Energy Alternatives

By Mónica Pérez Nevárez

Solar panels, photovoltaic thin films, wind turbines (both large and home-scale), bio-thermal, ocean-current, waste-to-energy, methane retrieval from landfills, and many more technologies are being used around the world today to generate an ever-increasing amount of energy. The world's leading corporations and investors are beginning to realize the tremendous risks that environmental degradation and climate change pose, and are starting to respond to growing demand for greener policies and technologies by investing in them. According to the Worldwatch 2008 State of the World report, more than $100 billion of annual investment is directly related to environmental projects. Some $52 billion was invested in renewable energy in 2006, a 33% rise from 2005. That figure jumped to $66 billion last year, and is set to rise again this year. The report also estimates carbon markets tripled in 2006 to some $30 billion dollars. It’s time for Puerto Rico to step up to the plate.

“2008 began with the price of petroleum surpassing $110 a barrel. This brings to the fore the problem of depending on fossil fuels: not just for transportation, but more importantly as fuel for our electrical energy generators. So we have to analyze our power strategy: why should Puerto Rico continue to depend on petroleum and other fossil fuels, if many new clean technologies are available?”
Dr Efraín ÓNeill


A reliable source of energy is fundamental to economic development and community well-being. In Puerto Rico, we must generate our own electricity, make sure that there is enough power for all, and that the source is reliable and affordable. A family might be able to survive without electricity for a few days, but a business or a manufacturing plant might not recover economically from continuous electricity shortages, so reliability is paramount. Given all the possible negative consequences of Peak Oil, climate change and air pollution, analyzing alternative sources of power makes sense. Business Puerto Rico spoke with Dr. Efraín ÓNeill Carrillo, PE, UPR professor and Investigator, to get a better idea of the possibilities.

“In any debate or discussion about our energy future, we must evaluate and give weight to alternatives that take into consideration not just economic factors, but environmental and social aspects as well,” said O’Neill. “Not to do so paves the way for future problems and unintentional consequences that will be much more expensive to deal with unless we start planning for them now. And the technology is there for us to make use of it.”

Taking care of problems before they arise is one of the reasons businesses make business plans: to try and foresee obstacles and avoid them, be ready for them, or solve them before they get out of hand. Pressing environmental concerns demand that businesses do a little more planning, and more community outreach, in order to involve all of the stakeholders: the employees, the management, the community, the politicians, the owners and the company shareholders. Some experts have pointed out that yes, the transition to alternative sources of fuel will be costly, but compared to what it will cost if we do nothing, the answer seems self-evident.

“The time has come for reviewing the way we generate electricity in Puerto Rico, and include in our evaluation new environmental technologies that have been developed in the past decade to help us solve our energy needs” stipulated O’Neill. “No economic development initiative will be viable in Puerto Rico if the power challenge is not addressed. The more we wait to include alternate sources of power, the costlier it will be to solve the problem. Every year that passes makes the economic situation more precarious and our dependency on petroleum even greater.”

Around the world, big business has already started to invest in environmental technologies and conservation measures. Chemical giant DuPont has cut its greenhouse gas emissions 72% since 1992 and saved $3 billion dollars in the process. Clean technology is now the third largest recipient of venture capital, according to Worldwatch, and new renewable energy laws and climate policies in Europe and China will ensure these kinds of investments will continue to grow in the future. Citigroup pledged $50 billion last year to address climate change over the next decade, and Goldman Sachs invested $1.5 billion in renewable energy technologies in 2006. These are serious investments that are setting the standard, and leading the way to the transition to alternate sources of fuels.

For Puerto Rico, the sun, the ocean waves and the wind are the most obvious alternative sources of energy, and they are free. Scientists theorize that a 1000 square mile solar array in the desert southwest of the United States could potentially power the whole country, or that several hundred square miles of the Atlantic Ocean can generate enough power to satisfy demand for the whole world. There are currently wind farms in California, Nevada and Texas that generate enough energy to power several of their biggest cities. There are wind farms in Patagonia that generate half the energy needs of Chile. Germany has set a goal of 25% power from alternative sources (mostly solar and wind) by 2025, and is halfway there already. And these technologies are becoming more efficient and productive with every passing year.

