Puerto Rico: Deciding Its Energy Future
May 10, 2018
The immediate energy nightmare in Puerto Rico is gradually winding down, with electrical power now available to about 90 percent of households (some rural areas are still without power). But it’s clear to nearly everyone that a reversion to the island’s previous energy status quo is not a viable option: Puerto Rico has no developed local energy resources, and most of its electricity is generated by burning imported oil. Its utility company, PREPA, is billions of dollars in debt and famously inefficient. The island is clearly at a crossroads with regard to its energy future.
Predictably, some top Republican lawmakers are proposing to privatize PREPA and switch power generation to natural gas. Investors could build a liquid natural gas hub on the island, along with pipelines and generating stations. The project could bring in revenue by re-exporting gas to other islands in the Caribbean.
The arguments for the proposal have been carefully thought through—up to a point (more on that point later!). After all, natural gas is cheaper than oil and produces lower carbon emissions. And the privatization of PREPA, which has filed for bankruptcy, seems highly likely if not inevitable.
Nevertheless, there are other proposals on the table. The Institute for Energy Economics and Financial Analysis, or IEEFA, thinks PREPA could transition to renewables—including rooftop and utility-scale solar. And Tesla has offered its solar power unit as a long-term solution to the island’s energy woes. José H. Román, interim president of the Puerto Rico Energy Commission, agrees with the solar microgrid vision for his country’s future.
There are lots of good reasons to go for renewables. And there is one reason not to opt for natural gas, which almost nobody is talking about: while supplies of the fuel are abundant today, we should not assume this will be the case much longer. Armed with the best proprietary drilling-and-production database in existence, David Hughes of Post Carbon Institute has carefully analyzed the shale gas boom for the past several years, and argues persuasively that the boom is in fact a short-term investment bubble. Production from individual wells tends to fall off rapidly, requiring constant high rates of drilling to avert field-level production decline. Only “sweet spots” within productive regions have any hope of being profitable, and those small areas are being saturated with wells. The early shale gas plays are already long past their peak rates of production, and the biggest, the Marcellus, is nearing its own turnover point.
This information changes everything, not just for Puerto Rico, but for the United States as a whole. Over half of U.S. natural gas production currently is from shale resources, and the mainland has therefore bet its electricity future largely on natural gas. That will in all likelihood turn out to be a catastrophic choice. Despite its economic and other challenges, Puerto Rico is now in a position to decide its energy future. It doesn’t have sunk investments in natural gas infrastructure. It knows first-hand the consequences of climate change, and can choose an energy path that does not exacerbate global warming and therefore sea-level rise and more powerful storms. It can learn not only from its own past mistakes, but from the mainland’s as well. Radical energy efficiency together with distributed renewables is the only option that won’t lead to yet another disaster.
Teaser image: Resilience Power Puerto Rico facebook page.