Letter to PREPA, FOMB, Congress and PREBAMarch 22, 2021 Dear Mr. Padilla:
Your attention is called to the New Energy Partners’ (NEP) report dated December 30, 2020, filed by PREPA on March 15, 2021, with the Puerto Rico Energy Bureau (PREB) under PREB’s order in Case Number NEPR-MI-2020-0012 dated March 5, 2021.
As stated by NEP in their report, Montalva was “…removed from consideration in this round after confirmation of concerns raised by PREPA operations” with reference to “in this round” referring to Stage One. The above reference is from page 5 of the NEP report.
The disqualification of Montalva on the grounds and concerns raised in NEP’s report is ludicrous, improper and prejudicial both to the competitive ranking of Montalva being at least $175 million better than the second ranked project and $100 million better than the first ranked project, and to PREPA and PREPA ratepayers incurring the higher costs that will be incurred by not selecting Montalva as the highest ranked project and recommending its approval to FOMB.
This is equally true for the safety and reliability of operations provided by Montalva that are not provided by any of the other projects including microgrid support and reduced transmission and ancillary services requirements for having high DC/AC ratio and extended battery storage.
First and foremost, Stage One in the NEP report was listed as consisting of ”…six pass/fail gates…used to determine which PPOAs should be candidates to be approved for negotiation ranking order.” Montalva was disqualified from consideration for failing Gate 3 “Does the project fail PREPA’s interconnection criteria on its own, based on the S&L report.” The above reference is page 4 of the NEP report.
The Montalva project did not fail Gate 3 based on the S&L report. Quite to the contrary.
In fact, the S&L report states:
“If only Montalva is considered to interconnect onto Line 37100…a project size of 73 MW does not introduce any new thermal violations or worsen any existing thermal violations. This is true for any N-1, N-2, or N-1-1 contingency cases. A project size of 80 MW also does not introduce any new thermal violations with normal operations of the transmission system (no contingencies). The project also does not introduce new thermal violations or worsen any existing thermal violations for N-1 and N-2 contingency cases, however, S&L identified overloads for the N-1-1 contingency case of the outage of Line 37100 between the Acacias TC and the San German TC followed by the loss of a section of line east of the Montalva sectionalize…The output of the project would need to be curtailed in this event.”
The above reference is from page 29 of the S&L report.
By any stretch of interpretation of the S&L report, nothing in the S&L report warrants any disqualification of Montalva and in fact only references an overload of 7 MW under an extreme circumstance of an N-1-1 contingency. In fact, were this to occur in practice, there would be a large power outage to customers and the availability of Montalva would allow for continued service or quick restoration of power. A safety and reliability benefit offered by Montalva.
Specifically, the Montalva PPOA provides for curtailment of Montalva and curtailment is not a default under the PPOA by PREPA or an unanticipated event. This is standard practice.
NEP also acknowledges the above fact on page 9 and 10 of its report “Gate 3: Interconnection Concerns:” and states that it disqualified Montalva because it did not have adequate data provided by PREPA or S&L to evaluate the financial impact to PREPA under the PPOA for curtailment in the event of the identified N-1-1 event and having nothing to do with meeting minimum transmission criteria for consideration in the ranking of Stage Two.
In fact, the NEP report states:
“If a project, operating on its own, would be curtailed based on violations of N-1, N-2 or N-1-1 contingency tests, then it will be placed in the provisional category unless S&L can provide a number of the expected hours per year of curtailment for the projects, which would then be added to the costs in Gate 4.”
The above reference is from pages 9-10 of the NEP report.
