiscal Responsibility Law for Puerto Rico could be designed in order to deal with the current juncture and manage fiscal policy in the long-term; while Gordon Gray, Director of Fiscal Policy at the American Action Forum, cautioned about the challenges such a law would face in the context of Puerto Rico’s current politically charged atmosphere.

Puerto Rico’s elected officials, Congressman Pedro Pierluisi, Resident Commissioner for Puerto Rico, and Senator Eduardo Bhatia, President of the Puerto Rico Senate, closed the event, cautioning against externally imposed solutions to the Puerto Rico crisis.

If you want to be part of the conversation regarding Puerto Rico’s future, join us, and watch CNE’s DC panel on the link below.

Is a Federal Fiscal Control Board the Only Option for Puerto Rico? – Opening Remarks

Click on the link below to watch the opening remarks of the Center for a New Economy’s forum “Is a Federal Fiscal Control Board the Only Option for Puerto Rico?” delivered by CNE’s President Miguel A. Soto-Class. The event took place on March 2, 2016 at the National Press Club of Washington D.C.

Click “Read more” for the text of the opening remarks.
READ MORE

Is a Federal Fiscal Control Board the Only Option for Puerto Rico? – Keynote: Andrés Velasco

Click on the link below to watch Andrés Velasco’s keynote in the Center for a New Economy’s forum “Is a Federal Fiscal Control Board the Only Option for Puerto Rico?”. The event took place on March 2, 2016 at the National Press Club of Washington D.C. Scroll below to download the slides from Mr. Velasco’s presentation and to read a brief biography.

Download Andrés Velasco’s presentation slides:
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Andrés Velasco
Professor, Professional Practice in International Development
Columbia University’s School of International and Public Affairs, New York City

Velasco is a former presidential candidate and Finance Minister of Chile, and was also part of the team that negotiated Chile’s commercial agreements with Mexico, Canada and the United Sates. He has taught Development and International Finance at Harvard University, was Director of the Center for Latin American Studies of New York University, and has published over 100 articles and four books on international economics and development. Velasco holds a Ph.D. in Economics from Columbia University and a Post-Doctoral Degree in Political Economy in Harvard University and the Massachusetts Institute of Technology.

Is a Federal Fiscal Control Board the Only Option for Puerto Rico?- Sergio M. Marxuach

Click on the link below to watch Sergio Marxuach’s remarks in the Center for a New Economy’s forum “Is a Federal Fiscal Control Board the Only Option for Puerto Rico?”. The event took place on March 2, 2016 at the National Press Club of Washington D.C. Scroll below to read a brief biography of Mr. Marxuach.

Sergio M. Marxuach
Public Policy Director
Center for a New Economy, San Juan

Prior to joining CNE, Marxuach served as Deputy Secretary of Commerce and Economic Development, and as Special Assistant to the Executive Director of the Office of Management and Budget for the Commonwealth of Puerto Rico. Before joining the Commonwealth government, he was an associate in the New York City law firm of Curtis, Mallet-Prevost, Colt & Mosle LLP, where he structured cross-border capital market transactions and arranged vendor financing and syndicated credit facilities for U.S. multinational firms in Latin America. Mr. Marxuach has a B.A. in Economics and Political Science from Yale University. He also has a Juris Doctor degree from the Georgetown University Law Center and a Master of Science in Foreign Service from the Graduate School of Foreign Service at Georgetown University.

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