Fiscal Oversight Board gives way with conditions to amendments to large-scale solar energy projects

Fiscal Oversight Board gives way with conditions to amendments to large-scale solar energy projects

The Fiscal Oversight Board (JSF) endorsed – with a series of conditions – the amendments that were agreed upon, in recent months, by the Electric Power Authority (AEE) and 10 private proponents of construction projects renewable energy on a large scale, a process that resulted in a 34% increase in electricity costs, according to the agency’s official communication.

In the letter that the Board sent yesterday, Thursday, to PREPA, it is stated that the renegotiations of the contracts resulted in the average cost of each megawatt hour (MWh) produced increasing from $99 to $133. The updated cost, therefore, translates into an increase of 3.4 cents per kilowatt hour (kWh) in the price at which PREPA will acquire the energy generated by the 11 private entities.

Although the Board expressed multiple reservations with the changes agreed upon between the parties, it concluded that ultimately allowing the so-called Tranche 1 solar projects to go forward is in the best interest of the energy system and will ultimately result in rate reductions. for clients.

“We recognize that the amendments will escalate contract costs that, in some cases, exceed the average annual increases experienced in the continental United States. However, the Supervisory Board also highly values ​​the progression of these projects, which simultaneously guarantee lower energy generation costs to consumers. It is vital to ensure that (the projects) advance to the commercial operation stage”the Board stressed in the letter to the legal director of the PREPA, Richard Franqui Cruz.

According to the calculations presented by the Board, even after renegotiations, renewable energy projects will result in savings of 13% by 2025 – when they must come into operation – and 53% by 2035.

The contractual amendments were agreed upon following demands from proponents who pointed to global inflation, increases in interest rates and delays in materials distribution chains.

Conditions approval

As a condition to sustain its endorsement, the Board required that the 10 proponents request financing from the Loan Program Office (LPO) of the Federal Department of Energy and ordered that, if successful, PREPA and the contractors agree to the pertinent contractual amendments.

“In the event that the LPO approves financing to a resource provider (proposer), any savings that result (from the loan) must be reflected directly proportionally in a reduction in rates. Therefore, PREPA and resource providers must agree to new terms that reflect the savings achieved,” stated the Board through its main lawyer, Jaime El Koury.

In the event that the LPO denies the loan application, the tax agency said, the proponents must demonstrate that they made “diligent efforts” and explain the reasons why they “did not comply with the LPO requirements.”

Throws warning

Although it gave way to the contracts, the Board stressed that the amendments pose a risk in the face of subsequent tenders for the acquisition of renewable energy supervised by the Puerto Rico Energy Bureau (NEPR). As part of the projects approved in Tranche 1, the NEPR made way for 855 MW of solar energy capacity and 350 MW of battery storage.

“Although practical, allowing renegotiations to the original PPOA (power purchase agreements) can distort market competition and bring certain risks. Renegotiations can cause the offers of potential bidders to not reflect market conditions, thinking that the terms may subsequently change, affecting the quality and prices of futures projects,” stated the Board.

Originally, the NEPR approved 18 contracts, of which 10 proponents completed the amendment process: Ciro Two Salinas, Guayama Solar Energy, Convergent Coamo Energy Storage, Clean Flexible Energy, CS-UR Juncos PV, Go Green USA America, Solaner Puerto Rico One, Tetris Power, Pattern Barceloneta, YFN Yabucoa Solar. Clean Flexible Energy, a subsidiary of AES, has two solar energy projects and two storage projects.

According to the contracts reviewed by The new day Last month, the Ciro Two Salinas project, of 68 MW, has the lowest energy sale price, of 9.55 cents per kWh, with an “escalator” of 2% annually. The highest cost, meanwhile, is presented by Pattern Barceloneta, with 15,311 cents per kWh. Pattern’s contract does not include annual climbers.

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