The people of Puerto Rico will soon benefit significantly from an untapped and least-cost energy resource: energy efficiency. Customer efficiency programs lower overall energy bills for residents and businesses, promote local economic development, reduce emissions, and can improve electric system reliability and resilience.
In coming months, Puerto Rico is scheduled to begin such programs as a result of legislation enacted in April that sets a goal of saving 30% of electricity use by 2040. Unfortunately, opponents of energy efficiency in Puerto Rico have recently gotten the facts wrong, emphasizing the costs while missing the benefits for all customers, and mischaracterizing the programs as conservation ads rather than efficiency programs.
Benefits outweigh the costs
The Puerto Rico Energy Bureau (PREB), the island’s energy regulator, has developed a $13 million budget for initial programs, to be collected on customer bills beginning this month. But press coverage on the new charge has been dominated by skeptics who focus only on the effort’s costs and not its benefits.
Efficiency is the least-cost resource compared to more costly electricity generation —on average about 3 cents per kilowatt-hour (kWh). By investing in more efficient equipment and appliances in homes and buildings, Puerto Rico can reduce customer energy bills because of lower energy use and the reduced need to build more expensive generating plants to serve these loads. Efficiency also reduces emissions and boosts local economic development. Its programs are not free but small increases in consumer rates return a much higher share of benefits to all customers.
Hawaii Energy, for example, has operated such programs for a decade. According to its most recent annual report, efficiency programs will deliver 1.8 billion kWh in lifetime energy savings at a cost of only 2.1 cents per kWh (program levelized cost of saved energy). The programs drive customer bill savings of $37 million annually, more than $488 million over the life of the measures installed, and will save an estimated equivalent of three million barrels of oil and 1.8 million tons of greenhouse gas emissions.
Efficiency not conservation
Puerto Rico’s legislation envisions substantial reductions in both energy use and peak energy loads through a comprehensive set of efficiency programs that cover a wide range of customers. For example, Hawaii Energy’s programs provide customer incentives for more efficient water heating and air conditioning, lighting, appliances, and pumps and motors. They cover diverse markets, including single-family homes, multifamily buildings, low-income customers and communities, and businesses.
Unfortunately, press coverage in Puerto Rico has claimed that the charge will be used “to pay for an advertising campaign on energy efficiency” (see here; in Spanish) and have not mentioned the more substantial set of programs that the legislation envisions.
Next steps
Puerto Rico’s governor has suggested seeking other sources of income such as “collaborative agreements” or federal funds (see here; in Spanish). While such funds might possibly be available for a small program, a comprehensive program that delivers large benefits to customers requires a comprehensive funding source. And as states around the United States show, customer-funded efficiency programs successfully leverage other sources of funding such as private businesses that can provide their own capital and other financing.
The details of the efficiency programs have yet to be determined because PREB still must choose a third-party program administrator for them. The next step is for regulators, working with PREB stakeholders, to develop a path toward implementation.
Proposals that focus on funding sources other than customer rates would make this impossible, inhibiting the ability of the new third-party administrator to deliver energy efficiency. In fact, such as move would be a major setback. It would lead to higher energy costs, because it would encourage the local electric utility - PREPA - to meet customer’s needs with more expensive resources instead.
Efficiency can play a key role in Puerto Rico’s clean energy future
As Puerto Rico scales up its ambitious and timely plans to modernize its grid with investments in solar and storage, it should ensure that energy efficiency plays a central role as a least-cost solution that directly benefits customers and makes it easier and cheaper to invest in other sources of clean energy.
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