petroleumworld

Petroleumworld`s
Opinion Forum:
viewpoints on issues in energy, international politics & civilization.

Sunday's
Feature

A bright spot in the Caribbean , but with a big price tag

NASA

The Caribbean at night

By Hector Hereter

Of the many pictures taking at night from NASA's International Space Station orbiting Earth many miles up, one spot in the Caribbean outstands for its brightness like a compact source of light that draws an almost perfect square among the other countries located in this region. Puerto Rico with its 3,500 square miles and with 4 million habitants outshines by far more populated areas such as Mexico City with a population of 24 million or Buenos Aires with 12 million habitants.

Electricity it is the source of this light that provides the power for the thousand of households around the island to keep a high standard of living in a comfortable environment of air conditioned, television in one end, and in the other; an industrial infrastructure able to work around the clock in the pharmaceutical and high-tech sector turning Puerto Rico into the world's seventh largest trading partner of the United States, with a $61 billion dollars in export/imports per year, a figure envied by many of the countries surrounding the Caribbean basin and Latin America.

But all this comfort and industrial capability sometimes encounters problems due to interruptions caused by electricity generating system failures.

“Puerto Rico for us has been a major success story since we arrived here more than seven years ago, but the major concern for us is to have a reliable power supply” said Chiqui Santos, manager of the Inkjet Cartridges, Americas Region Organization, for Hewlet-Packard Puerto Rico located in Aguadilla, in the northwest corner of the island.

“In order to keep our operations running without interruptions we were forced to make a major investment in assembling in location our own power plant ”, added Santos . “At HP we consider that all that financial resources could had been routed in expanding further our operations in the island, instead of investing in a costly in-house power plant”.

Hewlett-Packard Puerto Rico (HPPR) has expanded its manufacturing facility as part of a $100 million expansion of its printer cartridge operation. At the present the company have more than 500,000 square feet of space for manufacturing, services and administration. Hewlett-Packard has increased its labor force on the island from 409 employees to 1,800 during the past seven years.

For companies manufacturing products of high precision such as bio technical equipment, any variation in the voltage of electricity supplied could have catastrophic consequences because they depend on extremely calibrated machinery.

“What for anybody else could only be an annoying flickering of the lights while they are reading of watching TV, for us means that we have to go back and calibrate most of our components”, said Bartolmé Gamundi, vice president in Puerto Rico of Electro Biology Inc. and member of the Government of Puerto Rico's Committee to Support Science and Technology Development.

Electro Biology, located in Guaynabo , employs more than 150 that manufactures high precision medical equipment such as growth stimulator for mending non-fractured broken bones and swollen therapy control equipment. The operations in Puerto Rico contribute 30% of the $1.7 billions dollars annual sales of the company headquartered in New Jersey .

Multinational corporations are not the only to suffer from this power situation, small businesses, that conform more than 60% of Puerto Rico 's economy force also are affected severely by the sudden change in power supply. Because all these companies are heavily computers oriented, are the ones to suffer the must every time there is a voltage change in the electrical generation.

“Once I lost several of my client's accounting files because of the frequents blackouts here in the Trujillo Alto”, said Reynaldo Vázquez, president and owner of Accounting Services, a 12 year old accounting firm that provides services for more than 30 companies in the Grand San Juan Metro Area, from Carolina to Bayamón.

This situation is acknowledged by the central government under the administration of Governor Sila María Calderón.

A WORLD CLASS SERVICE

“We are striving very hard to change this situation”, said José A. Martínez Laboy, consultant for the Office of Strategic Projects and Infrastructure at the Fortaleza , the Puerto Rican governors residence. “Maybe we have problems, but if we compare ourselves with other South American countries, and even some areas in the United States , we are way high above their standards of power supplementation; we cover 98% of all households in the country, that's like saying that almost every body in the island has power supply.”

Another person that recognizes the different challenges facing Puerto Rico is Héctor Rosario, executive director of Puerto Rico Electric Power Authority (PREPA), that took charge of this agency in one worst time ever faced this agency, with a tight economic recession after the events of 9/11, hikes in the oil prices and labor unrest inside of PREPA.

“Overcoming the challenges of a difficult period for the global economy, the Puerto Rico Power Authority managed, after all, to consolidate its reputation as a world class energy supplier”, assured Rosario during an interview in the new PREPA'S executives offices in Santurce. “We have being able to reduce the amount of blackouts to a considerable 80.1% per year”.

