Trends and Developments in the Puerto Rico Energy Sector: A Critical Look at Policy, Procurement, and Infrastructure Challenges

Puerto Rico’s energy sector stands at a critical juncture, grappling with a confluence of challenges that have exposed the fragility of its energy infrastructure and underscored the urgent need for systemic transformation. The island’s heavy reliance on fossil fuels, compounded by the catastrophic impacts of Hurricane Maria and subsequent natural disasters, has laid bare the vulnerabilities of its ageing electric grid and energy systems. These challenges, however, have also catalysed a bold and ambitious push toward a clean energy future, driven by a growing recognition of the need for resilience, sustainability, and reliability in the face of climate change and economic pressures. 

Central to this transformation is the development of comprehensive energy policies and strategic frameworks designed to overhaul the island’s energy landscape. The Integrated Resource Plan (IRP), a cornerstone of Puerto Rico’s energy strategy, provides a 20-year roadmap for the sector’s evolution, with periodic revisions every three years to adapt to emerging challenges and opportunities. Legislative milestones such as Act 57-2014, the Puerto Rico Energy Sector Transformation and RELIEF Act, and Act 17-2019, the Puerto Rico Energy Public Policy Act, have further solidified the island’s commitment to a sustainable energy transition. These policies aim to reduce dependence on imported fossil fuels, promote renewable energy adoption, and enhance grid resilience. 

Adding depth to these efforts is the Puerto Rico Grid Resilience and Transitions to 100% Renewable Energy Study (PR100 Study), a groundbreaking initiative led by the US Department of Energy (DOE) in collaboration with the Argonne National Laboratory (ANL) and the National Renewable Energy Laboratory (NREL). The PR100 Study comprehensively analyses Puerto Rico’s energy transition, presenting detailed modelling, scenarios, and actionable pathways to achieve a fully renewable, resilient, and economically sustainable energy system by 2050. This study has become an indispensable resource for policymakers, stakeholders, and industry leaders, providing critical insights into the island’s energy transformation’s technical, economic, and social dimensions. 

We examine the trends and developments shaping Puerto Rico’s energy sector, focusing on the interplay between policy, procurement, and infrastructure challenges. By analysing the successes, setbacks, and ongoing efforts in the island’s energy transition, we aim to shed light on the complexities of achieving a sustainable and resilient energy future for Puerto Rico.

The Evolution of Puerto Rico’s Energy Policy: A Roadmap to Resilience and Renewables

Enacted in 2014, Act 57-2014, the Puerto Rico Energy Sector Transformation and RELIEF Act, marked a pivotal step in the island’s energy transformation. This legislation established a strategic roadmap and comprehensive framework for advancing sustainable energy practices, focusing on ensuring reliable, affordable, and sustainable electricity generation. Central to this framework is the IRP, a long-term planning tool designed to guide Puerto Rico’s energy future. The IRP emphasises the integration of renewable energy sources, enhancing grid resiliency, and retiring outdated, inefficient power plants, all while addressing the island’s pressing energy infrastructure challenges. 

The IRP outlines specific goals for renewable energy adoption, infrastructure investments, and the phased retirement of older power plants while accounting for future energy demand. Act 57-2014 empowers the Puerto Rico Energy Bureau (PREB), the island’s energy regulatory authority, to oversee the development and implementation of the IRP. The PREB ensures that the plan aligns with Puerto Rico’s energy needs while adhering to state and federal environmental standards. 

On August 24, 2020, the PREB issued its IRP Final Order, approving a modified version of the IRP submitted by the Puerto Rico Electric Power Authority (PREPA). This approved IRP included a Modified Preferred Resource Plan (Action Plan) detailing specific power generation capacity additions, unit retirements, and a procurement plan for renewable energy and battery storage resources. The plan mandated the procurement of 3,750 MW of renewable energy and 1,500 MW of battery energy storage systems (BESS) through six tranches, with completion targeted by June 2023. The IRP also authorised the retirement of older, oil-fired steam units, combined cycle turbines, and peaking units at facilities such as Palo Seco, San Juan, and Aguirre between 2021 and 2025, contingent on the availability of replacement capacity. 