But paving the way to the transition needs a concerted effort. “We need to create a new public policy that promotes and rewards power efficiency, the use of renewable sources of fuel, and helps entrepreneurs dedicated to innovative energy technologies start their alternative energy businesses. It is unrealistic to think that 100% of our demand for power will be satisfied with renewable sources in the near future. But it is unacceptable that we do not generate any energy from large-scale alternate sources, which is our condition at this point in time,” adds O’Neill. In Puerto Rico there are many homes with solar water heaters, and while that defrays the cost of heating your water, there is so much more that can be done.

Continued human progress now depends on an economic transformation that is more profound than any seen in the last century. We should be taking advantage of the ability of markets to allocate scarce resources while explicitly recognizing that our economy is dependent on the broader ecosystem that contains it. A growing number of countries are beginning to consider and implement "green accounting programs," but Worldwatch acknowledges that the influence of such programs is still limited. O’Neill echoes former World Bank chief economist Nicholas Stern's comment that the impacts of rising greenhouse gases caused by human activities represent "the greatest and widest-ranging market failure ever seen," when he states that “whether this transition occurs rapidly enough to avoid an economic breakdown is the single biggest challenge facing us today."

Part of the problem is that economic indicators fail to adequately consider environmental degradation. In the "Stern Review," a report issued in October 2006, Stern warned that unabated climate change will cause profound impacts to societies and ecosystems across the planet and could cost the world five to 20 percent of gross domestic product (GDP) annually. The market failure described by Stern is one that "the global economy is not prepared to cope with and that most of today's economic analysis is not able to understand." In fact, widely used economic indicators such as GDP fail to consider how nature benefits humanity, or the economic costs of environmental degradation, whether it is unsustainable logging, air pollution or adverse impacts to water quality.

Possibilities for the Future

“This process requires a commitment over time greater than the four year political cycle. It is necessary to understand that the problem is much greater and more complex than the mere reduction of cost of energy or the price of gasoline. It will take political will, private sector investment, and community support” added O’Neill.

The electrical grid in Puerto Rico is made up of 1) electrical energy generators, for example plants like Palo Seco and Costa Sur; 2) transmission lines (metal towers that transmit voltages of 100,000V (volts); and 3) distribution lines (the posts we see in residential and commercial zones, although there are also underground systems). This model was built around the use of fossil fuels, and is usually situated far from the places in which the electricity is used. It served its purpose, but now needs an enormous influx of money to be maintained and renovated. Why not invest instead in newer, cleaner forms of power?

Integrated solar power system could change the way our power infrastructure is maintained

Federal legislation has already taken the first step. The US Energy Policy Act of 1992 allowed small generators access into the electrical transmission and distribution systems. The Energy Policy Act of 2005 forced all electrical companies and state Public Service Commissions to consider the interconnection of generators in the distribution systems, new advanced measurement systems and inventory programs. So after public hearings on the 9th and 10th of July 2007, the Autoridad de Energia Electrica (AEE, the Power Authority) stated their intention to allow the interconnection of generators in their systems of distribution, and the 16th of August 2007 Governor Acevedo Vila signed a law that created a program of net measurement. “These measures are important in that they will allow a clear picture of the traditional structures of electrical energy in Puerto Rico to emerge; allow the integration of renewable sources at residential and commercial levels, move us towards a less fossil-fuel dependent future, and curb the current drain in our economy” stated O’Neill.

“It is vital to consider the use of a portfolio of strategies and resources that include conservation, efficiency and renewable power plants. For example, a recent Masters thesis I read proved that the widespread use of solar heaters can reduce the demand for electrical energy to the point of eliminating one of the currently operating generating plants,” continued O’Neill. “Another important alternative is the small scale generation of electrical energy, for example, making use of photovoltaic systems to power homes. This distributed generation of energy must be stimulated to the best of our abilities so that small towns have the tools necessary to handle their power requirements, especially after catastrophic weather events such as hurricanes, or problems with the AEE grid service.”