Based on PREPA's annual report, the amount of blackouts was considerable reduce from more than 52 interruptions before 2001 to only 28 service interruptions, with a maximum duration of these interruptions was 46 minutes, with an average length of 13 minutes per client.

One challenge that faced Rosario as soon as he was designated to this position was to straighten the agency's financial numbers. During the first two years PREPA issued $1.42 billions in bonds, with a resulting $40.3 million in savings at present value. For that move PREPA received and A- “positive” and Baa1 classification by Standard and Poor's and Moody's Investors, respectively, that provided the agency with additional $515 million bond issuance to finance the Capital Improvements Program.

DIVERSIFICATION AND SAVINGS

That financial stability allowed PREPA to launch its Electric System Expansion's Strategic Plan. This plan is based on the diversification of the geographic locations of the principal power plants, which are concentrated on the northern and southern coasts, and the electrical system's expansion through a network of transmission loops, that will ensure services continuity during outages on atmospheric disturbances.

“One of the problems facing Puerto Rico 's power supply was the economic plans drawn during the fifties that betted all a major expansion in the southern coast of the island, but it never occurred”, pointed out Rosario . “Now our most important generators are in this location, forcing us to transmit it to the consumers through a complicated network of lines, with a consequent waste of energy”.

Stabilizing electricity prices has been another of Rosario 's top priority goals, since 72% of the generated power comes from burning hydrocarbons or fuel oil.

“In order to have some level of control upon the open market price instability and political recurrences in traditional suppliers such as Venezuela , we signed purchase agreements with the Brazilian oil company Petrobras América. Inc, which saved us some $9 million purchasing 10 million barrels of residual fuel oil”, added Rosario . “This agreement assured us a continuous and unaltered supply of fuel oil guaranteed under a preferential client clause that allowed us to stabilize the electricity prices our clients pay”.

This is why Puerto Ricans consumers have not seen a sharp increase in their monthly power bill if compared to prices they pay at the gas stations every time the fill up the tanks, where prices of gasoline have increased in more than 100% in less than two years.

Another of the reasons why PREPA was able to keep prices under control is due to the Clients' Fund which helps to alleviate the agency's clients' energy cost.

“Out of every dollar we are able to save through the sound management of cost and operations, we separate a portion that is accredited to this fund with more than $10 millions at present time”, said Rosario .

BACKBONE

PREPA's power infrastructure is considered by Rosario as the agency's backbone, and their main goal is strengthening day by day. There being an investment of $250 million in the construction of better power facilities throughout the island, creating 1,118 direct jobs.

Underground electrical power systems are being developed in urban centers in the San Juan metropolitan area, Mayagüez, Vega Baja and Ponce . The under-grounding of these lines not only provides a more esthetical view of the urban areas, but also secures the constant flow of power during serious atmospheric events such as hurricanes.

PREPA recently added new gas isolated substations (GIS) like Toa Alta's Barrio Piñas, a $7.2 millions investment. Electrical infrastructure has been completed in seven special communities, thus benefiting some 4,546 families through an investment of $4,058,436.

Rosario assured that each project developed by PREPA is designed to minimize electrical system failure and guarantee a constant energy supply to the entire island, including the island municipalities of Vieques and Culebra. For instance, the $10 millions submarine cable completed in 2003 between Vieques, Culebra and Naguabo reinforced the flowing of electricity to those islands.

POWER COGENERATION

Other of the goals established by previous administrations and followed by the present is the cogeneration of electricity by the private sector that relay in other energy sources but oil.

AES, a global company from the United States, that supplies power from coal and Liquefied Petroleum Gas (LPG), and Ecoeléctrica from Spain that uses Liquefied Natural Gas (LNG) at the moment are supplying 28% of all the power consumed in the island, calculated in more than 5,000 megawatts (1 megawatt provides electricity to 550 households) .

In the summer of 2002, additional 454 megawatts were streamed into PREPA grid by AES new plant in Guyama , which its energy source is coal imported from Colombia .

“Our fuel source has many advantages if we compare it with oil, because is a lot cheaper and more environmentally friendly”, said Neil Walington, Business Development Director for AES.

Walington informed that oil has proved to be a very expensive source of energy, but coal is more convenient since a ton only costs $2 dollars in the open market.

“We have proven reserves that will last for another 250 years, which allows us to exercise a tight control on its price levels, while oil is vulnerable to demand, price manipulation by brokers and political situations around the world”, said Walington.

Meanwhile, Ecoeléctrica have being operative in Puerto Rico since June 20, 2001 , generating 507 megawatts from gas-fired combined cycle power plant located in Peñuelas.

