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Federal Energy Funds for Puerto Rico, A Small Down Payment

Photo by Autoridad de Energía Eléctrica (AEE), Feb 12 2018.

Photo by Autoridad de Energía Eléctrica (AEE), Feb 12 2018.

Just this past week, Puerto Rico suffered another setback in its effort to restore power to the island. One of its 400 megawatt power plants caught fire, plunging people back into the darkness.

The outage underscored how much work needs to be done to bring normalcy back to the island.

In that regard, how the federal government will help bring back power to Puerto Rico was answered in part last week with the passage of the so-called Bipartisan Budget Act of 2018. We have gone through the 600 plus pages and have a few insights.

It’s actually decent news, although the funding is far short of what will be needed to restore power to the island. Recall that a prior report asked for $18 billion. This provides $2 billion, perhaps a down payment on that total.

In any case, the sections on Puerto Rico and the Virgin Islands are pretty brief. In effect, the law provides $2 billion in federal funding for “enhanced or improved electrical power systems.” (p. 91). That’s it for guidance.

But there is one important addition: the law appears to amend the Stafford Act to allow for better reconstruction than before. The Stafford Act historically has been an odd law, used to prevent rebuilding of systems better than they were before they were destroyed. Overturning that restriction, the new language states that repairs to “critical services” can be built “to industry standards without regard to pre-disaster construction of the facility or system.” (Sec. 20601, p. 46).

To us, this should mean this funding could go to solar and storage systems (or that some call microgrids) on the islands, not just grid hardening (although how much is key). Building level or community solar and storage systems should then be eligible for this federal support.

This could be good and important news, as the funding is not geared to rebuilding the same way. This is an important first-time precedent for disaster recovery for power systems.

As to the process for funding to go to these purposes, it appears this funding will simply be part of the Community Development Block Grant that the island government will administer, with oversight by HUD. (p. 91). The island then can use 5% of the total to administer the program. In addition, there is $15 million for “capacity building or technical assistance “for contracting and procurement processes. (p. 97).

Puerto Rico must submit a six-month plan regarding the funding and any “actions as may be necessary to mitigate vulnerabilities to future extreme weather events and national disasters and increased community resilience” including new codes and standards. (p. 105). It seems that the law contemplates funding and activity before that period, however.

There is also additional funding for public health (p. 68) and it’s not clear to us whether any of that separate funding could be used to upgrade health facilities with more resilient power.

In the end, a lot of how this goes seems to depend on how well the island government administers this program, and whether HUD will effectively support that process, at a minimum.

It should be noted that, if a significant amount of this funding comes into place for resilient power systems, it could be the largest public funding support for resilient power in the country, dedicated to one state level unit of government.

But much needs to go right here when so much to date has gone wrong.

The rules must be established to allow for solar and storage microgrids to be installed. The capital must be leveraged with federal funds to get those projects financed. The solar installer community must be trained to put in storage systems so the power does not out the next time. And the utility regulators and policy makers must put the right plan in place to allow all of this to happen soon.

The next year will be critical to how well this country responds to what has become the largest blackout in American history.

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