Financing Puerto Rico’s Renewable Energy Transition

FINANCING PUERTO RICO’S RENEWABLE ENERGY TRANSITION

February 2024

Princeton University

School of Public and International Affairs

FinancingPuertoRico’sRenewableEnergyTransition

February2024

JeremiahChamberlin

BrentEfron

CharlesFraser

CydneyGardner-Brown

KathleenHannick

LiamMaguire

ChristianPerkins

JustinSchuster

AchinthyaSivalingam

MayaT.Woser

Authors

JeremiahChamberlin

AtPrinceton,Jeremiahfocusesoneconomicaccess,socialmobility,andincomeinequality.Priorto hisstudiesatSPIA,heworkedfornumerouscommunity-focusednonprofitsacrossthecountrywith AmeriCorps.

BrentEfron

Brentstudiesdomesticclimatepolicyimplementationandishopingtopursueacareerinfederal climatepolicy.HemostrecentlyworkedintheBidenadministrationattheU.S.EPAasSpecial AssistanttotheAssociateAdministratorforPolicy.

CharlesFraser

CharlieisanMPAcandidatefocusingontheeconomics,finance,andpoliticsoftheglobalenergy transition.BeforePrinceton,heworkedoninternationalclimatediplomacyandfinancefortheUK government.

CydneyGardner-Brown

CydneyisanMPAcandidateandCharlesB.RangelInternationalAffairsFellowatPrinceton UniversityhailingfromDetroit,Michigan.Shefocusesprimarilyonpoverty,urbandevelopment,and diplomacy.Previously,sheworkedastheAmericanRescuePlanActImplementationFellowat PovertySolutionsbasedinAnnArbor,Michigan.FollowinghertimeatPrinceton,Cydneywillbe workingattheUSStateDepartmentasaUSforeignserviceofficer.

KathleenHannick

KathleenisanMPAcandidateatPrincetonUniversityfocusingonanti-povertyissuesand strengtheningthesocialsafetynet.PriortoPrinceton,sheworkedasaSeniorResearchAssistantatthe BrookingsInstitution’sEconomicStudiesprogram.

LiamMaguire

Liam'spolicyinterestslieattheintersectionsofclimatechange,migration,andemergencyresponse. HavingworkedwithUSAID'sBureauforHumanitarianAssistanceandtheUN'sInternational OrganizationforMigration,hehopestocontinueacareerfocusedonenvironmentalpolicyandthe humanimpactsofclimatechange.

ChristianPerkins

AtPrinceton,Christianfocusesonenergyeconomicsandpolicy,andisinterestedinpursuingacareer implementingU.S.governmentprogramsaimedatspeedingthetransitiontorenewableenergysources. PriortoPrinceton,heworkedattheU.S.EnvironmentalProtectionAgency(EPA),andamongother achievements,hewasrecentlynamedanAspenInstituteFutureClimateLeader.

JustinSchuster

AtPrinceton,Justinfocusesonclimatechange,diplomacy,andtheMiddleEast.Previously,he workedasanAssociateDirectorattheCouncilonForeignRelationsandastheManagingDirectorof anonprofitnewsroomcoveringthewarinSyria.

AchinthyaSivalingam

AchinthyaisanMPAcandidateatPrincetonUniversityinterestedinlaborandinternationalclimate policy.Previously,sheworkedattheGatesFoundationandwasanelectoralandcommunity organizer.

MayaT.Woser

MayaisanMPAcandidateatPrincetonUniversity,focusingoninternationaldevelopmentand climatechangepolicy.Shehasresearchandprogrammanagementexperienceacrossnon-profits, multilateralorganizations,andtheprivatesector.

ExecutiveSummary

In2019,inthewakeoftheenergyvulnerabilitiesexposedbythedevastatingHurricaneMaria,Puerto Rico passedthePuertoRico EnergyPublicPolicyAct(Act17),anambitiousenergyplantotakethe island to 100 percent renewable energy by 2050. In the four years since the passing of the act, while notableprogresshasbeenmade,PuertoRicoisstillalongwayfromreachingitsgoal.PuertoRicofaces persistentchallengesinachievingitsenergytransitiongoals,includingrecurrentclimate-relateddisasters andfinancialstrainlinkedtothegovernment'srecentbankruptcy.

This report focuses on the financing required to achieve the goals set by Act 17. The passing of the InflationReductionAct(IRA)in2022wasapivotalmoment,signalingasignificantshiftinresource mobilization toward financing clean energy initiatives, not only across the United States, but also specifically in Puerto Rico. The federal government has further committed dedicated funds to the island,withtheSecretaryoftheDepartmentofEnergy(DOE)demonstratingapersonaldedicationto advancingPuertoRico'sobjectives.Althoughfederalfundingisavailable,timeislimited.

This report is designed to aid energy stakeholders in meeting Puerto Rico's clean energy mandate, focusing on identifying and effectively utilizing federal funding sources. The first section presents a detailedoverviewofavailablefederalfundingsources byU.S.governmentagency.Thesecondsection addresseskeychallengesinaccessingandmobilizingthesefundsandbroaderinvestment,ineachcase providingrecommendationsforprogressmovingforward.Theseinclude:

Recommendation Addressed to

Challenge: Puerto Rico's status as a territory status leaves citizens and entities ineligible to receive the Investment Tax Credit (ITC), hindering investments in renewable energy technologies and infrastructure.

Push the Office of Tax Policy at the Department of the Treasury and the White House to use their authority to waive the current tax rule restrictions for the ITC so it includes Puerto Rico and the other territories.

Waive the current tax rule restrictions for the Investment Tax Credit to include Puerto Rico and the other territories. Department of the Treasury

Secretary Jennifer Granholm

Recommendation

Addressed to

Challenge: Relevant actors facilitating the energy transition, including PREB, LUMA, Genera PR, and others, lack a central coordinator to manage long-term, large-scale development and financing issues.

Support the development of a Puerto Rican entity that functions as a financefocused coordinating body amongst relevant stakeholders within the territory.

Secretary Jennifer Granholm

Challenge: The Puerto Rico Green Energy Trust lacks the necessary resources and funding to act on its mission.

Provide the Puerto Rican Green Energy Trust with the funds promised in 2022.

Begin hiring senior level staff and raising administrative capacity, with an emphasis on utilizing funds available through the Greenhouse Gas Reduction Fund and to further energy justice throughout low income communities in Puerto Rico.

Governor Pedro Pierluisi

Puerto Rico Green Energy Trust

Challenge: Delays and disruptions to the procurement of utility-scale renewable energy have undermined market confidence and raised costs, threatening a principal avenue for private sector investment in the energy transition in Puerto Rico.

Prioritize increasing public transparency and accountability, including by ensuring a functional central website, providing regular announcements and issuing a detailed, regularly updated timeline to which all stakeholders are publicly committed.

The Department of Energy should maintain its support for the procurement process, providing technical assistance and political direction where possible.

PREB, independent coordinator, LUMA

Secretary Jennifer Granholm

Challenge: Puerto Rico’s progress toward advancing energy efficiency is slow compared to other states and territories, but progress could significantly reduce costs and improve reliability.

Pair existing territory-led energy efficiency programs with available federal funding, leveraging grants, rebates, technical assistance, and other existing programs. PREPA

Introduction

PuertoRico’senergytransition

As of the 2022 financial year, only 3 percent of Puerto Rico’s utility-scale energy generation came from renewables.ElectricitycostsasofJune2023remainelevated,rangingfrom37percenthigherthanmainland U.S.ratesforresidentialconsumersto168percenthigherforindustrialconsumers.1 Thekeydriverforhigh and volatile prices is Puerto Rico’s reliance on imported fossil fuels especially bunker oil and liquefied natural gas for its electricity generation. These issues are made worse by weak supply links from the mainlandUnitedStatesandfederallawthattypicallypreventsPuertoRicofromreceivingimportsfromthe U.S.mainlandonnon-USflaggedships.2

Source:TheEnergyInformationAdministration,June2023.

Nevertheless,PuertoRicohasbecomealeaderinthe solarrevolution.Rooftopsolarisrapidlyexpanding ontheisland.Theindustryismorethandoublingeveryyear,with71,000householdsconnectingtorooftop solarpanelsbetweenJuly2021andOctober2022,accountingfor451MWofrenewableenergyexpansion.3 This growth has allowed Puerto Rico to reach one of the highest rates of rooftop solar penetration per householdofanyterritoryorstateinthecountry.4

A major hurdle to the expansion of green energy investments is the fact that Puerto Rico’s government emergedfromafive-yearbankruptcyin2022.Deepfinancialissueshavealsoseverelyimpactedtheisland’s solepublicly-ownedelectricityutility,thePuertoRico ElectricPowerAuthority(PREPA),whichisnow the only major debtor still negotiating the terms of a plan to end its 2017 bankruptcy. The utility’s bankruptcyarosefromalong-termfailuretoensureelectricityratescoveredoperationalcostsandrequired capitalinvestments,coupledwithitssubsequentrelianceonunsustainablelevelsofdebt.5 Thesefinancial issues have limited Puerto Rico’s borrowing capacity and its ability to finance investments in modern infrastructureandnewcleanenergycapacity.6, 7

Table1.PuertoRicanshaveHigherEnergyCostsComparedtoAverageAmericans

Tomovetowardasolvent,efficient,andcleanpowersector,reformsbeganin2014withtheestablishment ofanindependentenergyregulator,thePuertoRicoEnergyBureau(PREB).From2018,therehasbeena process to unbundle the generation, transmission, and distribution operations originally run by PREPA. Most electricity sector operations are now managed by two private companies: since June 2021, LUMA Energy(LUMA)hasoperatedtransmissionanddistributionandinJuly2023,GeneraPRbeganoperating legacythermalgenerationplants,whichitisalsoresponsibleforprogressivelydecommissioningasrenewable sources are scaled up.8,9 In addition to its core regulatory functions, PREB has taken on most of the key planningandprocurementresponsibilities.

Despitethesereforms,poweroutagesontheisland,andinSanJuaninparticular,occuralmostdaily,and canlastanywherefromafewminutestomanyhours.LUMAhasmadeincrementalimprovementsingrid reliability and service, but public mistrust of the firm and of the broader electricity system remain high. Ratepayersareskepticalofthesystem’sabilitytodeliverreliablepowerandcomplainaboutrisingbills,as evidencedbyrecentprotestsinSanJuan.10, 11 Thisbroadlackofconfidenceinservicedeliverymayweaken communitysupportfornewrenewableenergyprojects,whichinturnunderminesdeveloperreadinessto proposenewprojects.

