Yet Again, Electricity Prices Soar in Puerto Rico

Soaring electricity prices in Puerto Rico highlight the value of nuclear energy.

Yet Again, Electricity Prices Soar in Puerto Rico

Update: Monday, September 19. Hurricane Fiona’s rampage through Puerto Rico today has already knocked out power island-wide and ravaged infrastructure. The suffering there demonstrates the island’s need for resiliency—especially a resilient electricity grid. When the full scope of the damage can be assessed, atop the continuous electricity price hikes from a crippled grid, this might be the last straw for Puerto Ricans before much needed change.

For about a month now, protestors have been out on the streets of San Juan to protest the latest turn in the electricity woes that have haunted Puerto Ricans for years. On June 15th, the island’s energy provider, LUMA Energy, requested permission from the government to increase rates by 17.1%. The request was approved by the Puerto Rico Energy Bureau (PREB) on July 1st and will remain in effect until September 30th. The costs will be reevaluated by October 1st. This is the 7th rate increase of the year.

Not surprisingly, the hike sparked an outcry, with protestors now demanding that the government axe its original 2020 agreement with LUMA to let the company take responsibility for the island’s energy system.

LUMA has responded, arguing that the most recent rate increase results from supply chain issues, including those resulting from Russia’s war on Ukraine. While the world is indeed still grappling with gas price volatility as a result of that invasion, this latest increase is nevertheless aggravating old wounds from years of high prices and continuous power outages. LUMA has blamed previous increases on increasing fuel costs, primarily those for imported natural gas and petroleum, which LUMA does not control. Natural gas and petroleum generate about 81% of the electricity for the island. This import dependence is, in fact, a large cause of Puerto Rico’s high electricity costs.

Figure 1: Electricity Prices for Puerto Rico and the United States. Data provided by the U.S. Energy Information Administration

The recent rate hike and previous ones show that the island's energy needs must be addressed with firm and flexible power sources—sources that are currently still dominated by fossil fuels. Renewables cannot cost-effectively fill this role due to their variability. Solar power currently supplies less than 3% of Puerto Rico’s electricity. While solar power and other renewables will play an important role in reducing energy import dependence, they cannot be the silver bullet for an island struggling to gain energy system stability and resilience, a large part of which will mean decoupling electricity generation from dependence on volatile weather conditions. Puerto Rico will need reliable power from somewhere else when tropical disasters like Hurricane Maria block the sunshine for days upon end and trash solar modules with high winds and flying debris.

Energy troubles are not unusual for most Caribbean nations, whose collective dependence on imported fossil fuels for energy has cemented the region’s ranking as having one of the highest energy prices in the world. While renewable energy projects can help alleviate this problem at the margins, the key question is how to replace the oil-fired boilers at the heart of island power grids. With this challenge in mind, nuclear power possesses great potential to help many Caribbean countries, including Puerto Rico, finally achieve energy security and resilience. Based on its peak demand of about 2900 MW, a few large-sized nuclear plants or multiple Small Modular Reactors (SMRs) could provide safe, reliable energy while eventually resulting in lower electricity rates over time thanks to relatively low fuel costs. A growing number of regional voices, including the Nuclear Alternative Project (NAP), a group of Puerto Rican nuclear engineers, is working toward this vision, with the NAP having received funding from the US Department of Energy (DOE) last year to conduct a feasibility study for utilizing SMRs in Puerto Rico’s energy system.

How long will it take before Puerto Rican officials give nuclear energy the full support it needs? More rate hikes? More outages? More protests? They may not act before they are forced to do so, but eventually, they will be forced to do something—and when they are, backing nuclear will be their best bet.