However, the implementation of the IRP has faced significant challenges in Resolution and Order No NEPR-AP2023-0004, dated October 29, 2024, the PREB denied LUMA Energy’s, the private operator overseeing transmission and distribution in Puerto Rico, request for an extension to submit the 2025 IRP, citing urgent operational challenges. The PREB highlighted 111 loss-of-load events, a concerning frequency that underscores critical reliability issues within Puerto Rico’s power grid. These events, often caused by generation shortfalls or unit performance problems, have led to frequent customer outages, further exposing the fragility of the island’s energy infrastructure. 

The PREB emphasised that while transmission system repairs and rebuilds, funded by federal resources, are underway, the primary issue remains the lack of sufficient generation capacity. The October 29th Order stressed the urgent need to address this shortfall through both supply-side and demand-side resources, including diverse forms of generation and storage. The PREB concluded that without swift and decisive action, the reliability of Puerto Rico’s power grid will continue to deteriorate, exacerbating an already volatile situation. 

To address these challenges, the PREB ordered LUMA to submit key components of the 2025 IRP by November 27, 2024, and to provide transmission and distribution-related requirements by February 28, 2025. The final 2025 IRP Report is due by May 16, 2025. On November 25, 2024, LUMA submitted its First Interim 2025 IRP Filing, which included preliminary results from four modelled scenarios. These scenarios considered varying input assumptions for future demand, resource costs, and other factors, resulting in preliminary energy resource additions and retirement portfolios. 

LUMA’s Fixed Decisions, unchanged assumptions across all scenarios, included significant capacity additions, such as 578.8 MW of solar PV and 350 MW of BESS from the Tranche 1 process, 360 MW of BESS under the Accelerated Storage Addition Program (ASAP), and 336 MW of LNG peaking units proposed by Genera PR, as the operator and administrator of PREPA’s emission generation units. Fixed retirements included 147 MW of diesel units in 2027 and 454 MW of coal from AES in 2028. Preliminary portfolios also indicated the retirement of heavy fuel oil (HFO) and diesel units between 2032 and 2042, as well as biodiesel conversions for existing and new units between 2030 and 2041. 

These developments highlight the dynamic nature of Puerto Rico’s energy transition. Once finalised, the 2025 IRP will include updated retirement schedules for emissions units at facilities operated by Genera PR, as well as new capacity additions and fuel conversions.

Adding further complexity, Bill No 270, introduced in the Puerto Rico Senate on January 22, 2025, proposes amendments to Act 17-2019. The bill seeks to extend the deadline for eliminating coal-fired energy generation from 2028 to 2030 and remove interim renewable energy targets, such as the 40% goal by 2025 and the 60% goal by 2040, while retaining the 100% renewable energy target by 2050. If enacted, this legislation would alter Puerto Rico’s energy transition timeline, delaying the retirement of its sole coal-fired facility and impacting the submission of the final IRP. 

In summary, Puerto Rico’s energy sector is navigating a complex and evolving landscape, marked by ambitious renewable energy goals, urgent infrastructure challenges, and ongoing regulatory and legislative developments. The 2025 IRP will play a critical role in shaping the island’s energy future, with significant implications for grid reliability, environmental sustainability, and economic resilience. As stakeholders work to address these challenges, the need for coordinated action, transparent decision-making, and adaptive planning remains paramount.

The Energy Procurement Process: Delays, Challenges, and Opportunities

Puerto Rico’s renewable energy and battery storage procurement process under its IRP has faced significant delays, highlighting the complexities of transitioning to clean energy. The IRP initially outlined six tranches targeting specific renewable and storage capacities, but progress has been hindered by procurement delays, financing challenges, permitting issues, and slow project development.