Ernesto Córdova, Ecoléctrical's General Manager in Puerto Rico , relates that until 1993, the island depended 99% on oil for producing electricity. But that same years many blackouts and the enforcement of laws for protecting the environment by the Federal Government, forced the local government to draw a new public policy to search and implement the use of new energy sources.

“Therefore, two years later, in March of 1995, PREPA and Ecoléctrica signed a contract to purchase power of approximately 507 megawatts”, said Córdova.

He added that one of the major beneficiaries by Ecoléctrica presence in Puerto Rico , is Puerto Rico 's environment itself, since the fuel used in Peñuelas is 99% methane and 100% sulfur free.

“Much of the contamination we see today around the world is because oil contains high levels of sulfur that is corrosive to the environment, while methane dissipates into the atmosphere with no major impact”, added Córdova.

By his part, Rosario of PREPA said that although there are other sources of energy like wind, solar or sea waves, they are no considered to be reliable and too expensive to implement for the time being.

“Our objective is to be a key player in the economic development of Puerto Rico by harmonizing the rational growth of our electrical system with the protection of the environment, and always guaranteeing the proper handling of this public corporation's funds”, insisted Rosario.

MUNICIPAL INITIATIVE

Senator, Juan A. Cancel, president of the Senate's Commission of Infrastructure, Technological Development and Commerce and vice president of the Commission of Federal and International Affairs, Banking and Consumers Affairs, informed that most of the initiatives for other sources of energy are conducted at a municipal level.

“We built in Carolina the first waste management recycling plant producing methanol that provides energy for a desalinization plant which provides drinkable water to the east coast of the island”, said Cancel.

When the desalinization plant started to operate the electricity bill was a big burden on its operational costs, but with the methanol provided by the recycling plant the costs were reduced significantly.

Carolina is the only one with two full operating plants, although Caguas uses a similar program and contracted the same consultants working in the Carolina 's plants.

INCENTIVES

Although Rosario affirms that PREPA is not looking to other sources of energy besides fuel oil, coal or natural gas, it is estimated that Puerto Rico is a leading country in the Caribbean region in solar energy for house water heating.

More than 45% of the houses in the island have installed a water heating solar system that saves the end user a 15 to 20% on their monthly electricity bill plus a considerable reduction at the end of the year by tax deduction. But this incentive program is not supervised by PREPA but by Puerto Rico 's Treasury Department (Hacienda), entity that provides a one time only cut to the taxpayers.

Other forms of energy have been studied in Puerto Rico , but the official sector has not drawn a aggressive program in pursuing the implementation of those sources of energy.

Among these sources are:

• Nuclear Power

Nuclear power is an alternative energy source that can be obtained from either the splitting of the nuclei of atoms (nuclear fission) or the combining of the nuclei of atoms (nuclear fusion). In either of these two reactions, great amounts of energy are released. Nuclear power plants use a device called a nuclear reactor in which uranium or plutonium atoms are split in controlled fission reactions. The heat energy released is captured and used to generate electricity. As of 1997, there were 109 operating nuclear power plants in the United States . France relies on nuclear power for more than 70 percent of its electricity production.

Although nuclear power is a clean, cheap, and relatively safe means of providing energy, public concern over safety issues has brought the construction of new nuclear power plants to a virtual halt in the United States . The nuclear accidents at Three Mile Island in Pennsylvania in 1979 and at the Chernobyl nuclear power plant in Ukraine in 1986 (in which a large amount of radioactive material was released into the atmosphere) prompted fears of similar disasters occurring elsewhere. In addition, there is the problem of storing radioactive nuclear waste safely so that it does not pose a threat to humans or the environment.

• Water Power

The power of moving water, or hydropower, is a clean and efficient means of generating electricity. Water falling through dams powers water turbines that are hooked up with electric generators. The energy is then distributed across vast electrical networks. Canada , the United States , and Brazil lead the world in hydroelectricity production. The building of dams has an environmental impact, however, causing flooding of land above the dams and disrupting the normal flow of water below them, which can affect the natural ecosystem of a river.

• Wind Power

Wind power is one of the earliest forms of energy used by humankind. Windmills were used on farms in the early part of the twentieth century to pump water and generate electricity. Now considered an alternative energy source, wind power is being harnessed by modern windmills with lighter, stronger blades. But paradoxically this form of energy has encountered resistance among some environmental NGOs because they claim that the big blades are a hazard to bird emigration.

