White House authorizes $9.6B to rebuild Puerto Rico's grid, but how can it be spent?

Dive Brief:

The Trump Administration on Friday announced the Federal Emergency Management Agency (FEMA) authorized $9.6 billion to rebuild Puerto Rico's power infrastructure — three years after the island's electric grid was destroyed by Hurricane Maria.
Questions remain, however, about how the federal disaster recovery funding can be spent, including whether the money can go towards new distributed generation or must be spent repairing existing infrastructure. And some observers questioned whether the announcement is a political ploy in a contentious election year.
The Puerto Rico Energy Bureau (PREB) in August approved a long-term plan calling for the addition of significant battery storage and renewable energy. The FEMA funds won't be enough to pay for the entire plan, "but would certainly be a big chunk of it," said Morten Lund, partner at Stoel Rives LLP and chair of the firm's energy storage initiative.

Dive Insight:

It's been three years since Hurricane Maria devastated Puerto Rico. While the power system remains fragile, most of the island does have power. Observers are celebrating the White House's announcement of FEMA funds to assist the grid rebuild, but there are questions about the timing and when the money will be made available.

"I don't know of any other situation where FEMA has showed up three years after an emergency promising a bucket of money," said Lund. "It's weird."

The implication, which some observers do not want to make explicit, is that the announcement is an effort to curry favor with Puerto Rican voters living in Florida.

Rep. Nydia Velázquez, D-NY, in a statement said the White House was "blatantly playing politics with this aid.”

Regardless, utility officials celebrated the announcement.

“The reconstruction of Puerto Rico's grid is necessary to bring the electrical system to the place that Puerto Rico deserves," Efran Paredes Maisonet, interim CEO of the Puerto Rico Electric Power Authority (PREPA), said in a statement. "This will be possible with the great contribution of the federal government through FEMA."

A statement from the White House said the funds would allow PREPA to "repair and replace thousands of miles of transmission and distribution lines, electrical substations, power generation systems, office buildings, and make other grid improvements."

Rocky Mountain Institute Principal Roy Torbert said that the funds could come with "restrictions," but the details remain to be seen.

FEMA funds "do generally have less flexibility," Torbert said. But he also called the announcement a "vote of confidence" in the island's plan to rebuild its grid.

In August, PREB approved PREPA's Integrated Resource Plan (IRP), directing the procurement of at least 3.5 GW of solar and 1.36 GW of battery storage by 2025. The decision also rejected PREPA's plan for a new liquefied natural gas terminal and gas-fired generation, instead directing the utility to utilize an all-source procurement to speed development of carbon-free resources.

An update on the utility's renewable resource procurement efforts could come this week, according to Raghu Murthy, a staff attorney for Earthjustice, which has been participating in the IRP process. Murthy said he expects the funds can be used to develop distributed generation on the island.

"We think the money can go to reimagining the grid, as opposed to putting the grid back where it was pre-Maria," he said.

Along with questions related to how the funds can be spent, it is unclear when Puerto Rico will have access to FEMA's aid. PREPA must first produce a plan showing how the utility intends to spend the money, said Murthy.

"There's not a lot of precedence for this," said Lund. "There's never been an electric grid wiped out that has to be rebuilt from scratch. ... I'm not aware of any FEMA history that is even close to this scale or topic. There's always been specific wires that need to be put back where they were."

"I can see a situation where this becomes a political hot potato," said Lund. "I don't know if there are any strings attached. But the history with this particular administration would seem to indicate there are."