Planningtheenergytransition

Thelong-termfinancialissuesandrecentrestructuringoftheenergysectorhaveincreasedtheimperative foreffectiveplanningandcoordinationoftheenergytransitionsetoutinAct17,alongsidetheterritory’s broaderenergyneeds.Tothisend,since2014,PREPAhasbeenrequiredtodevelopandregularlyupdate anIntegratedResourcePlan(IRP)thatsetsoutacost-minimizingroadmaptomeetPuertoRico’selectricity demand,incorporatingitsrenewableenergygoalsandgridreliabilityandresiliencyrequirements.12

The most recent iteration of the IRP demonstrated the clear business case for urgently accelerating the deploymentofrenewableenergycapacityinPuertoRico.ThispromptedPREPAtoinitiateacentralized processtoprocureutility-scalesolarandbatterysystemsinFebruary2021,with3,750MWofsolarcapacity to be added through a series of requests for proposals (RFPs) issued across six tranches.13 Unfortunately, PREPA’s insolvency, contractual issues, increased costs for project developers, land use concerns, and interconnection issues have all severely delayed this process. Power Purchase and Operating Agreements (PPOAs)forprojectsunderthefirsttranchewereonlyagreedin2023,withtheprocurementprocessfor thesecondandthirdtranchesunderwayatthetimethisreportwaswritten.14 Toaddresssomeofthedelays, PREBistakingamoreactiveroleintheprocessandhasappointedanindependentcoordinatortoleadon an accelerated timeline,15 with project developers now able to access financing support from the DOE’s LoanProgramOffice(LPO).16

Atthesametime,governmentalandnongovernmentalorganizationsareworkingtoboostenergyaccessand resilience for vulnerable, low-income, and rural communities in Puerto Rico. A large network of Puerto Rican and national nonprofits are focused on improving access to distributed energy sources, such as rooftop solar systems and micro-grids. Several non-profit organizations have successfully implemented small-scaleprojectsinPuertoRico,servingasusefulproof-of-conceptforthebroadermovementtoincrease resilienceandreliabilitywithintheterritory.17, 18

Integratedplanningwillcontinuemovingforward,withPREBleadingthenextiterationoftheIRP,tobe publishedin2024.AlongsidethisPuertoRico-ledprocess,theDOE’sGridDeploymentOffice(GDO),in partnershipwithsixnationallaboratories,isleadingthePR100studytomodelscenariosthatmeetPuerto Rico’srenewableenergytargetsandachievebroaderrecoveryandresiliencygoals.Whilethefinalreportis yet to be published, preliminary results demonstrate the feasibility of multiple pathways to meet Puerto Rico’s renewable energy goals, incorporating different scenarios with varying levels of reliance on utilityscaleandrooftopsolarsolutions.19 Recognizingtheseongoingprocessesandthecomplexitiesofthevarious environmentalandpoliticalconcerns,ourreportremainsagnosticabouttheoptimumenergyportfolioand trajectory to achieve the island’s targets. Instead, we assume that a diversified energy portfolio will be requiredandpresentfinancingsolutionstoacceleratetheirdeployment.

Federalsupport

Accompanyingtheshiftinpolicyambitionandplanning,therehasbeenanupswellinpoliticalsupportand a substantial influx ofgovernment funds available to finance the transformational investments needed to meetPuertoRico’senergytransitiongoals.20, 21 InthewakeofthedevastationbroughtbyHurricaneMaria, the Federal Emergency Management Agency (FEMA) made available some $9.4 billion in recovery and reconstruction funds for Puerto Rico’s power grid, with more expected to be allocated after Hurricane Fiona in 2022. The funds are targeted toward rebuilding the island’s generation, transmission, and distribution infrastructure, and providing necessary updates to increase resilience while installing new technologiesthatadvancetheisland’scleanenergygoals.

In the Infrastructure, Investment, and Jobs Act (IIJA) and the InflationReduction Act (IRA), Congress approvedhundredsofbillionsofdollarstoadvancethecleanenergytransitionacrossthecountry,including many sources of funding that could directly benefit Puerto Rico. President Biden’s administration is championingPuertoRico’senergyplan,appropriatinganadditional$1billiontoestablishthePuertoRico EnergyResilienceFund(PR-ERF)inFebruary2023.22 TheDOE’sSecretaryGranholmhasalsovisitedthe islandmanytimesduringhertenure,settingtheagendafortheswiftexecutionandmobilizationoffunds todeliverontheterritory’sgoals.23, 24

Reportstructure

This report begins with a brief background, positionality statement and the methodology used for identifying parties of interest for different sources of financing. The next section outlines these federal financing sources and opportunities for entities in Puerto Rico, by agency and office. The final section discussesaseriesofkeyandadditionalchallengesinaccessingandmobilizingsourcesoffinancingforthe energytransitioninPuertoRico,providingrecommendationsforchangemovingforward.

ReportBackground

A group of ten students in the Master of Public Affairs program at Princeton University’s School of Public and International Affairs compiled this report under the supervision of Professor Eduardo Bhatia, former Senate president of Puerto Rico.25 The report is the product of an applied policy workshopfocusedonidentifyingavenuesforfinancingtherenewableenergytransitioninPuertoRico accordingtotheparametersoutlinedinAct17.

FromSeptemberthroughDecember2023,theworkshopmetwithfederalandPuertoRicanofficials, nongovernmental organizations, wind and solar energy developers, and community stakeholders through a series of virtual and in-person meetings, including during a ten-day visit to the island in October 2023. Combined with independent research on the island’s energy finance landscape and relevantfederallegislationandprograms,thisreportcatalogstheavailabilityandeligibilityrequirements ofrelevantfundingsources.Thereportexaminesthemainchallengestoaccessingthosefundingsources andprovidesasetofrecommendationsforaddressingthosechallengesgoingforward.

PositionalityStatementandReportLimitations

As a group of non-Puerto Rican students created this report over the course of one semester, we acknowledge the limits of our understanding of energy financing and implementation, as well as importanthistoricalandculturalcontextinPuertoRico.Recognizingthelimitedtechnicalexpertiseof theauthors,wedonottakeapositiononthebreakdownofrenewableenergyportfolioinvestmentsthat theislandshouldpursue.Wealsodonotmakerecommendationsonotherimportantissuesthatmay significantlyaffectgreenenergyprojects likepermitting aswedeemedthoseoutsidethescopeofthis report.

That said, we met with a wide range of stakeholders involved in the energy transition to prepare this report,includingdozensofexpertsworkingonPuertoRicotax,energy,andenvironmentalpolicy.The diverseperspectivesconsultedpaintabroadpictureoftheopportunitiesandchallengesthatdefinethe energy finance landscape for the island. This report provides a concise synthesis of the insights we collectedfromthesemeetings.Wehopethisreportwillhelpawiderangeofstakeholdersworktoward PuertoRico’senergytransition.

FederalFinancingOpportunities

Numerous federal funding opportunities are available to help Puerto Rico finance its clean energy transition. The DOE, the U.S. Department of Housing and Urban Development (HUD), the U.S. DepartmentofAgriculture(USDA),theU.S.DepartmentoftheTreasury(Treasury),andtheEPAall have programs through the IRA and other legislation aimed at promoting green energy projects. In addition,FEMArecoveryfundsforthehurricanesarestillbeingdistributedinPuertoRicoandusedto advancetheisland'senergygoals.

Thissectionofthereportprovidesanoverviewofthefederalfundsrelatedtorenewableenergyavailable toPuertoRicobyagencyordepartment.Formoredetailedinformationoneachfundingsource,please seetheFundingDatabase

TheDepartmentofEnergy

TheDOEhasdozensoffundingoptionsavailableforPuertoRicotofinanceitsenergytransition.Here, weoutlinetwentyofthelargestprogramscategorizedbytheirofficewithinDOE.

GridDevelopmentOffice

AfterHurricaneFiona,theDOE’sGDOlaunchedthePR-ERFin2023with$1billionofPuertoRicospecific funding from the FY 2023 Consolidated Appropriations Act to support Puerto Rico’s grid resilience and its transition to 100 percent renewable energy by 2050. The first tranche of PR-ERF funding(upto$450million)aimstosupporttheinstallationofresidentialsolarandbatterysystemsin 30,000–40,000verylow-income,single-familyhouseholds.Thisfirsttranchehasbeenawardedtothirdpartyresidentialdeployers,community-sponsoredresidentialdeployers,andnonprofitsthatwillwork towardbeneficiaryeducation,training,andconsumerprotection.26 ThePR-ERFalsoincludesfunding tofurtherintakeprocessing(SolarAmbassadorPrize)andtosupporteducation,training,andconsumer protection.ThesecondmajortrancheoffundingthroughthePR-ERFwillbeannouncedin2024.27

The GDO also oversees the Wholesale Electricity Market Studies and Engagement Program (WEMSE), which “provides states and regions with technical and financial assistance related to developing, expanding, and improving wholesale electricity markets.”28 In FY2023, WEMSE oversaw $9millioningrantfunding,whichcouldassistPuertoRicosystemoperatorsinconductinganalytical studiesandinterregionaltransmissionplanning.

TheIRAallocated$300millioningrantstotheTransmission SitingandEconomicDevelopment Grants Program (TSED), a program aimed at accelerating and strengthening electric transmission sitingandpermittingprocesses.TSEDisdesignedtoovercomestateandlocalchallengestoexpanding transmission capacity while supporting communities along major new and upgraded lines. In Puerto Rico,LUMAshouldworktoutilizethesefunds.

TheIIJAestablishedtheGridResilienceStateandTribalFormulaGrantProgramatDOE,which isdesignedtostrengthenandmodernizethepowergridtoincreaseitsresiliencetoextremeweatherand naturaldisastersexacerbatedbyclimatechange.29 Theprogramissettoaward$2.3billionfrom2021to 2026. This grant program cannot be used to fund new generation capacity only improving grid resilience.30 Aspartoftheprogram,thePuertoRicoCentralOfficeforRecovery,Reconstruction,and Resiliency (COR3) received a $7.4 million grant for increasing access to cost-effective and resilient electricity in vulnerable communities in July 2023.31, 32 While specific project requirements have not beenpublished,entitiesalreadyprovidingelectricityservicestoruralandremotecommunitieswillbe wellplacedtoseekthisfunding.ThePuertoRicoCOR3officeshoulddefineaclear,publictimeline forcompetitivelyselectingprojectsandawardingthefundingassoonaspossible.

The Transmission Facility Financing Program established by the IRA provided $2 billion in fundingtosupporttheGDO’sdirectloanauthority for facility financing. Loans will support modification of existing facilities and construction of new ones.33 In Puerto Rico, this loan authority allows the GDO to support LUMA’s efforts to revitalizeandstrengthentransmissiontechnology.

The IIJA allocated $2.5 billion for the TransmissionFacilitationProgram arevolving fundthatusesfederaldollarstobuild,upgrade,and expand large-scale interregional transmission lines and connection of microgrids across the United States.Thistypeoffundingisparticularlyimportant forPuertoRico'senergytransitionastheislandseeks tofullyupdateitsgridtomeetenergygoals.

AnotherIIJAprogramistheGridResilienceandInnovationPartnerships(GRIP),whichincludes three funding opportunities for Puerto Rico. The first funding opportunity is the Grid Resilience Utility and Industry Grants Program, which includes $2.5 billion to support upgrades and modernization of the electric grid including transmission and distribution infrastructure so communities are better equipped to handle extreme weather events such as floods, wildfires, and hurricanes.DOEwillprioritizeprojectsthatproducethegreatestcommunitybenefitbyreducingthe harmcausedbysevereweatherandotherdisruptiveevents.

Next,GRIPincludes$3billionofSmartGridGrantsaimedatincreasingtheflexibilityandreliability oftheelectricsystem.Thesefundsfocusonincreasingcapacity,preventingfaults,integratingrenewable energy at transmission and distribution levels, and facilitating the integration of EVs and efficient buildings.

Finally, the Grid Innovation Program will fund $5 billion in grants to support projects that use transmission,storage,anddistributioninfrastructuretoincreasegridresilienceandreliability.Selected projects will include investments to accelerate the interconnectionof clean energy generators and the distributionofbackuppower.

GRIP funds provide ample opportunity for Puerto Rico to continue its transition to 100 percent renewable energy. Specifically, PREB may be eligible to apply for and disburse funds to increase the capacity of Puerto Rico’s transmission and distribution systems, which qualify as allowable activities underthisprogram.

OfficeofStateandCommunityEnergyPrograms

The Renew America’s Schools program has $80 million in grants to promote clean energy improvements suchasenergyefficiency,renewableenergy,andalternative-fueledvehicleupgrades at K-12 schools nationwide, focusing on high-need schools. Puerto Rican educational institutions shouldpreparetoapplyforthenextroundoffunding,whichopensinspring2024.

Similarly,theRenewAmerica’sNonprofitsprogramhas$50millionincompetitivegrants“toreduce carbonemissions,improvehealthandsafety,andlowerutilitycostsatbuildingsownedandoperatedby 501(c)(3) nonprofits.”34 Puerto Rican nonprofits should contact Southface Energy Institute the relevantprimeawardee assoonaspossibletosubmitpitchesforsubrecipientprojects.