The first tranche (2021) aimed for 1,000 MW of solar and storage but achieved only 555 MW of solar and 350 MW of battery storage by 2022. The second tranche, targeting 500 MW of solar and 250 MW of storage, completed procurement in May 2024 but had no signed power purchase agreements. The third tranche was cancelled in early 2024 due to a lack of developer interest and financial concerns, underscoring investment hurdles.

In response, the PREB consolidated remaining targets into Tranche 4, aiming for 500 MW of renewables and 250 MW of storage, with bids due by November 25, 2024. Meanwhile, LUMA’s November 2024 filing outlined preliminary energy scenarios, including planned retirements of fossil fuel units and proposed biodiesel conversions, with a final 2025 IRP report due by May 2025.

Despite setbacks, progress is evident with Tranches 4 and 5 underway, targeting additional solar and storage capacity, and Tranche 6 expected soon. Federal funding, including USD1.2 billion from the DOE, has been critical, supporting projects like Infinigen’s solar and storage arrays and Convergent Energy’s solar farm. However, the new US administration’s freeze on Inflation Reduction Act funds threatens future support, potentially impacting Puerto Rico’s energy transition.

In summary, while delays and challenges persist, opportunities exist to accelerate Puerto Rico’s renewable energy goals through streamlined processes, increased investment, and strategic planning. The success of future tranches and the 2025 IRP will be pivotal in achieving a resilient, sustainable energy system.

Grid Reliability and the Need for Increased Generation Capacity

Puerto Rico’s energy infrastructure faces significant reliability challenges, including ageing systems, frequent outages, and insufficient generation capacity. Since Hurricane Maria in 2017, efforts have been underway to modernise the grid and integrate microgrids and decentralised systems, but the island’s electricity system remains vulnerable. Reserve margins have consistently fallen short of the 750 MW minimum threshold, with levels averaging 572 MW in early 2024 and dropping below the threshold for nearly half of September 2024. This shortfall, driven by over-reliance on outdated fossil fuel units, has led to frequent brownouts and blackouts, threatening grid stability and essential services.

The PREB has emphasised the need for supply- and demand-side solutions to address these issues. The recent agreement between the Public-Private Partnership Authority (P3A) and Energiza LLC to develop an LNG-fired power plant, convertible to hydrogen by 2028, aims to support the transition from coal and diesel while modernising generation infrastructure. However, resource adequacy remains a critical challenge, with the planned retirement of older oil-fired plants creating a dilemma: balancing clean energy goals with the need for reliable power during the transition.

Upgrading the transmission and distribution (T&D) system is also vital, as the ageing network limits renewable energy integration and grid stability. While LUMA Energy has made progress in repairing infrastructure with federal support, further investments are needed. A multifaceted approach – accelerating renewable energy and storage deployment, optimising existing assets, and modernising T&D infrastructure – is essential to ensure a reliable and resilient energy future for Puerto Rico. Strategic planning and stakeholder coordination will be key to navigating these challenges and achieving a sustainable energy system.

The Role of Battery Energy Storage Systems (BEES)

BESS are set to play a transformative role in addressing Puerto Rico’s energy reliability and resource adequacy challenges. By storing excess energy during low-demand periods and dispatching it during peak demand or low renewable generation, BESS can reduce reliance on fossil fuels, enhance grid stability, and support the transition to a cleaner, more resilient energy system. The PR100 Study underscores BESS as critical for achieving Puerto Rico’s 2050 renewable energy goals, emphasising their role in mitigating the intermittency of solar and wind power and ensuring a stable power supply.

The study highlights the need for thousands of megawatt-hours of BESS capacity, including utility-scale and distributed systems, to meet grid demands and decarbonisation targets. Initiatives like LUMA Energy’s Accelerated Storage Addition Program (ASAP) aim to integrate BESS into the grid rapidly. ASAP’s two-phase approach targets adding 360 MW of BESS capacity, focusing on sites requiring minimal infrastructure upgrades to provide essential grid services like voltage support and frequency regulation. Approved by the PREB in May 2024, ASAP aligns with the island’s energy goals and public policy.