A vision begins to emerge of what future power generation and conservation in Puerto Rico could look like. In suburbs and smaller cities, every rooftop would have solar panels generating electricity instead of three or four central generating stations. In San Juan, every flat highrise rooftop would be under green cover, as the City of Chicago has done in their Green Roof Program. Wind farms in the Sonda de Vieques could generate enough electricity for the east coast and neighboring island municipalities. Wave generators in the Mona Passage could power the western half of the island. Solar arrays in the dry southwestern corner of the island could supplement energy production for the south coast. Those are some of the large-scale possibilities. There are small-scale possibilities too: the UPR is in the process of patenting a solar powered air conditioner, which by itself could cut down the cost of home electricity by two thirds. Communities have gotten together to conserve their green areas and plant more trees, as in the San Patricio Forest. These are not just dreams, but concrete possibilities and business opportunities.

“I understand that the enormous economic investment in this transition should not fall entirely on the power company, but the agency must become a facilitator through simple administrative processes for interconnection into the grid and easy permitting in cases where the impact on the generating system is negligible. This is also an opportunity for the AEE to reinvent itself just as many corporations have had to do, in order to adapt to the new economic environment” concluded O’Neill.

“The Government, on the other hand, must establish the necessary economic incentives so that individuals and small businesses have the possibility of acquiring and installing these technologies. The cost would be prohibitive otherwise,” said O’Neill. And there are other benefits to the homeowner. In California, a $48,000 home generating system can be bought and installed for $16,000 after grants and rebates. Yes, it is expensive, but the power the system generates coupled with the new regulations, gives the homeowner about $300 income a month for the life of the system (solar panels average 25 years). That translates to $3,600 a year for 25 years, or a total of $90,000. Not a bad return on investment, considering it is passive income, and pays for itself in 6 years.

Nevertheless, the economic reality in Puerto Rico is that most homeowners do not have the capital to invest in a renewable energy system, even if the government stepped up with the necessary monetary incentives. A possible solution, proposed by Dr. Fernando Plá, retired UPR professor of Mechanical Engineering, is for the AEE to lease or rent-to own a solar system to citizens with limited resources. Under this structure, the AEE would become a service provider and accountant. But there are additional options as well. Banks could also start specific energy loan programs, secure in the knowledge that they would be investing in micro generating plants and using them as collateral, and could work out a system of automatic payments directly with the AEE. This would lessen the demands on the old AEE infrastructure, would generate a new market for banks, and would create an additional income stream for homeowners. Not to mention it would save money and the environment.

Or, Puerto Rico could mimic the business plan implemented in rural Minnesota, where an entrepreneur started a small wind farm by renting out a part of a ranch and put up a couple of wind turbines. Once they were up and in operation and giving him extra income, the whole community got together and got into the wind power-generation business. The entrepreneur was able to convince several multinational corporations to put up 80% of the cost of the turbines, the land owners put up 20%, the corporation made use of government tax credits that the farmers could not use, and the farmers received an added income stream. A particular utility signed a contract to pay a set price for all the energy produced. For the first ten years, the corporation received a larger portion of the benefits, but for the remaining 30 years, the farmers receive all of the benefits. The farmers had a new passive cash “crop”, the corporation had a tax credit, the environment had a renewable energy source, and a community that had been in decline got a shot in the arm from new technology and creative financing. Granted, in Puerto Rico most of the land is not owned by small farmers, but this plan can be adapted to give solar power to every single stand-alone home on the island.

Final Thoughts

“History is full of examples of critical moments that define the destiny of a country, an individual or an organization. The tragedy is not to recognize those moments” adds O’Neill. “Right now Puerto Rico faces a crucial transition in the development of its power resources. In 2006 billions of dollars were taken out of the local economy to purchase fossil fuels. With the present price of petroleum, in 2008 there will be an even greater drain on local capital. Would it not make more sense to generate our own power companies, be they micro-solar systems for homes or bigger wind and wave arrays and keep that money in our local coffers?”

“Let us remember that the infrastructure decisions that we take today will be with us for the next 30 or 40 years, both in terms of physical infrastructure as well as economic commitment. I understand that the AEE must guard their organizational interests and their financial health, like its commitments to their bondholders. But I also feel that we all, as individuals and commercial and industrial entities, have a right to decide what electrical services we receive, how the money we pay is used, which opportunities are available, and what new technologies exist to make all these things possible. Participatory mechanisms such as Dialogue, Planning and Action with stakeholder representation must be created. And an index of sustainable economic well-being implemented to clearly show our progress is essential” concluded O’Neill. This last item will ring true with any manager because without benchmarks and measures there is no way of knowing whether you’ve reached your goals.