Congress created the State Energy Program (SEP) amid the energy crisis of the 1970s to promote energyefficiencyandrenewableenergyefforts.Today,“SEPprovidesfundingandtechnicalassistance tostates,territories,andtheDistrictofColumbiatoenhanceenergysecurity,advancestate-ledenergy initiatives,andincreaseenergyaffordability.”InFY2023,theprogramhas$60millioninformulagrants atitsdisposal.35 TheEnergyPolicyProgramofPuertoRico’sDepartmentofEconomicDevelopment andCommercecancapitalizeonthesefunds.

TheEnergy Efficiency and Conservation Block Grant (EECBG) Program,foundedin2007, has received $550 million from the IIJA. These formula and competitive grants “assist states, local governments,andTribesinimplementingstrategiestoreduceenergyuse,toreducefossilfuelemissions, andtoimproveenergyefficiency.”36 Throughthisprogram,localgovernmentscanpursuevouchersfor thepurchaseandinstallationofenergyefficiencyorcleanenergyequipment.

The IIJA also appropriated $250 million for the Energy Efficiency Revolving Loan Fund (RLF) Capitalization Grant Program, which is “designed to provide capitalization grants to States to establish a RLF under which the state shall provide loans and grants for energy efficiency audits, upgrades, and retrofits to increase energy efficiency and improve the comfort of buildings.”37 The EnergyPolicyProgramofPuertoRico’sDepartmentofEconomicDevelopmentandCommercecan capitalizeonthesefunds.

TheWeatherizationAssistanceProgramwascreatedin1976toincreasetheenergyefficiencyoflowincome households. The IIJA recently provided an additional $25 million to the program, which is allocatedtostatesandterritoriesbasedonaDOEformula.Low-incomePuertoRicansareeligiblefor thesefunds,throughPuertoRico’sStateOfficeofPublicEnergyPolicy.

LoanProgramOffice

The DOE LPO oversees the Title 17 Clean Energy Financing Program, which provides access to long-termdebtforcleanenergyprojects.38 Originallypartofthe2005EnergyPolicyAct,theprogram wasrecentlyadoptedintotheIRA.Intotal,theTitle17CleanEnergyFinancingprogramisauthorized to guarantee loans of more than $300 billion.39 Loan guarantees are provided on a project-by-project basis,sothereisnofixedallocation.TheLPOhasdeterminedthatrenewableenergyprojectsandbattery energy storage systems procured through Puerto Rico’s centralized procurement plan (the tranche process, led by PREB) are eligible to apply forTitle 17 loan guaranteesunderthe Energy Investment Reinvestment(EIR)authority.40, 41 TheDOEshouldconsiderwaysitcanprovideadditionalcapacity supporttoPREBtomaximizetheimpactofDOE’sloanguaranteesupport.

OfficeofCleanEnergyDemonstrations

TheOfficeofCleanEnergyDemonstrations’(OCED)EnergyImprovementsinRuralorRemote AreasTechnicalAssistanceProgramisa$1billiongrantthathelpsdeploycommunity-drivenclean energysolutionsinruralandremoteareasnationwide.ManyareasofPuertoRicoareconsideredrural andcouldthusbenefitfromthegrant.

OCED also runs the Distributed Energy Systems Demonstrations Program. With $50 million from the IIJA, this program funds distributed energy systems (DES) demonstrating financial and technicalapproachestodistributinglargeamountsofdistributedenergyresources(DERs)tosupport communities. Utilities and for-profits that are workingon DERs in Puerto Rico should capitalize on thesefunds.

OfficeofEnergyEfficiencyandRenewableEnergy

Created in 2017, the Office of Energy Efficiency and Renewable Energy (EERE)’s Clean Energy Innovator Fellowship is a workforce development program that provides fellows with on-the-job trainingandprofessionaldevelopmentopportunities.Atthesametime,theirhostsreceivesupportto acceleratethetransitiontocleanelectricityandimprovegridresiliency.Fellowssupportawiderangeof projectscoveringtopicsincludingcleanenergyintegration,expandingelectricvehiclecharging,Tribal energy sovereignty, distribution-level grid services, and grid resilience and energy planning in Puerto

Rico. While Puerto Rico has always been eligible under the program, it has recently received authorizationforeligibleentitiestoreceivemorefellowsthananyotherstateorterritory.42

OfficeofPolicy

Communities Local Energy Action Program (LEAP 2.0) provides technical assistance to communities to develop and advance theirown community-driven clean energy transition approach. Specifically,LEAP2.0focusesonservinglow-income,energy-burdenedcommunitiesthatexperience environmentaljusticechallengesand/ordirecteconomicimpactsfromreducingtheirhistoricalreliance on fossil fuels. The program will distribute $18.75 million worth of technical assistance to between twenty-fourandthirty-twoselectedcommunities.

TheDepartmentoftheTreasury

TheIRAprovidesalmost$400billionforenergyandclimateprograms.Mostofthatfunding $259 billion istaxincentivestocorporations($216billion)andindividuals($43billion).43 Todeliverthese credits,theIRAestablishedmonetizationmechanismsbyaddingnewsectionstotheInternalRevenue Code.Section6417establisheselectivepayandSection6418establishestransferability.Theoptionof elective pay (also known as direct pay) enables eligible entities, such as tax-exempt and governmental entitiesthatwouldnototherwisequalifyforspecifictaxcreditsduetotheirlackoffederalincometax liability, to take advantage of certain clean energy tax incentives. The second mechanism, known as transferability, is supposed to make credits available to entities that are not eligible for elective pay. Transferability enables commercial, for-profit entities, such as private solar or wind developers, to exchangetheirtaxcreditsforcash.

The IRA establishedor expandedtwo main typesoftax credits: Production Tax Credits (PTCs)and ITCs.UnderTreasury’sinterpretation,PuertoRicancitizensandentitiesarecurrentlyonlyeligiblefor elective pay and transferability for the PTCs. Seven different PTCs are available to Puerto Ricans, including (1) PTC for Electricity from Renewables that can be used to offset the cost of electricity productionfromeligiblerenewablesources,suchaswind,biomass,geothermal,solar,smallirrigation, landfillandtrash,hydropower,marine,andhydrokineticenergy;(2)CleanElectricityPTC,whichisa “technology-neutral tax credit” for clean electricity production; (3) Credit for Carbon Oxide Credit Sequestration; (4) Zero-Emission Nuclear Power Production Credit; (5) Advanced Manufacturing ProductionCredittofostertheproductionofcleanenergycomponentssuchassolarandwindenergy systems,inverters,batteries,andessentialmaterials;(6)CleanHydrogenPTC;and(7)CleanFuelPTC.

BonusincentivecreditscanalsobeaddedtoPTCs.ThesecreditsboostthegenerosityofthePTCsfor projects in energy communities, projects that meet prevailing wage and apprenticeship standards, and/orprojectsthatuse“domesticcontent,”whichmeansthatthesteel,iron,ormanufacturedproducts usedintheprojectweremanufacturedintheUnitedStates.44

ITCs are the other type of tax credit available, which include five different credits that Puerto Rican citizensandentitiesarenoteligiblefor,including(1)ITCfor EnergyPropertywhichcanbeusedfor fuelcell,solar,geothermal,smallwind,energystorage,biogas,microgridcontrollers,andcombinedheat and power properties projects; (2) Clean Electricity ITC; (3) Advanced Energy Project Credit for manufacturing projects in energy communities; (4) Credit for Qualified Commercial Clean Vehicles including passenger vehicles, buses, and ambulances; (5) Alternative Fuel Vehicle Refueling Property Credit.ITCsalsohavebonusincentivecreditsattachedtothem.Inadditiontotheadderslistedabove forthePTCs,ITCsalsohaveaccesstotheLow-IncomeCommunitiesBonusCreditforsmall-scalesolar and wind or clean electricity projects located on Native American Tribal land, federally subsidized housing,orinlow-incomecommunities.

While Puerto Rican individuals and companies are excluded from taking the ITCs, they could still benefitfromITCsviathird-partyowners(TPOs).ATPOwhoisnotbasedinPuertoRicobutrather inthefiftystatesorWashington,DC,couldclaimtheITCon behalfofanindividualorcompanyin PuertoRico.TheTPOwouldthenaddthosecostsavingsintothefinanceplanoftheentityinPuerto Rico.TPOshavebeenavitalpartofexpandingsolarenergyinPuertoRicoandcancontinuetohelp expandthecleanenergyfootprintontheisland.Energyregulatorsandconsumer-protectiongroupson theislandcanworktogetherwithTPOstoensurethatPuertoRicancitizensandentitiesarereapingas muchoftheITCbenefitsaspossible.

TheDepartmentofAgriculture

TheIRAalsoestablishedseveralprogramsattheUSDAthattheislandcantakeadvantageoftofinance its energy transition. For example, the Powering Affordable Clean Energy Program (PACE) sets aside$1billiontoenableruralcommunitiestoaccesscleanandreliableenergy.Applicantscanapplyfor loansandloanforgiveness,withamaximumloanincludingaforgivableportionof$100millionanda minimum of $1 million. PACE can be used for wind, solar, hydropower, geothermal, or biomass renewableenergyprojects.InPuertoRico,eligibleprojectscouldincludesolarfarmsservingprimarily ruralareas,energycommunitiesormicro-gridprojects,utilitiesservingruralareas,andenergystorage. The Empowering Rural America (New ERA) program helps rural Americans transition to clean, affordable,andreliableenergy.Byreducingairandwaterpollution,NewERAfundingimproveshealth outcomesandlowersenergycostsforpeopleinruralcommunities.NewERAfundingtotals$9.7billion and is available to member-owned, rural electric cooperatives through loans, grants, and/or loan refinancing.PuertoRicanorganizationscantakeadvantageofthisfundinggiventhatmostoftheisland isconsideredrural.

Finally,theIRAaddedover$2billiontothe Rural Energy for America (REAP)programthatwas established in the 2008 Farm Bill. The REAP adjustment under the IRA sets aside $145 million in guaranteedloansthatcanbenefitsmallbusinessesandfarmersinruralPuertoRico.

FederalEmergencyManagementAgency

FEMA provides funds to bolster Puerto Rico’s resilience to natural disasters. Some of the allocated resourcescansupportrenewableenergyinvestmentsforutilityproviders,aswellasterritoryandlocal governments. While most of FEMA’s public assistance programs need to be linked to damage or emergencyrecovery,somenon-recoveryfundscanfundothermitigationinvestments.

FEMAfundingisareimbursementprogram.FundsareprimarilytransferredthroughtheRequestfor Reimbursement (RFR) process, wherein beneficiaries submit Project Worksheet (PW) requests for approval.

Insomecases,FEMAcanarrangeRequestsforAdvance(RFA).TosubmitaRFA,applicantsshould submit a contract of work, procurement plan, and ninety-day spend plan to FEMA. Final documentationandconfirmationofpaymentswillbeduetoFEMAninetydaysafterthedisbursement ofRFAfunds.

FEMAalsofacilitatesWorkingCapitalAdvances(WCA).ToapplyforaWCA,applicantsdonotneed acontractorprocurementplan.However,theapplicantmustcertifythattheobligatedpermanentwork projectwillcomplywithstateandfederalregulations.UndertheWCA,FEMAwillgrantapplicantsa 25percentadvancepaymentforthefederallyobligatedshareoftheproject(whichis90percent).