• Solar Power

Solar power, or energy from the sun, is a free, abundant, and nonpolluting source of energy. Solar energy can be used to heat buildings and water and to produce electricity. However, the sun does not always shine, and the process of collecting solar energy and storing it for use at night and on cloudy days is difficult and expensive.

• Geothermal Energy

Geothermal energy is the natural heat generated in the interior of Earth and released from volcanoes and hot springs or from geysers that shoot out heated water and steam. But Puerto Rico lacks that type of reservoirs.

• Tidal and Ocean Thermal Energy

The rise and fall of ocean tides contain enormous amounts of energy that can be captured to produce electricity. In order for tidal power to be effective, however, the difference in height between low and high tides needs to be at least 20 feet ( 6 meters ), and there are only a few places in the world where this occurs. A tidal station works like a hydropower dam, with its turbines spinning as the tide flows through them in the mouths of bays or estuaries (an arm of the sea at the lower end of a river), generating electricity. By the end of the twentieth century, tidal power plants were in operation in France , Russia , Canada , and China .

• Biomass Energy

Certain biomass (the sum total of living and dead plants, animals, and microorganisms in an area) can be used as fuel to produce heat energy. Wood, crops and crop waste, and wastes of plant, mineral, and animal matter are part of the biomass. The biomass contained in garbage can be burned to produce heat energy or can be allowed to decay and produce methane (natural gas). In western Europe, over 200 power plants burn rubbish to produce electricity. Methane can be converted to the liquid fuel methanol, and ethanol can be produced from fermentable crops such as sugar cane and sorghum. Adequate air pollution controls are necessary when biomass is burned to limit the release of carbon dioxide into the atmosphere. Some autonomous municipalities such as Carolina and Caguas have designed some programs for garbage recycling, but to the high cost of such plants, many are questioned about its benefits compared to their operational costs.

• Energy Conservation

Energy conservation plays an extremely important role in reducing unnecessary energy consumption. Improving energy efficiency is the best way to meet energy demands without adding to air and water pollution. Designing gas-saving automobiles, using fluorescent lightbulbs, recycling, raising the setting for house air conditioners, improving the efficiency of appliances, and properly insulating buildings are some of the ways energy can be conserved.

For UPR's Geology professor José Molinelli, energy conservation is vital among the other forms of providing electricity in Puerto Rico , but so far, he considers, the past administrations have done almost nothing to educate the population in how to save this resource.

“We don't have to invest so much in developing new infrastructure, just by encouraging our citizens to be more energy efficient, is enough to reduce considerably our dependency on costly energy sources”, says Molinelli

He proposes to construct less boxy houses and office buildings that depend less on air conditioned and take advantage of or constant tropical breeze. He adds that the air conditioned dependency fosters another health problems, mostly on children, because of what is known as the sick building syndrome, turning to be a source of bacterial and viruses growth.

With some simple planning and ingenuity Puerto Rico can save millions of dollars”, said Molinelli. “Instead of everybody being released at the same time from their jobs, we can have different intervals for the workers to arrive and leave their working sites”.

He considers that the ELA's policy of constructing more highways or widening the existing ones and the continually supplying the demand have failed due to the political factor involved. “Every time somebody proposes an alternative, there is another one defending some specific interests, either private or political, that kills that proposition even before is born”, said Molinelli.

Héctor Héreter is an independent Public Relations/Affairs consultant with an extensive experience in global affairs, particularly those concerning Latin America ( hereter@hotmail.com ). Petroleumworld does not necessarily share these views.

Editor's Note: This is article was specially written for Caribbean Business ( San Juan, Puerto Rico). Petroleumworld reprint this article in the interest of our readers.

All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld. All comments expressed are private comments and do not necessary reflect the view of this website. All comments are posted and published without liability to Petroleumworld.

Fair use Notice: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of environmental and humanitarian significance. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.

All works published by Petroleumworld are in accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. Petroleumworld has no affiliation whatsoever with the originator of this article nor is Petroleumworld endorsed or sponsored by the originator.

Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.

Internet web links to http://www.petroleumworld.com are appreciated

Petroleumworld welcomes your feedback and comments: editor@petroleumworld.com. By using this link, you agree to allow E&P to publish your comments on our editor's letters page.

Petroleumworld News 08/24/08

Copyright© 2008 respective author or news agency. All rights reserved.
We welcome the use of Petroleumworld™ stories by anyone provided it mentions Petroleumworld.com as the source. Other stories you have to get authorization by its authors.