Despite their benefits, BESS deployment faces challenges such as high costs, regulatory barriers, and financing needs. Federal funding, including USD1 billion from the DOE, has supported projects like Convergent Energy’s 100 MW solar farm with 55 MW of storage and Pattern Energy’s standalone battery projects. These efforts demonstrate BESS’s potential to scale and meet Puerto Rico’s energy needs.

In summary, BESS is a cornerstone of Puerto Rico’s energy transition, offering solutions for grid reliability, renewable integration, and resilience. Prioritising BESS deployment, alongside renewable energy projects, is essential to address resource adequacy, reduce fossil fuel dependence, and build a sustainable energy future. The PR100 Study and initiatives like ASAP highlight the urgency of scaling BESS capacity to unlock the full potential of renewables on the island.

Energy Equity: Ensuring Fair Access to Renewable Energy

As Puerto Rico transitions to renewable energy, ensuring energy equity is crucial to prevent exacerbating existing inequalities and to provide affordable, reliable, and clean energy to historically underserved communities. Energy equity must be a central focus, with policies like community solar programs, energy efficiency initiatives, and targeted investments in disadvantaged areas playing a key role. These measures can reduce energy burdens, create jobs, and improve resilience in marginalised communities.

The PR100 Study emphasises the need for targeted investments and inclusive planning to ensure all communities benefit from the clean energy transition. Engaging communities in decision-making processes is essential to building trust, fostering local ownership, and addressing unique challenges. By prioritising equity, Puerto Rico can create a sustainable, just, and resilient energy system that leaves no one behind. The PR100 Study provides a strong foundation for these efforts, highlighting the importance of an inclusive approach to achieving a renewable energy future.

Net Metering: A Critical Tool for Puerto Rico’s Renewable Energy Transition

Net metering has been a key driver of Puerto Rico’s renewable energy transition, particularly for residential solar systems. This policy allows customers to sell excess electricity back to the grid for bill credits, spurring widespread solar adoption and enhancing energy independence and resilience, especially after Hurricane Maria in 2017. However, the Puerto Rico Financial Oversight and Management Board (FOMB) has raised concerns about its financial sustainability, proposing to reduce compensation rates from full retail to “avoided cost” rates to address PREPA’s fiscal challenges.

This proposal has sparked opposition, as critics argue it could hinder solar adoption, slow decarbonisation efforts, and disproportionately impact low- and middle-income households reliant on solar for cost savings. The PR100 Study emphasises the importance of net metering and distributed energy resources in achieving Puerto Rico’s renewable energy goals, highlighting the need for grid modernisation to support these systems.

In summary, while net metering is vital for Puerto Rico’s clean energy future, balancing its benefits with grid financial sustainability remains challenging. Policymakers must carefully consider the social, economic, and environmental impacts of any changes to ensure the island’s transition to a resilient, renewable energy system.

New Government, Changes in Policy 

In 2025, Puerto Rico’s Governor, Jennifer González, appointed Josué Colón as the island’s new energy tsar, marking a significant development in the ongoing efforts to address the energy crisis. Colón, a seasoned energy expert and former head of PREPA, brings decades of experience in the island’s energy sector to his new role. His responsibilities include overseeing efforts to stabilise the energy system, auditing the performance of LUMA Energy, the private operator of Puerto Rico’s transmission and distribution system, and serving as Executive Director of the P3A. With PREPA still in bankruptcy, Colón’s role also involves managing LUMA’s and Genera’s contracts and overseeing PREPA’s transition to an administrative function. His appointment underscores the administration’s commitment to addressing the island’s energy challenges while maintaining the current privatisation framework. 

In addition to Colón’s appointment, Governor González established a 12-member advisory committee to provide strategic guidance on Puerto Rico’s energy crisis. The committee, composed primarily of sector leaders, legislators, and developers, has already issued its initial report, which includes several key recommendations. Among these is the removal of intermediary renewable energy targets, acknowledging the difficulty of achieving the 40% renewable energy goal by 2025. The report also calls for expanding the powers of the PREB to enhance its regulatory oversight and ensure more effective energy transition management. 