In 2020, three years after Hurricane Maria, the agency launched its FEMA Accelerated Awards Strategy(FAASt)forPuertoRico,whichgavePREPA$9.4billiontofundexpeditedenergygridwork and restorations caused by the storm. In 2023, $1.2 billion was also allocated for Hurricane Fiona recoveryfundsundertheFAAStmechanism.Thefundingforgridinfrastructureincludedmicrogrids, substationandtransmissionlinerestorations,andotherprojectstoaidemergencyrecoveryandadvance theisland’stransitiontorenewableenergy.LUMAandGeneraPRareeligibleforreimbursementsfrom thefund,despitePREPAremainingthelegalsubrecipient.45

A percentage of the FEMA Public Assistance funds get allocated to the Hazard Mitigation Grant Program (HMGP). Unlike Public Assistance funds which must be linked to damage, HMGP need

only help mitigate future disasters. These funds can support mitigation projects, including flood protection,retrofittingmeasures,ormicrogridconstruction.46 47

Finally, FEMA supports the Building Resilient Infrastructure Communities (BRIC) and Flood Mitigation Assistance (FMA) grant programs. In FY23, BRIC provided $1 billion to state, local, Tribal, and territorial governments to mitigate the risks of future natural disasters and to increase resilienceandreducesuffering.FMAprovided$800millionforresilienceprojects.48

TheEnvironmentalProtectionAgency

The EPA has allocated grants, supported by IRA funds, to bolster climate justice efforts within underservedcommunities.Thesegrantsarededicatedtofinancingprojectsthattargetthereductionof pollution, the strengthening of climate resilience, and the empowerment of these regions to tackle challenges related to climate justice. Many of these initiatives focus on sending money directly to communitiestomitigatetheimpactofclimatechange.

Through the Climate Justice Community Change Grants, the EPA has allocated $2 billion for community-based non-profit organizations (CBOs); partnerships between CBOs and federally recognized tribes, local governments, and institutions of higher learning; and collaborating subrecipientsandsubcontractorsformulti-facetedprojectsaddressingarangeofpollution,climatechange, andotherpriorityissues.

The Climate Pollution Reduction Grants (CPRGs) provide “flexible support” for territories to designclimateactionplansthatincorporateavarietyofmeasurestoreducegreenhousegassesacrosssix key sectors: electricity generation, industry, transport, buildings, agriculture, and waste management. Nonprofitorganizations,municipalities,anduniversitiesareeligibleforsub-awards.ThePuertoRico Department of Natural and Environmental Resources (PR-DNER) should consider this program in deciding who it can hire to develop the Priority Climate Action Plan (PCAP) and Comprehensive ClimateActionPlan(CCAP),whichqualifiesasaneligibleexpenditureundertheCPRG.

EPAhasalreadyawardedPR-DNERfundstodevelopitsclimateactionplansunderthefirstphaseof the CPRG program. PR-DNER should also apply for phase two (implementation) funds and work withstakeholdersacrosssectorstoensuretheclimateactionplanreachesabroadrangeofbeneficiaries.

GreenhouseGasReductionFund

TheGreenhouseGasReductionFund(GGRF)containsthreemainprograms:CleanCommunities InvestmentAccelerator(CCIA),NationalCleanInvestmentFund(NCIF),andSolarforAll

CCIA will deploy $6 billion through grants to two to seven hub nonprofits, providing funding and technicalassistancetocommunitylendersthatareeitherpublic,quasi-public,ornonprofit.Examples of community lenders include green banks, community development financial institutions, credit unions, housing finance agencies, and minority depository institutions. The deadline for these hub nonprofits to apply has passed. Puerto Ricanentitiesshouldbe able tobeginapplying forfundingin late2024.

Through sub-grants or subsidies, the funding assistance will support the capitalization of these communitylenders.Thetechnicalassistancegrantswillbedesignedtohelptheircapacity.Allprojects funded under the CCIA must be spent in at least one of three priority areas: distributed energy generation,net-zeroemissionsbuildings,andzero-emissionstransportation.Theseprojectsmustalsobe locatedinanEPA-designatedlow-incomeanddisadvantagedcommunity.

The NCIF is a new program that will award $14 billion to two to three national green banks. These green banks will fund individuals, families, nonprofits, governments, small businesses, and others to accesscapitaltodeploycleantechnologies.

Allfundsmustbespentononeofthreepriorityprojectcategories:distributedenergygeneration,netzeroemissionsbuildings,andzero-emissionstransportation.Atleast40percentoffundsmustbespent in EPA-designated low-income and disadvantaged communities. As with the CCIA, the deadline for thesehubnonprofitstoapplyhaspassed.Fundingshouldcomeonlinebeginninginlate2024,atwhich pointentitiesinPuertoRicocanapplyforgrantsandloans.

Solar for All is a new $7 billion program created by the EPAto spur the nationwide deployment of residentialdistributedsolarenergy.Uptosixtyawardswillbemadetoentitiesacrossthecountry.The fundedsolarprojectswilleitherberesidentialorservecommunitysolarprojects.Underthestatute,all programfundsmustbespentinlow-incomeanddisadvantagedcommunities.Thedeadlinetoapplyfor SolarforAllfundinghaspassed;however,shouldanentityinorservingPuertoRicobeawarded,Puerto Rican renters, homeowners, municipal governments, nonprofits, and for-profit organizations could ultimatelybenefitfromthisopportunity.

TheDepartmentofHousingandUrbanDevelopment

HUDisalsoasignificantplayerinPuertoRico’sdisasterrecoveryeffortsandfinancingitsrenewable energytransition.GivenHUD’sexperiencewithoverseeingtheCommunityDevelopmentBlockGrant Program (CDBG), Congress often allocates the agency additional federal funding after disasters to provideaffectedareaswithanacceleratedinfluxofcash.FollowingHurricanesIrmaandMaria,Puerto Rico received a total of $10 Billion of this Community Development Block Grant Disaster Recovery (CDBG-DR) funding. Congress also allocated an additional $8.2 billion in long-term Community Development Block Grant Mitigation Funding (CDBG-MIT). In 2021, HUD announcedanadditional$1.9billionexclusivelyforimprovingthereliability,resiliency,efficiency,and sustainabilityofPuertoRico’senergygrid,CDBG-DREnergy.

Most of this funding will meet immediate needs and repairs for homeowners, businesses, and infrastructure.However,aportionhasbeenintentionallyinvestedinprogramsfocusedonrenewable energy.CDBG-DREnergynamesthePuertoRicoDepartmentofHousingasthegranteeforthefund, whichisimplementedintwodistinctprograms,ER1andER2.

ER1, also known as the Energy Grid

Rehabilitation and Reconstruction Cost Share Program, covers the required 10 percent non-federal matching funds necessary to access specific FEMA funds for FAAStprojectstobecompletedbyPREPA. This program has a budget of $500 million fromtheCDBG-DREnergyallocation.

ER2, or the Electrical Power and Reliability and Resilience Program, provides direct grants to projects that enhance electric system reliability, affordability, and resiliency through the development and interconnection of microgrids and distributed energy resources, includingrenewableenergygeneration,combinedheatandpowersystems,andbatteryenergystorage systems.Theremaining$1.3billionCDBG-DREnergybudgethasbeenapportionedtothisprogram.

In addition to these allocations, $395 million from the CDBG DR/MIT funds have been directed toward the Community Energy and Water Resilience Installations Program (CEWRI). The programprovidesenergyandwaterefficiencyandresiliencyinstallationtoindividualsreceivingaidfrom the CDBG-DR Home Repair, Reconstruction or Relocation (R3) Program. Eligible low-tomoderate-income households receive improvements, which include photovoltaic system and battery system installation at free or reduced costs, prioritizing the most vulnerable communities across the island.

Through the IRA, HUD also created the Green Resilient Retrofit Program (GRRP), which includesthreeawardtypes:Elements,LeadingEdge,andComprehensive.Elementsawardswillprovide $140 million in funding for owners who are already “materially advanced” in a recapitalization transaction in which the project includes targeted utility efficiency, carbon emissions reduction, renewable energy, and climate resiliency measures. Leading Edge awards will offer $400 million for properties in the planning stages of a recapitalization effort. Comprehensive awards provide $1.47 billion for people interested in improving their property’s utility efficiency and resilience to climate hazardsbutmaynotbereadyforarecapitalizationproject.

ChallengesandRecommendations

Many challenges are hindering Puerto Rico’s capacity to meet its legally binding renewable energy mandates. Barriers to financing the transition in the territory are multifaceted, with historical and structuralimpedimentsmergingtocreateacomplexmixoffiscal,technical,andeconomicconstraints. Many of these barriers directly impact Puerto Rico’s ability to fund or attract investment for a clean energygrid.

PuertoRico’scleanenergyambitioncanandshouldserveasamodelfortherestofthenation,andmany ofitschallengesmirrorthosethatexistonthemainland.Inaddition,someoftheterritory’schallenges tofinancingrenewableenergystemfromexternalconstraintsthatareoutsideitscontrol,suchasitshigh exposuretonaturaldisasters.Nevertheless,certainbarriersaremorespecifictoPuertoRico,forwhich specificpolicyrecommendationscanbeprovided.

This chapter of the report is divided into two sections. The first provides policy recommendations relatedtofivecriticalfinancingproblemareasPuertoRicofaces:

1. InvestmentTaxCreditIneligibility

2. SustainableCoordination

3. TheGreenEnergyTrust

4. TrancheProcessandProcurement

5. EnergyEfficiency

The second section presents challenges that, while relevant, are less closely related to the financing of renewableenergy.Barriersinthisfinalsectionarethereforeconsideredbeyondthescopeofthisreport, and no recommendations are presented. Nonetheless, the discussion provides meaningful context necessarytounderstandthebroaderenergytransitionlandscape.

InvestmentTaxCreditIneligibility

Challenge

The ITC for rooftop solar, energy storage, and other renewable energy technology is one of thestrongestincentivesforhomeownersandbusinessestoacceleratethetransitionawayfrom fossil fuels. However, because of its territory status, Puerto Rican citizens and entities are ineligibletoreceivethebenefit.

TreasurycurrentlyinterpretstaxrulesrelatingtotheITCimplementedundertheIRAinamannerthat excludesPuertoRicanentitiesfromreceivingthebenefits.AccordingtoTreasury,theITCs“cannotbe usedpredominantlyoutsidetheUnitedStates(thefiftystatesandtheDistrictofColumbia)unlessthe property is owned bya US corporationorUScitizen...Therefore, property used inthe territories and ownedbyaterritorygovernment,oranentitycreatedinororganizedunderthelawsofaU.S.territory generallywouldnotqualify.” 48F 49

Treasury’scurrentinterpretationoftheITCstatuteleavesPuertoRicans,localterritorialgovernment bodies,andotherorganizationsheadquarteredwithintheterritoryineligiblefortheITCbenefit.This ineligibilitydecreasesaccesstofinancingopportunitiesthatwouldotherwisefundrooftopsolar,battery storage,andotheractivitiesnecessaryforthetransition.

Specifically,thetaxrulesgoverningtheIRAITCsusesection50(b)(1)oftheInternalRevenueCodeto describe eligibility as individuals and entities located within the fifty states and Washington, DC. Treasury’s Office of Tax Policy has the regulatory authority to waive this provision or create an

exception for the territories. When issuing the Proposed Elective Pay Regulations, Treasury used its authoritytoclarifythat“applicableentities”includedterritorygovernmentsforPTC.Usingthatsame authorityinthefinalregulation,TreasurycanclarifythatallIRAtaxcreditsareeligibleforelectivepay andtransferability. 50

Recommendation

TheSecretaryofEnergyshouldpushtheOfficeofTaxPolicyatTreasuryaswellastheWhite House to use their authority to waive the current tax restrictions for the ITC so it includes PuertoRicoandtheotherterritories.

Byprovidinganexceptiontosection50(b)(1),Treasurywouldallowterritoriestobecomeeligiblefor theITC’selectivepayandtransferabilityoptions,whichwouldnotonlyextendtheseITCbenefitsto PuertoRicobutalsoextendtheLowIncomeCommunityBonusCredit.SincenearlyallofPuertoRico would qualify as low-income, residents and entities could see the cost of eligible projects cut in half. Giventhis,andinkeepingwiththepolicyintentionoftheIRA,theOfficeofTaxPolicyshouldwaive thisprovision.

