Opportunities in the Caribbean Microgrid Market

In August 2019, Puerto Rico declared a national emergency as Tropical Storm Dorian approached its coasts. Hurricane Maria is still fresh in peoples’ minds as the wrath it brought is still being felt by Puerto Rico and other islands that were in its path. The storm’s fallout serves as a painful reminder of how damaging peak hurricane season can be and what lessons need to be learned to better mitigate the severity of these storms on human lives.

Estimates vary, but Maria brought upwards of $100 billion in damages, 3,000 fatalities, and decimated an already crumbling power grid, leaving 1.5 million people without electricity or cell phone service. The Puerto Rican Electric Power Authority (PREPA) reported that it took nearly 1 year of repairs to largely restore power to the island. Even so, there are still concerns over the reliability and resilience of the new power infrastructure. This hurricane season will likely serve as a litmus test for the effectiveness of the repairs and the reliability of the grid.

The Shift

Despite the successful, albeit lengthy, power restoration process, PREPA understands Puerto Rico’s power sector still has vast room for improvement to ensure reliable power in the future. This is evidenced in PREPA’s latest Integrated Resource Plan (IRP) to redesign the island’s power grid and transition away from centralized power to distributed generation sources. The plan is a 20-year initiative to modernize the grid. It essentially splits the island into eight different microgrids, powered primarily by solar PV and energy storage. In the initial stages of the plan, PREPA aims to deploy 1.4 GW of solar and 920 MW of battery storage by 2022, which is no small feat. For context, the US deployed about 300 MW of battery storage in 2018.

Puerto Rico is not the only Caribbean island making the shift. Since 2014, Guidehouse Insights has documented a total of 80 projects that are already, or soon to be, installed over the next few years.

Why the Shift?

PREPA’s IRP for microgrids (especially with high renewables integration) is a grand plan and would be a major win for the microgrid community should it come to fruition, but it is not an uncommon solution. In fact, it is part of larger trend of a global shift toward microgrids. Guidehouse Insights’ most recent Microgrid Deployment Tracker 2Q19 report has identified 4,475 projects and nearly 27,000 MW of microgrid capacity across the globe.

Microgrids are increasingly deployed as power solutions for a variety of reasons. They satiate the need for reliable and resilient power (especially in the wake of climate change) and aid in greater renewable technology integration. Microgrid solutions also often use business models that provide less financial risk to clients. Pertinent to Puerto Rico and other islands is the fundamental need for reliable power in critical facilities (like hospitals) in times of disaster. As these extreme weather events grow in ferocity and frequency, facilities dependent on outdated transmission and distribution infrastructure are inherently at risk.

Opportunity Abounds

Although dire conditions pushed these island nations toward rethinking their respective power sectors, opportunity lies in being able to build new rather repair old. Puerto Rico is setting the example and other island nations are likely to follow. Coupled with decreasing renewable costs and continuously more conducive policy frameworks, microgrids are a key piece of the puzzle for the Caribbean going forward.