The governor’s energy agenda prioritises accelerating energy development through streamlined processes and centralised decision-making. Key initiatives include centralising permitting, fast-tracking project approvals, and maximising generation capacity to address the island’s resource adequacy shortfall. These measures aim to reduce bureaucratic delays and create a more efficient framework for energy projects, particularly those involving renewable energy and grid modernisation. 

Early indications suggest that energy is a top priority for the González administration, with significant efforts underway to tackle the crisis. By appointing an experienced energy leader like Colón and establishing a high-level advisory committee, the administration is signalling its commitment to addressing Puerto Rico’s energy challenges with urgency and strategic focus. However, the success of these efforts will depend on balancing immediate needs with long-term goals, ensuring that the transition to a more reliable and sustainable energy system benefits all island residents. 

As Puerto Rico navigates this critical juncture, the administration’s policies and actions will play a decisive role in shaping the island’s energy future. The focus on centralising permitting, expanding regulatory oversight, and accelerating project development reflects a pragmatic approach to overcoming the systemic challenges that have long plagued Puerto Rico’s energy sector. With energy resilience and sustainability at the forefront, the González administration’s initiatives could pave the way for a more stable and equitable energy system in the years to come.

Charting the Path Forward: Puerto Rico’s Energy Transformation

Puerto Rico’s energy sector is undergoing a profound transformation, driven by the urgent need to integrate renewable energy, modernise the grid, and enhance resilience to climate change and natural disasters. While significant progress has been made, the island continues to grapple with challenges in procurement processes, resource adequacy, and infrastructure development. These hurdles underscore the complexity of transitioning to a sustainable and reliable energy system. 

Net metering remains a cornerstone of Puerto Rico’s renewable energy strategy, empowering residents and businesses to adopt solar power and contribute to grid stability. However, the policy faces ongoing challenges due to fiscal pressures and policy decisions, particularly from the FOMB. Balancing the grid’s financial sustainability with the need to incentivise renewable energy adoption will be critical to ensuring the long-term success of net metering and similar initiatives. 

The PR100 Study provides a comprehensive roadmap for achieving a fully renewable energy future by 2050, emphasising the importance of investments in renewable energy sources and BESS. These technologies are essential for addressing the intermittency of renewables and ensuring grid reliability. Complementing this vision, the IRP serves as a critical strategic framework, outlining actionable pathways to meet energy demands, retire outdated infrastructure, and achieve long-term sustainability. The IRP’s phased approach to integrating renewable energy, retiring fossil fuel-dependent units, and deploying BESS highlights the importance of a balanced and adaptive energy strategy. 

The IRP also underscores the need for grid modernisation and resilience enhancements, vital for integrating distributed energy resources and ensuring reliable power delivery. By aligning the IRP’s goals with the findings of the PR100 Study, Puerto Rico can create a cohesive strategy that addresses both immediate energy challenges and long-term decarbonisation targets. However, the successful implementation of the IRP will require robust regulatory oversight, significant investment, and collaboration among stakeholders. 

Achieving Puerto Rico’s ambitious decarbonisation targets and building a resilient energy system will require a multifaceted approach. Policymakers must prioritise careful planning, equitable distribution of the benefits of the energy transition, and active engagement with communities. This includes ensuring that low-income and marginalised populations have access to affordable, clean energy solutions and are empowered to participate in the transition process. 

Conclusion

Puerto Rico’s energy transformation represents both a challenge and an opportunity. By addressing the systemic issues that have long plagued the island’s energy sector and embracing innovative solutions, Puerto Rico can pave the way for a sustainable, resilient, and equitable energy future. The success of this transformation will depend on the collective efforts of government, industry, and communities working together to overcome obstacles and seize the opportunities presented by the clean energy transition. The IRP, alongside initiatives like the PR100 Study, provides a clear pathway forward, but its realisation will require sustained commitment, collaboration, and adaptability in the face of evolving challenges.