Given the President has delegated the Secretary to spearhead the federal effort to support the energy transition in Puerto Rico, Secretary Granholm should advocate that Treasury and the White House change the interpretation of the ITC allowable investment areas. While this change in interpretation cannotbemadebytheDOEdirectly,leveragingtheagency’ssoftpowerandcolloquialauthorityonthe energytransitioninPuertoRicoshouldhelpprompttheadministrativeprocessnecessarytoimplement amoreinclusivereadingofthestatute.

SustainableCoordination Challenge

Over the past year, the DOE has played a crucial role in convening and coordinating various stakeholdersinthePuertoRicanenergysector.However,leadershipwithintheDepartment, including its Secretary, may change depending on the outcome of the 2024 election cycle, meaning a long-term presence by the federal government may be unsustainable. Likewise, relevant actors facilitating the energy transition, including PREB, LUMA, Genera PR, and others, lack a central coordinator to manage progress and issues related to long-term, largescalerenewableenergypenetration.

In September 2022, Hurricane Fiona devastated Puerto Rico with record rainfall, mudslides, floods, and as a result, widespread power outages, compounding damage from Hurricane Maria.50F 51 In its aftermath, President Biden designated Secretary Granholm to coordinate federal efforts “to help transformtheentiresystemofPuertoRico.”51F 52

Over the pastyear, Secretary Granholm has prioritized the Puerto Rican energy transition withinher department. To achieve this goal, she has established the Puerto Rican Grid Recovery and ModernizationTeam,ledbyDirectorAgustínCarbó-Lugo,andhasvisitedtheislandseveraltimessince November2022.52F 53, 53F 54

AccordingtoasourceatDOE,duringthesetrips,theSecretarymeetswithkey decision-makersfromrelevantfederalandstategovernmententities,includingFEMA,HUD,PREPA, Genera PR, and the Financial Oversight and Management Board for Puerto Rico (FOMB). Furthermore, the Secretary receives regular updates from participating agencies every six weeks to monitortheprogressofongoingprojectsandworkstreams.

Duringmeetingsontheisland,relevantgovernmentbodiesandotherstakeholderssignaledappreciation fortheextrapushbyDOEandtheSecretary.However,thenationalpoliticalclimatemaymakeDOE’s roleinthisspaceunsustainable.Withcontrolofthe Housechangingfollowingthe2022election,the DOE faces new scrutiny regarding the Secretary’s policy priorities. 55 The upcoming presidential electionalsocreatesuncertaintyfortheroleofthefederalgovernmentinPuertoRicoafter2024.Should PresidentBidenlosereelection,SecretaryGranholm’ssuccessormaybeunwillingtoprioritizePuerto Rico’senergytransitioninthesameway.

DespiteplayingalargeroleinpushingthecleanenergyagendaforwardinPuertoRico,theSecretary’s rolewithinPuertoRico’sinternalaffairsislimitedbydefinition.Forexample,itisnottheroleofthe

federalgovernmenttobeinvolvedinPuertoRico’slocalpoliticsorlandusepolicies.WheretheDOE does not weigh in, Puerto Rican entities and other organizations taking a more ad hoc approach to financingthetransition,whichdoeslittletospeedtheterritorytowardsitsrenewableenergymandates. Asa result, across the landscape of actors invested in the renewable energy transition in Puerto Rico, therehasbeenagapinplaceofacentralplanningandcoordinatingentity.

Recommendation

TheDOEshouldsupportthedevelopmentofalocal,PuertoRico-basedentitythatfunctions as a clean energy finance-focused coordinating body amongst stakeholders. Based on our analysis, the newly established Green Energy Trust, once functional, could perform this role withtherightorganizationalsetupandleadership.

Giventheradicalchallengetoachieveafulltransitiontorenewableenergyby2050,it’scriticaltobuild out an institution to coordinate efforts. To our knowledge, there is no functioning organization that performsthisroleorcanfillthisgap.However,theGreenEnergyTrust,oncesetup,couldtakeonthis role.Asaquasi-governmental,publicly-fundedorganizationcommittedtoadvancinggreenenergyon theisland,theGreenEnergyTrustmaybewellpositionedtoactasacentralized,coordinating agency. Ifthisoptionisexplored,itwouldrequiremodifyingandexpandingtheGreenEnergyTrust’scurrent mandate,asitisnottechnicallydesignedtoplayanadvocacyorcoordinatingfunction.Theremayalso beotherPuertoRico-basedorganizationsthatarebettersuitedtotakeonthisrole,oranentirelynew organizationmayneedtobeestablished.

Somekeyfunctionsassociatedwiththiscoordinatingorganization(whethertheGreenEnergyTrustor adifferententity),include:

Tracking federal and private funding opportunities. While some deadlines for federal funding have passed, many loan and grant programs remain available for Puerto Ricans. 56 Further, in the funding application cycles that have passed, Puerto Rico has submitted applications for which the timelineandresultsareunknown.

Engagingrelevantpartnersintheapplicationprocess.ThemanyactorsinPuertoRico'stransition lack coherent leadership and coordination across their mandates. Bringing in an entity to increase efficienciesandidentifyandgrowthecoalitioniscriticaltosuccessfullyexecutingtheenergytransition. This alsoincludes bringing grassroots, community-led organizationsinto theconversation,since they

bringperspectivesthatareessentialtoinforminganequitableandjusttransition.Thesegroupsareoften smallerinsizeandhencefinditmorechallengingtoparticipateinongoingprocessesanddiscussions.

Technical assistance for applications. Many applications for federal funding require technical knowledgeregardingbotheconomicoutcomesandrenewableenergytechnology.Itiscriticaltobuild capacity to ease access to this information for smallbusinesses and local governments to enable more robustapplications.

Monitoringongoingworkandarchivingefforts. Itisunclearwheretheworktoward100percent renewableenergystandsatahighlevelacrossallactors.ThenextiterationofPuertoRico’sIRPandthe PR100 report are likely to provide comprehensive technical answers, but the financial and political hurdlesandlessonslearnedwilllikelynotbeincluded.Anorganizationmusttakestockofwhathasbeen donesofartochartamorerealisticpathforthefuture.

Liaising with federal offices. MuchofthefundingthatPuertoRicorequiresforthetransitionwill come from the federal government in the form of grants and loans. Liaising with federal offices to understand how Puerto Rico can best take advantage of what may come down the pipeline and preparingorganizationsonthegroundiscritical.Trackingnewregulationsandnewpolicieswillalsobe tothebenefitoforganizationsworkinginPuertoRico.

Supporting coordination and convening of relevant stakeholders. At present, Secretary Granholm’s regular visits to the island also serve as a time for various stakeholders to come together, provide updateson theirwork, communicate with one another, andcreate goals forfuture meetings. This important function may be eliminated if there are changes to federal leadership or if Secretary Granholm’svisitsbecomemoresporadicforanyotherreason.Ifindifferentadministrationsthereisan absenceoffederalleadershipfocusedonPuertoRico,acentralized,dedicatedorganizationontheisland should ensure that these important regular meetings take place to provide a space for stakeholders to engage,shareupdatesandlearnings,andharmonizetheirefforts.

ThePuertoRicoGreenEnergyTrust Challenge

ThePuertoRicopublicgreenbank,thePuertoRicoGreenEnergyTrust,lacksthenecessary resourcesandfundingtoactonitsmission.

Act 17 called for the creation of a green bank broadly modeled after the NewYork and Connecticut greenbanks,aswellaslocallyafterthePuertoRicoLandandScienceTrusts.TheGreenEnergyTrust issupposedtoprovideincentivestosupportPuertoRico’sresidents,businessowners,andgovernment toinvestingreenenergyinaccordancewiththerenewableenergytargetsofAct17.57 AccordingtoAct 17,otherkeyobjectivesoftheTrustincludebutarenotlimitedto:

● Promotethegrowthofgreenenergyproducers.

● EncouragePuertoRicanconsumerstobecomeprosumers.

● Educatethepublicaboutgreenenergy.

● Supportpilotprogramstoincreaseaccessibilityanduseofgreenenergysources.

● Establish programs to support low and moderate-income communities in accessing green energy.

● Support municipal energy, solar, and microgrid businesses in low and moderate-income communities.

● Facilitatefinancingofgreenenergyprojectsinsmall,medium,andmicro-businesses.

DespiteAct17“creating”thetrustnearlyfiveyearsago,theTruststillhasonlyonestaffmember(hired in2023)andhasyettobringonanexecutivedirector.57F 58 Thereisalsocurrentlynowebsite.Addressing thesekeyorganizationalchallengesareimperativetoitcarryingoutitsstatutorymandate.

In2022,GovernorPierlusipledgedtoseedthetrustwith$400-$500millioninfundingmadeavailable through HUD’s CDBG-MIT.58F 59, 59F 60 While this investment would make the Trust one of the largest such entities in the country, as of the publication of this report, these funds do not appear to have materialized. With their proven track record in the states, green banks are an effective method for amplifying the financial impact of public dollars in deploying climate solutions. As an example, the ConnecticutGreenBankfoundthatforevery$1ofpublicfundscommittedbythebank,itgenerated anadditional$7inprivateinvestmentinthelocaleconomy. 61 Asof2023,thereweretwenty-fiveactive greenbanksacrosseighteenstatesandtheDistrictofColumbia,withover$9billionmobilizedinpublic andprivatecapitalsince2011.61F 62 Withtherequisiteresources,theTrustcouldbecomeamajorplayer

in Puerto Rico’s energy financing landscape. The Trust would also be a natural vehicle for receiving fundingthroughmultiplenewprogramscreatedundertheIRA.However,initscurrentstate,thereis littlecapacitytoadministerthesenewprograms.

Recommendation

TheGovernorshouldprovidethePuertoRicoGreenEnergyTrustwiththefundshepromised in 2022. Secretary Granholm and others working in the Puerto Rico energy space should ensurethisissueisbroughttohisattention.

Despite its slow and jilted start, the Trust has the potential to be a leader in Puerto Rico’s energy transition and occupy an important role in coordination, administration, and messaging. For these reasons,theTrustmustbecomeoperationalassoonaspossible,inlargeparttoleverageitspositionto seekfederalfundinginsupportofitsmission.

Becoming operational necessitates funding. The Governor promised to provide the Trust $400-$500 millioninfundingin2022butthishasyettobedelivered.Hisofficeshouldexpeditiouslyprovidethis support or at least some level of funding that would allow the organization tobegin delivering on its legallymandatedresponsibilities.

GivenherprominentroleinPuertoRico’senergysector,theSecretaryofEnergyandherstaffshould underscore the importance of getting the Trust up and running. Other stakeholders in Puerto Rico, includingmembersoftheprivatesectorandenergyjusticeorganizations,shouldalsoadvocateforthe GreenTrusttoreceivethisfunding.

The Green Energy Trust’s Board should mobilize rapidly to build out the organization’s administrativecapacityandachieveitsstatutorymission.Itshouldpayparticularattentionto utilizingfundsthroughtheGreenhouseGasReductionFundtoachievethisgoal.Thereshould alsobeanefforttoprovideasmuchbenefitaspossibletolow-incomecommunitiesinPuerto Rico.

IftheTrustistobecomeaproductiveorganizationandachieveitsnumerousstatutoryobjectivesaslaid outinAct17,itneedstorapidlybuilditsadministrativecapacity.Followingtherecentappointmentof aCEO, 63 theTrust'sBoardshouldsupportaprocesstorapidlyrecruitafullexecutiveleadershipteam. Whilestaffdataisnotavailableforallgreenbankinstitutionsinthestates,areviewofseveralwebsites suggests these organizations tend tohave staffofatleasta dozen, and in thecase of theRhode Island GreenBank,roughlyfiftyemployees.TheTrust'sBoardshouldactswiftlytocompletetheonboarding ofthenewCEOand,subsequently,otherseniorstaff.

