Solarizing the Island of Culebra, Puerto Rico: Rate-Design Model and Analysis

Abstract

Power on the island of Puerto Rico has historically been served through a centralized generation system that has largely failed to provide reliability— ability of the grid to provide the right quantity and quality of electricity needed and operate in times of stress — and resilience— the ability of the grid to come back online quickly and for all consumers after a major disruption. This master’s project team is working with the Fundación Comunitaria de Puerto Rico (FCPR; Puerto Rico Community Foundation) to support the Caribbean’s first community-owned solar utility in Culebra, Puerto Rico to improve grid reliability and to foster community energy independence.

The idea behind Culebra’s solar utility is simple: 50 businesses, non-profits, and critical facilities will pay for the energy service provided by the utility through rooftop solar and battery systems that have been fitted to meet the individual facility energy needs. These entities that purchase this utility electricity become subscribers to the service, and these payments will allow for operation and maintenance (O&M), equipment replacement, system expansion and any other necessary services to be sustained. A SWOT analysis is provided to identity the different Strengths (S), Weaknesses (W), Opportunities (O) and Threats (T) for the project.

The core objective of this project is the development of a rate-design model to evaluate the optimal rate to charge the subscribers of this solar utility. This rate-design model has three parts – Revenue, Costs and Financial Statements. For the revenue calculations, a load curve for an average subscriber was fitted based on historical consumption data. This information was used in a Monte Carlo simulation to model subscriber demand on a monthly basis. This simulated subscriber demand was compared with solar production forecasts to compute monthly revenue per subscriber. Four types of costs were considered in this analysis: Operations and Maintenance, Administrative, Insurance and Correction costs. All costs are increased annually with inflation.

An analysis of the cost-breakdown results shows that correction cost is the largest cost component, however this declines over time. Operations and maintenance is the second largest component, followed by administrative and insurance costs. The results from the revenue and cost analysis were used to compute an Income Statement and Statement of Cash Flows for the solar utility.

A set of sensitivity analyses were conducted to assess the effect of input parameters such as inflation, PREPA electricity rate, solar utility electricity rate, and taxes on output metrics such as net income, profit margin, subscriber savings, annual revenue and costs. A combination of the rate-design model and various sensitivity analyses suggest an ideal rate of $0.19/kWh for FCPR to charge to subscribers for the solar utility project. FCPR has already submitted an electricity rate of $0.21/kWh to the Puerto Rico Energy Bureau. This team’s analysis shows that the $0.21/kWh rate will help realize significant subscriber savings and ensure the viability of the solar utility project over its initial lifespan of 10 years and beyond. This project is expected to yield $2,600 of annual savings in electricity payments for subscribers and lead to the abatement of 1076 MT CO2e annually.