In building out organizational capacity, we recommend that the Trust’s Board and, ultimately, its Executive Director should focus on how the organization can best position itself to apply for and administerfundingmadeavailablethroughtheEPA’sGGRF.Thisisparticularlyimportantgiventhe magnitudeoffundingavailablethroughGGRF,whichcould,inturn,allowtheorganizationtoachieve itsotherobjectivesandbecomealargerplayerinthePuertoRicocleanenergyfinancespace.

BasedonaconversationwithBoardmembers,weunderstandthattheTrustwaspartofanapplication for the GGRF’s Solar for All program. Should itwin this competitive grant process, staffing support willbeneededalmostimmediatelytosupportthedevelopmentofanew,likely$100+millionprogram. AnnouncementsareexpectedfromEPAinSpring2024.

The GGRF alsoincludestwootherprograms forwhich the Trusthasnotyetbeen able toapply,the CCIA and the NCIF. Together, in mid-2024, these EPA programs will provide over $20 billion to regional and national nonprofit financing organizations.63F 64 These awarded organizations will then begintoprovidebothgrantsandloanstoinstitutionsliketheTrustbeginninginfall2024.Thescaleof thefundingsuggestshundredsofmillionsofdollarscouldbemadeavailableforPuertoRicanentities

liketheTrustbeginningtowardstheendof2024.WhilethereissometimefortheTrusttoprepareto bothapplyforandadministerfundingundertheseprograms,beginningtheseeffortsnowcouldprovide acompetitiveadvantageoverotherinstitutionsinthemainland.

Act 17 states that the Trust should “establish program[s] or financially support projects that provide residentsoflow-andmoderate-incomecommunitieswithaccesstogreenenergy.”Werecommendthat the Trust commit to not just supporting projects that will provide these communities with access to green energy but further commit to providing at least 40 percent of the financial benefit from its programs to low-income and disadvantaged communities. This would be in line with all three of the programs organized underthe GGRF, which have requirements that between 40 and 100 percent of funding be spent in low-income and disadvantaged communities.64F 65 The White House’s Justice40 program or California’s CalEnviroScreen could serve as a guide for identifying communities and providingbestpractices.66, 67

Finally, after developing sufficient staff capacity for its statutory responsibility, the Trust could be a naturalvehicletocarryoutseveraladditionalresponsibilities.Manyofthesepossibleresponsibilitiesare outlinedintherecommendationonsustainablecoordination.

TrancheProcessandProcurement Challenge

Delaysanddisruptionstothe centralizedprocurementofutility-scalerenewable energyhave undermined market confidence and raised costs, threatening a principal avenue for private sectorinvestmentintheenergytransitioninPuertoRico.

Since 2021, the government in Puerto Rico has pursued a centralized procurementprocessto deliver 3,750MWofutility-scalesolarphotovoltaicgenerationcapacityand1,500MWofbatterystorage.This process was recommended by the most recent iteration of the territory’s IRP, with the compelling economicsofnewutility-scalerenewablegenerationofferinglowercostsforconsumers,especiallywhen comparedtoPuertoRico’sexistingexpensivefossilfuelgeneration,andapathwaytomeettheterritory’s legallybindingtargets. 68 Theplan,puttogetherbyPREPA,wastocompetitivelyprocurethiscapacity throughaseriesofRFPsforprivatesectorentitiestodevelop,operateandmaintainrenewableenergy projects. Six RFP tranches of between 500 and 1,000 MW were to be issued at six-month intervals betweenDecember2020andJune2023.69

Unfortunately, this process has suffered severe delays and disruptions that have undermined market confidence and raised costs, ultimately slowing the expansion of renewable energy in Puerto Rico. PPOAsforprojectsunderthe firsttranche were only approved in 2023,well over two yearsafterthe RFPwas issued, with thesecond and third tranches initiatedmore than a yearlate. 70 Often, utilities can leverage their revenue base to access debt from financial markets to support this kind of infrastructure investment, but PREPA’s ongoing Title III bankruptcy proceedings and long-term record in failing to ensure tariffs recover costs mean it does not have the creditworthiness to access private lending at feasible rates. 71 Overall developer and investor confidence is also likely to be negativelyaffectedbythegenerallackofpublicconfidenceintheelectricitysectorandservicedelivery provided by PREPA, LUMA and otherentities. In addition to this broad lack of market confidence, specificissueswiththetermsofthePPOAsofferedbyPREPAandtheprocessitfollowedhaveseverely delayed reaching financial close for tranche 1 projects and undermined the broader credibility of the process.71F 72 Theseissueswereexacerbatedbyrisingequipment,supplychainandfinancingcosts,which pusheddeveloperstoseekupdatedpricinginthetermsofthetranche1PPOAs.73

Note:Theoriginal andupdated timelinefortheprocurementofrenewablegenerationandbattery storagecapacity. Thisisa reproductionofFOMB’stable.

Source:FinancialOversightandManagementBoard.“Exhibit2424in2023CertifiedFiscalPlanforthePuertoRicoElectric PowerAuthority.”June23,2023.https://oversightboard.pr.gov/fiscal-plans-2/

Therearenoweffortstoaddresstheseissues.PREBhasbecomemoredirectlyinvolved,appointingan independent coordinator to lead the process for the subsequent tranches73F 74, 75 and ordering an investigation into the persistent delays.76 An accelerated timeline is being followed to partially

Table 2. PREB Guidance for Procurement of Renewable Generation and BatteryStorageCapacity

compensate for the delays so far. The DOE’s LPO has provided capacity support to ensure the bankabilityofthe PPOAs, enabling projectsundertranche 1 to progress. In July 2023, theDOEalso announcedthatprojectsprocuredthroughtranches1,2,and3wouldbeeligibletoseekloanguarantee support through the Energy Infrastructure Reinvestment component of the LPO’s Title 17 Clean Energy Financing program.76F 77 This support should boost market confidence and reduce financing costs,hopefullyloweringbidpricesfortranchesthatarecurrentlyunderprocurement.

Problemsstillpersist.LongdelaysinthecompletionofLUMA’sgridinterconnectionstudiesareakey barrier,creatinguncertaintyaboutfinalcostsforprojectdevelopersandslowingtheoverallprocess. 78 Thereisalsoalackoftransparency:thisreport’sauthorswereunabletoeasilyfindinformationonthe currentstatusoftheprocurementprocessonline.Thereisverylittle,ifany,currentinformationonthe dedicated website created by the independent coordinator. 79 This is despite the fact that greater transparency and accountability are known to be key to building greater public trust in such a procurementprocess.80

Recommendation

PREBandtheindependentcoordinatorshouldprioritizestrengtheningthecredibilityofthe procurement process by increasing public transparency, accountability, and communication withallkeystakeholdersandinlinewithrecognizedbestpractices.80F 81, 81F 82

Improvingtheprocurementprocesswillboostmarketconfidenceandattractmorerobust,competitive, and cost-effective proposals and private financing. Specific short-term priorities should include deliveringafunctionalcentralwebsite,providingregularannouncementsandissuingadetailedtimeline thatiskeptupdatedandtowhichallstakeholdersarepubliclycommitted.PREBandLUMAshould also work together to speed up interconnection studies in order to provide project developers with greatercertaintyaboutinterconnectioncostsandensuretheagreedprocurementtimelinescanbemet.

The DOE should maintain its strong support for this procurement process and its timeline, providingtechnicalassistanceandpoliticaldirectionwherepossible.

GiventhelikelyimportanceofTitle17loanguaranteestothecommercialviabilityoffinancingutilityscalerenewableenergyprojectsinPuertoRico,theLPO’sengagementandcoordinationwithproject developers, investors, and the Puerto Rican authorities should happen as early as possible. The LPO should act proactively to support proposals and maximize the likelihood that this federal financial supportcanbedelivered.

EnergyEfficiency Challenge

Puerto Rico’s progress in advancing its energy efficiency policy has been slow compared to otherstatesandterritoriesintheUnitedStates,butimprovementscouldsignificantlyreduce theenergydemandontheisland,decreasingblackoutsandbringingdowncosts.

WhentheAmericanCouncilforanEnergy-EfficientEconomy(ACEEE)reviewedthestateofenergy efficiencyregulations,codes,andotherinitiativesinPuertoRicoin2016,itrankedlowerthanoverforty USstates.WhilethiswasthelastsuchreviewbyACEEEofPuertoRico’senergyefficiencyprograms,it indicatedtherewassignificantroomforimprovement.

A 2023 study from the ACEEE found that investments in energy efficiency are both cheaper than investing in energy generation and effective in offsetting the escalating costs of fossil fuel-based energy.82F 83 AsPuertoRicostrivesforhighlevelsofrenewableenergypenetration,stronginvestmentin energy efficiency today could pay large dividends down the road. Moreover, energy efficiency improvementswouldreduceenergycostsforconsumers,aswellasthe overallstrainontheelectricity grid.Suchareductioninloadwouldlessenthelikelihoodofpowerdisruptions.

UnderAct17,PuertoRicoislegallyobligatedtoimproveitsenergyefficiencyby30percentby2040. 84 In pursuit of this goal, PREB put forward updated energy efficiency regulations in 2022. 85 In these regulationsPREBmandatesthatPREPAcreateandimplementenergyefficiencyprograms,yetfederal

programs are not cited as possible sources of funding, resources, or support. Given the availability of new federal funding for energy efficiency upgrades under the IRA, there may be room for PREB to updatetheseregulationsfurther.

Recommendation

Update PREPA’s energy efficiency programs by pairing them with readily available federal funding programs, using the grants, rebates, technical support, and other assistance to maximizePuertoRicanenergyefficiency.

PREPAhasbeenmandatedbyPREBto“developandofferenergyefficiencyprograms”;theseinclude services,initiatives,andeducationforcustomersandsmallbusinesses.85F 86 Numerousfederalprograms areavailabletothisend,particularlyundertheDOE’sOfficeofStateandCommunityEnergyPrograms (SCEP). These include the Weatherization Assistance Program, the SEP, the Energy Efficiency RLF Capitalization Grant Program, and the EECBG Program, among others. The IRA also offers federal incometaxcreditsandincentivesforhomeowners,homebuilders,andcommercialbuildingownersfor variouskindsofenergyefficiencyimprovements.86F 87

Some of these programs are already active in Puerto Rico and have created positive benefits for thousandsofpeopleacrosstheisland.87F 88 However,noneofthesefederalprogramsorfundingsources arereferencedinPuertoRico’senergyefficiencyregulations,presumablybecausemostoftheavailable federalfundingwasintroducedafterPuertoRico’sregulationwasfinalized.Thesefederalprogramsare alsonotidentifiedinanysubstantialmannerinthemostrecentversionofPuertoRico’sIRP.

EnergyefficiencymeasuresareessentialifPuertoRicoistoreach100percentrenewableenergyby2050, as these initiatives lower the total energy needs of consumers. As PREPA develops and implements energyefficiencyprograms,itshouldleveragefederalfundingtoamplifytheimpactoftheseefforts.In addition,PREPAshouldseektopartnerwithSCEPontheseendeavorsinordertoreducetheleadtime requiredtogetPuertoRico’senergyefficiencyprogramsoperationalandeffective.PREBcouldensure thisworkisundertakenbyupdatingthe2022regulationstoreflectnewfederalfunding.

AdditionalConsiderationsandStructuralLimitations

PuertoRicoalsofaceschallengesinitstransitiontorenewableenergythatarelessdirectlyrelatedtoits ability to finance the necessary investments. As such, it is beyond the scope of this report to provide recommendations on these issues. Nevertheless, understanding the broader context in which Puerto Rico’s financial barriers exist is critical in navigating the complex landscape of the ongoing energy transition.

Asinmanystates,PuertoRico’sstateandlocalpermittingprocesseshavebecomeanobstacle inreachingitsrenewableenergymandates.

In conversations with representatives of clean energy developers and advocates, permitting issues continuedtocomeupasachallengeforthefinancingandtimelydeploymentofrenewablesinPuerto Rico.Otherswemetdescribedthepermittingprocessasnomoreofanobstaclethaninanyotherstate. Regardless,researchfromtheBrookingsInstitutionsuggeststhatpermittinghasbecomeanobstacleto renewables nationwide.88F 89 Unnecessarily bureaucratic permitting processes can obstruct the constructionofcleanenergygeneration,distribution,andtransmissioninfrastructureatthepaceand scalerequired.

Toaddresstheconcernsofcleanenergyinvestors,PuertoRico'sstateandlocalgovernmentsmayneed toadoptmoreefficientapproachestoexpeditesiteselectionandauthorizationofcleanenergyprojects and their infrastructure. The current bureaucratic backlogs and unnecessary red tape often result in significant delays and additional costs, possibly leading to project termination. 90 Streamlining the processcouldensurethetimelycompletionofcleanenergyprojectsandestablishPuertoRicoasaleader indeliveringtheenergytransition.

However, environmental and community protections should notbe ignored in pursuitof expediting the deployment of clean energy. 91 Certain states have begun to demonstrate ways to reconcile these concerns,suchasNewYork'screationoftheOfficeofRenewableEnergySiting,whichcombinesthe permit application and review process into one department.91F 92 Similarly, Illinois passed legislation to standardizepermittingforrenewableenergyfacilities. 93

SincefinancialinclusionratesarelowerinPuertoRicorelativetomanystatesonthemainland, individual Puerto Ricans may find it more difficult to access financing opportunities to supportinvestmentsinrenewableenergysystems.

Low financial inclusion rates in Puerto Rico leave residents with less access to credit, meaning even households willing to invest in clean energy are often unable. According to the Consumer Financial Protection Bureau (CFPB), over ten percentof households in Puerto Rico lack a checking orsavings account, and some forty percent do not have a credit card. Many solar TPOs and government loan programs require individuals orhouseholds to havea minimum creditscore. However, Puerto Rican residentsfacehigherratesoffinancialhardshipthanmanycommunitiesonthemainland,andaccessto financialinclusionissignificantlylower. 94 Lowerfinancialinclusionontheislandleadstolesstake-up ofterritoryandfederal-ledprogramsmeanttoacceleratethetransitiontorenewableenergy.

Manyenvironmentalistsandactivistswithintheagriculturesectorcontinuetochallengelargescalesolardevelopment,citingtheprotectionofsensitiveecologicalareasandtheunnecessary modification of otherwise arable land. Developers could do more to respond to the concerns ofthesegroups,manyofwhichincludecommunitymembersandfarmers.

In August 2023, a coalition of environmental activists in Puerto Rico sued FEMA to halt the development of utility-scale renewable energy projects on agricultural land.94F 95 PREB, the body responsible forapprovinglarge-scale utility projects, has so fardevoted five thousand acres of land to high-capacity solar and wind. The lawsuit is a culmination of a broader effort among activists who oppose constructing renewable energy projectson fertile land. Puerto Rican officials have yet to find

thebalancebetweenrenewableenergydevelopersandtheselocalcommunitiesandactivists,butmoving forward,thisbalancewillbecriticalinensuringajustenergytransition.

Sincethemid-1960s,theislandhaslostaboutseventypercentofitsagriculturalland,andPuertoRico’s own 2016 Land Use Plan attributes the deficit in agricultural productivity in part to this arable land loss.95F 96 Whileactivistsgenerallyagreewiththeefforttotransitionawayfromfossilfuels,theypointto alternative sites upon which it is possible to build large-scale renewable generators. These areas, they argue, include existing parking lots, landfills, or Brownfield sites that do not threaten Puerto Rico’s already dwindling agricultural land. Activists from organizations like Sierra Club also push for mass installationofrooftopsolar,whichtheysayreducestheneedforlarge-scaleprojectsthatdisruptsensitive agriculturalandhistoricalsites.96F 97

FEMA,PREB,anddevelopersarguethatwhileutility-scaleenergyprojectsdorequiremoreland,much of the available arable land in Puerto Rico is not currently producing crops. In 2018, the National AgriculturalStatisticsServicenotedroughly14percentofagriculturallandwentunused,meaningno farming occurred on sites well-suited for such activities. When also accounting for land suitable for pastureorgrazing,wheresolarfarmscouldcoexistalongsidecattle,thepercentageofunusedlandrose to over 50 percent.97F 98 While some argue that expanding renewable energy on agricultural land will threatenPuertoRico’sfoodsecurity,otherspointoutthattheislandalreadygrowsonlyafractionof whatitconsumes. 99

These challenges have already threatened the development of large-scale projects within the territory. Regardlessof either side’sarguments, the current lawsuitis likely tocontinueto furtherdelay Puerto Rico’s transition to renewable energy. What is more, pushback from activists may continue via more legalbattles,protests,andchallengestoregulatoryoversightinPuertoRicorelatedtotheterritory’sland usepolicy.Fortheirpart,governmentofficialsanddevelopersalikecouldbetteraddressthe legitimate concerns of activists by communicating directly with them and accounting for their concerns during the development of utility-scale projects. So far though, it remains unclear whether developers and privateinvestorsareinvestingincommunityengagementefforts,whichwouldlikelyreducepushback totheseprojects.

ConcludingRemarks

Puerto Rico has set an ambitious and inspiring goalin committing to achieve 100 percent renewable energyby2050.Althoughtheterritoryisstillatthebeginningofthistransition,thetechnical,economic, and political steps that must be taken are increasingly clear. It is also evident that stakeholders across PuertoRico,includingnonprofitcommunityorganizations,theenergyauthorities,andprivateactors, are committed to this effort. This report has sought to complement existing work by examining the opportunities, barriers and solutions to financing the expansion of renewable energy on the island. GiventhelikelyimportanceoffederalsupportforPuertoRico’stransition,thisreporthasfocusedon thesourcesoffundingavailablefromthefederalgovernmentandhowactorsinPuertoRicocanaccess thesesourcesmosteffectively.Thereporthasalsoprovidedpolicyrecommendationstoaddressbroader challengestofinancingthedeploymentofrenewableenergyatthescaleandpacerequiredtoachievethe territory’sgoals.Inthiswork,itiscrucialthatallstakeholdersworktogetherinacoordinatedwaytoward asharedvisionforPuertoRico’senergytransition.

Thereisnowanunprecedentedamountofpoliticalandfinancialsupportfromthefederalgovernment for the expansion of renewable energy in Puerto Rico. Alongside resources from stakeholders within Puerto Rico, federal programs and sources of funding will fill many of the investment gaps that currentlyexist.Atthesametime,thisreportalsorecognizestheneedforamorerobustapproachtothe transition: federal funding alone cannot address the delays, disruptions and lack of coordination that havesofarlefttheterritorywithlimitedrenewableenergycapacity.

Someoftherecommendationspresentedherearestructuralinnature,withsuchchangestakingtimeto reapthedesiredoutcomes.Otherrecommendationsarepolitical,andSecretaryGranholmhasaunique opportunity to advocate on behalf of the energy transition in ways that will serve Puerto Rico in the near term. We believe that implementing this report’s recommendations will unlock accelerated progresstowardajustandsustainableenergytransition,transformingtheterritoryintoagreenenergy leaderwithintheUnitedStates.

GlossaryandAcronyms

ACEEE AmericanCouncilforanEnergy-EfficientEconomy

Act17

ThePuertoRicoEnergyPublicPolicyAct

BRIC BuildingResilientInfrastructureCommunitiesGrantProgram

CBO Community-basedNon-profitOrganization

CCAP ComprehensiveClimateActionPlan

CCIA CleanCommunitiesInvestmentAccelerator

CDBG CommunityDevelopmentBlockGrantProgram

CDBG-DR CommunityDevelopmentBlockGrantDisasterRecovery

CDBG-MIT CommunityDevelopmentBlockGrantMitigationFunding

CEWRI CommunityEnergyandWaterResilienceInstallationsProgram

CFPB U.S.ConsumerFinancialProtectionBureau

CPRG ClimatePollutionReductionGrants

COR3 PuertoRicoCentralOfficeforRecovery,Reconstruction,andResiliency

DOE U.S.DepartmentofEnergy

EECBG EnergyEfficiencyandConservationBlockGrant

EERE DepartmentofEnergyOfficeofEnergy EfficiencyandRenewableEnergy

EIR EnergyInvestmentReinvestment

EPA U.S.EnvironmentalProtectionAgency

FAASt FEMAAcceleratedAwardsStrategy

FEMA FederalEmergencyManagementAdministration

FMA FloodMitigationAssistance

FOA FundingOpportunityAnnouncements

FOMB

FinancialOversightandManagementBoardforPuertoRico

FY FiscalYear

GDO DepartmentofEnergy’sGridDeploymentOffice

GGRF GreenhouseGasReductionFund

GRIP

GridResilienceandInnovationPartnerships

HMGP HazardMitigationGrantProgram

HUD U.S.DepartmentofHousingandUrbanDevelopment

HVAC heating,ventilation,andairconditioning

IIJA Infrastructure,Investment,andJobsAct

IRA InflationReductionAct

IRP IntegratedResourcePlan

IRS U.S.InternalRevenueService

ITC InvestmentTaxCredit

LEAP CommunitiesLocalEnergyActionProgram

LPO LoanProgramOffice

LUMA LUMAEnergy

MSA MetropolitanStatisticalArea

NCIF NationalCleanInvestmentFund

NewERA EmpoweringRuralAmerica

NOI NoticeofIntent

OCED DepartmentofEnergy’sOfficeofCleanEnergyDemonstrations

PACE PoweringAffordableCleanEnergyProgram

PCAP PriorityClimateActionPlan

PPOA PowerPurchaseandOperatingAgreement

PR PuertoRico

PREB PuertoRicoEnergyBureau

PREPA PuertoRicoElectricPowerAuthority

PR-DNER PuertoRicoDepartmentofNaturalandEnvironmentalResources

PR-ERF PuertoRicoEnergyResilienceFund

PTC ProductionTaxCredit

PW ProjectWorksheet

REAP RuralEnergyforAmerica

REIC RenewableEnergyInstallationCompany

RFA RequestforAdvance

RFP RequestforProposal

RFR RequestforReimbursement

RLF RevolvingLoanFund

R3 HomeRepair,ReconstructionorRelocationProgram

SCEP DepartmentofEnergy’sOfficeofStateandCommunityEnergyPrograms

SEP DepartmentofEnergy'sStateEnergyProgram

TPO Third-partyowners

Treasury U.S.DepartmentoftheTreasury

TSED TransmissionSitingandEconomicDevelopmentGrantsProgram

USDA US.DepartmentofAgriculture

WCA WorkingCapitalAdvances

WEMSE WholesaleElectricityMarketStudiesandEngagementProgram

Endnotes

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2 Mueller,Julia.“PuertoRicoGetsJonesActWaiverforLiquefiedNaturalGasShipments.”TheHill,TheHill,18Oct. 2022,thehill.com/homenews/3692392-puerto-rico-gets-jones-act-waiver-for-liquified-natural-gas-shiptments/.

3 LUMA.“HistoryFirst:LUMAlaunchesnext-generationbatteryenergysharinginitiativetoimproveservicereliability acrossPuertoRico.”November2,2023.https://lumapr.com/news/historic-first-luma-launches-next-generationbattery-energy-sharing-initiative-to-improve-service-reliability/?lang=en

4 Wyss,Jim.“WhyTinySolarProjectsPlayanOutsizedRoleinPoweringPuertoRico.”Bloomberg.com,31May2022, www.bloomberg.com/news/articles/2022-05-31/how-home-solar-power-protects-puerto-rico-fromblackouts?leadSource=uverifypercent20wall.Accessed9Dec.2023.

5 FinancialOversightandManagementBoardandKobreandKimLLP.“IndependentInvestigator’sFinalInvestigative Report.”August20,2018.https://oversightboard.pr.gov/debt/.

6 FinancialOversightandManagementBoard.“2023CertifiedFiscalPlanforthePuertoRicoElectricPowerAuthority.” June23,2023,https://oversightboard.pr.gov/fiscal-plans-2/

7 U.S.SenateJoinEconomicCommittee.“InvestinginPuertoRico’sCleanEnergyFuture.”November17,2023. https://www.jec.senate.gov/public/index.cfm/democrats/issue-briefs?id=DE690FF9-6785-49ED-AD9EDECC497836BB.

8 ChrisGalford.“LUMAEnergytakesoveroperationofPuertoRico’selectrictransmission,distributionsystem.”Daily EnergyInsider.June2,2021.AccessedNovember24,2023.https://dailyenergyinsider.com/news/30526-lumaenergy-takes-over-operation-of-puerto-ricos-electric-transmission-distribution-system/.

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10 Reuters.“HundredsProtesttoDemandPuertoRicoScrapContractwithPowerGridOperator.”Reuters,21July2022, www.reuters.com/world/americas/hundreds-protest-demand-puerto-rico-scrap-contract-with-power-gridoperator-2022-07-20/.

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19 DepartmentofEnergy,PR100One-YearProgressUpdate:PreliminaryModelingResultsandHigh-ResolutionSolarand WindDataSets,January23,2023,https://www.nrel.gov/docs/fy23osti/85126.pdf

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24 DepartmentofEnergy.“ReadoutofSecretaryGranholm'sRecentVisittoPuertoRico.”August4,2023.Accessed November24,2023.https://www.energy.gov/articles/readout-secretary-granholms-recent-visit-puerto-rico

25 EduardoBhatiaistheJohnLWeinberg/GoldmanSachs&Co.VisitingProfessorandVisitingLecturerinPublicand InternationalAffairsatthePrincetonSchoolofPublicandInternationalAffairs

26 https://www.energy.gov/gdo/PRFOA2023

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28 “WholesaleElectricityMarketStudiesandEngagementProgram.”Energy.gov,n.d. https://www.energy.gov/gdo/wholesale-electricity-market-studies-and-engagement-program

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30 DepartmentofEnergy.“FrequentlyAskedQuestions:GridResilienceFormulaGrantstoStatesandIndianTribesIIJA Section40101(d).”June21,2023.AccessedNovember24,2023.https://netl.doe.gov/sites/default/files/202306/40101dpercent20Frequentlypercent20Askedpercent20Questionspercent20Updatedpercent20ALRD percent207.pdf

31 DepartmentofEnergy.“FactSheet-GridResilienceStateandTribalFormulaGrants:PuertoRico.”2023.Accessed November24,2023.https://www.energy.gov/sites/default/files/2023-09/082123_Gridpercent20Resilience percent20Statepercent20andpercent20Tribalpercent20Formulapercent20Grantspercent20Fact percent20Sheet_Puertopercent20Ricopercent20English.pdf.

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33DepartmentofEnergy.“TransmissionFacilityFinancing.”Energy.gov,n.d.https://www.energy.gov/gdo/transmissionfacility-financing

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36 “EnergyEfficiencyandConservationBlockGrantProgram.”Energy.gov,n.d.https://www.energy.gov/scep/energyefficiency-and-conservation-block-grant-program

37“EnergyEfficiencyRevolvingLoanFundCapitalizationGrantProgram.”Energy.gov,n.d. https://www.energy.gov/scep/energy-efficiency-revolving-loan-fund-capitalization-grant-program.

38 DepartmentofEnergy.“Title17CleanEnergyFinancing.”2023.AccessedNovember24,2023. https://www.energy.gov/lpo/title-17-clean-energy-financing

39 DepartmentofEnergy.“Title17CleanEnergyFinancing.”

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56 Seesectiononfinancingformoredetails.

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58 ThisisaccordingtoaconversationwithmembersoftheGreenTrustBoardinOctober2023.

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64 SeeFundingDatabase

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70 CenterforNewEconomy.“PuertoRicoElectricPowerAuthorityUpdate.”September11,2023. https://grupocne.org/2023/09/11/puerto-rico-electric-power-authority-update/

71 InstituteforEnergyEconomicsandFinancialAnalysis.“FiscalplanforPuertoRico’selectricitysystemedgessomewhat closertoreality.”July5,2023.AccessedNovember26,2023.https://ieefa.org/resources/fiscal-plan-puerto-ricoselectricity-system-edges-somewhat-closer-reality

72 FinancialOversightandManagementBoard,2023CertifiedFiscalPlanforthePuertoRicoElectricPowerAuthority,June 23,2023,https://oversightboard.pr.gov/fiscal-plans-2/.

73 FinancialOversightandManagementBoard.“Statement:RenewablePPOAAmendedContracts.”September14,2023. https://drive.google.com/file/d/1QDsWzY0d6Jyr-a-PNykiZfPpuIhiDaGE/view

74 PuertoRicoEnergyBureau.“ResolutionandOrder:AppointmentofTranche2IndependentCoordinator.”January 27,2022.https://energia.pr.gov/wp-content/uploads/sites/7/2022/01/20220127-MI20200012-Resolution-andOrder.pdf

75 AccionGroup.“CurrentAccionGroupEngagements.”AccessedNovember26,2023. https://acciongroup.com/current-projects/.

76 FinancialOversightandManagementBoard.“2023CertifiedFiscalPlanforthePuertoRicoElectricPowerAuthority.” June23,2023.https://oversightboard.pr.gov/fiscal-plans-2/

77 DepartmentofEnergy.“NoticetoApplicantsonLPODeterminationofEligibilityforPuertoRicoProjectsApplying UndertheEnergyInfrastructureReinvestment(EIR)Program.”DOELoanProgramOffice.July21,2023. https://www.energy.gov/lpo/articles/notice-applicants-lpo-determination-eligibility-puerto-rico-projectsapplying-under

78 PuertoRicoEnergyBureau.“InformativeMotionRegardingUpdateonLUMAInterconnectionStudiesPolicy Change,AmendmenttoClosingDate,T1ProjectPermittingProcessandRequestforOrderDirectingLUMA toTakeSpecifiedActionstoMinimizeFurtherDelays.”February28,2023.https://energia.pr.gov/wpcontent/uploads/sites/7/2023/02/20230228-Informative-Motion-Regarding-Update-on-LUMAInterconnection-Studies-Policy-Change-Amendment-to-Closing-Date-T1-Project-Permitting-Process-andRequest-for-Order-Directing-LUMA.pdf.

79 PuertoRicoEnergyBureauandAccionGroup.“PREBRFPHomePage.”AccessedNovember26,2023. https://prebrfp.accionpower.com

80 OECD.“RecommendationoftheCouncilonPublicProcurement.”2015.https://www.oecd.org/gov/publicprocurement/OECD-Recommendation-on-Public-Procurement.pdf.

81 OECD.“RecommendationoftheCouncilonPublicProcurement.”2015.https://www.oecd.org/gov/publicprocurement/OECD-Recommendation-on-Public-Procurement.pdf

82VinaySharmaandFelipeGoya.“Re-bootingpublicprocurementtorevitalizethe'socialcontract'ofgovernance.”World Bank.June7,2021.https://blogs.worldbank.org/governance/re-booting-public-procurement-revitalize-socialcontract-governance.

83 “AsGridDecarbonizes,EnergyEfficiencyMoreCriticalthanEvertoReduceCosts|ACEEE.”n.d.AccessedNovember 25,2023.https://www.aceee.org/press-release/2023/06/grid-decarbonizes-energy-efficiency-more-critical-everreduce-costs

84“PuertoRicoEnergyPublicPolicyAct.”2019.https://bvirtualogp.pr.gov/ogp/Bvirtual/leyesreferencia/PDF/2ingles/17-2019.pdf

85 PuertoRicoEnergyBureau.2022.“RegulationforEnergyEfficiency.”March25,2022.https://energia.pr.gov/wpcontent/uploads/sites/7/2022/04/Reglamento-9367-Regulation-for-Energy-Efficiency.pdf

86 Ibid,pg.19.

87 “FederalIncomeTaxCreditsandIncentivesforEnergyEfficiency.”EnergyStar,2022. https://www.energystar.gov/about/federal_tax_credits.

88 “StateandCommunityEnergyProgramsProjectMap–PuertoRico.”n.d.DepartmentofEnergy.AccessedDecember 2,2023.https://www.energy.gov/scep/articles/state-and-community-energy-programs-project-map-puerto-rico

89 Sud,Rayan,andSanjayPatnaik.2022.“HowDoesPermittingforCleanEnergyInfrastructureWork?”Brookings.

https://www.brookings.edu/articles/how-does-permitting-for-clean-energy-infrastructure-work/.

90 Ricketts,Sam,ChrisBast,andHannahArgento-McCurdy.2023.“ImplementingAmerica’sCleanEnergyFuture.” CenterforAmericanProgress(blog).September14,2023.

https://www.americanprogress.org/article/implementing-americas-clean-energy-future/

91 Bozuwa,Johanna,andDustinMulvaney.n.d.“AProgressiveTakeonPermittingReform:PrinciplesandPoliciesto UnleashaFaster,MoreEquitableGreenTransition.”RooseveltInstitute.AccessedNovember25,2023.

https://rooseveltinstitute.org/publications/a-progressive-take-on-permitting-reform/

92 “NewYorkStateAnnouncesPassageofAcceleratedRenewableEnergyGrowthandCommunityBenefitActasPartof 2020-2021EnactedStateBudget.”n.d.NYSERDA.AccessedNovember25,2023.

https://www.nyserda.ny.gov/About/Newsroom/2020-Announcements/2020-04-03-NEW-YORK-STATEANNOUNCES-PASSAGE-OF-ACCELERATED-RENEWABLE-ENERGY-GROWTH-ANDCOMMUNITY-BENEFIT-ACT-AS-PART-OF-2020-2021-ENACTED-STATE-BUDGET

93 Granholm,Ryan,AmyAntoniolli,andJaneMontgomery.2023.“IllinoisStandardizesPermitLawsForSolarandWind EnergyFacilities.”January30,2023. https://www.natlawreview.com/article/illinois-enacts-new-law-tostandardize-local-permitting-renewable-energy-facilities

94 Malaiyandi–,Sangeetha.2023.“FinancialStrugglesinPuertoRicoBiteDeeperthantheRestoftheUnitedStates.” ConsumerFinancialProtectionBureau.July27,2023.https://www.consumerfinance.gov/aboutus/blog/financial-struggles-in-puerto-rico-bite-deeper-than-the-rest-of-the-united-states/

95 Coto,Danica.“EnvironmentalistsSuePuertoRicanGovernmentoverLocationofRenewableEnergyProjects.”AP News,14Aug.2023,apnews.com/article/puerto-rico-lawsuit-renewable-energy-projectsa8ff7b663d708227e84a43afde2cb612.

96 JuntadePlanificación.PlanDeUsoDeTerrenos,GuíasDeOrdenaciónDelTerritorio;PuertoRicoPlanning Board:SanJuan,PuertoRico,2015;p.220.

97 Santiago,Ruth,etal.“TheDevastatingCostsofPuertoRico’sSolar‘Farms.’”NACLA,17Feb.2022,nacla.org/puerto-

98 UnitedStatesDepartmentofAgriculture.2020.“2017CensusofAgriculture,PuertoRico(2018)IslandandRegional Data.”AC-17-A-52.

https://www.nass.usda.gov/Publications/AgCensus/2017/Full_Report/Outlying_Areas/Puerto_Rico/prv1.pdf

99 Rodríguez-Cruz,LuisAlexis,MayaMoore,andMeredithT.Niles.2021.“PuertoRicanFarmers’ObstaclesToward RecoveryandAdaptationStrategiesAfterHurricaneMaria:AMixed-MethodsApproachtoUnderstanding AdaptiveCapacity.”FrontiersinSustainableFoodSystems5.

https://www.frontiersin.org/articles/10.3389/fsufs.2021.662918.