Noteworthy, PREPA and S&L did a thorough and extensive interconnection and transmission study of Montalva and concluded that the proposed capacity of Montalva from between 100 and up to 165 MW would have to be reduced to 80 MW in order to meet all PREPA requirements and interconnection criteria. The limitation of 80 MW was established and imposed by PREPA and S&L, not PBJL. There was never any discussion of a limitation of 73 MW nor was PBJL aware of any 73 MW limitation or had PBJL even been asked to respond to any associated risks of generating at 80 MW. Also, including Montalva, there was also consideration of a second project connecting to Line 37100 in the vicinity of San German TC, which together with Montalva totaled 115 MW and both were recommended by PREPA, approved by the PREPA Governing Board and PREB.
In the extreme event that line outages or other outages could occur, the PPOA provided PREPA with contractual rights to curtail Montalva generation and that of other projects.
Also noteworthy is the discussion of curtailments in the section “Interconnection Test Contingency Violations” on page 13 and 14 of NEP’s report where NEP highlights the need to take into account the costs to PREPA for curtailments under the PPOAs. Although NEP concludes that it does not have the data to analyze costs of curtailment for Montalva, and therefore it is prudent to eliminate Montalva from further consideration, NEP makes several misjudgments in accessing the possible magnitude of costs to PREPA and the issue of spinning reserves to cover curtailments triggered by contingency events.
First, the magnitude of the N-1-1 event identified by S&L is only 7 MW and not the entire 80 MW of Montalva. Also, the 7 MW is depended on Montalva operating at full output which depends on the time of day, time of the year and cloud cover. In any evaluation, first and foremost is to perform a probabilistic assessment of the likelihood of occurrence of the event under consideration. To perform the assessment, you need to know statistically how often the simultaneous failure of two independent lines were to occur, the time of day of the occurrence, the time of year and the length of the simultaneous outage. You then need to assign the number of hours per year on average and the length of each curtailment. However, the PPOA allows curtailments by PREPA for Grid Events for up to 40 hours per year before any payment obligations start. However, the 40 hours are full capacity hours or curtailment hours based on all 80 MW as referenced in the PPOA as Equivalent Grid System Derate Hours. Thus, applying the 40 hours of full capacity curtailment allowance to 7 MW of curtailment would be equivalent to more 457 hours of curtailment before PREPA would have any monetary obligations to pay under the PPOA. NEP considers only 40 hours available to be applied to the curtailment.
Second, in reference to sheading 7 MW of output, there are also several mitigation measures available to avoid dependency on spinning reserves. Under the circumstance where the sheading of 7 MW may not be instantaneous enough to maintain load, and spinning reserves have been compromised, the most obvious is to limit the generation of Montalva to 73 MW when either of the two lines of a dual-line outage were to be out of service. Obvious to NEP’s evaluation is the lack of assessment of the likelihood that the events of concern could occur and when would future repairs will be made to the lines to eliminate the N-1-1 all together as being too remote to warranty any consideration. However, the lack of repairs and maintaining Montalva at no more than 73 MW when lines are compromised is not extreme and is reasonable mitigation until lines can be repaired and certainly does not rise to the magnitude of disqualifying Montalva from consideration, particularly when Montalva saves $75 million over the second ranked project in PPOA price alone and has a lower interconnection cost. Likewise, PBJL also offered PREPA to construct a PBJL owned line to the Guanica substation avoiding many of the concerns of interconnecting directly to Line 37100.
In conclusion, neither PREPA nor NEP had any justifiable reason to disqualify Montalva in Stage One and Montalva should have been evaluated in Stage Two using its correct price of $0.0884 per kwh and correct interconnection costs of $3.8 million. Disqualification of Montalva for a lack of data for the probability of an N-1-1 contingency, in order to assess possible economic impacts under the PPOA, is not prudent or reasonable. There has been no data to even justify the N-1-1. However, the $75 million of price savings alone, dwarfs these considerations.
Based on the facts available to PBJL, Montalva should have been considered in Stage Two and we continue to believe that Montalva is the superior project in all respects when compared to the approved projects and would provide significant increased reliability and cost savings to PREPA and PREPA’s ratepayers over the selected projects.
To that end, we renew our request that the correct data and economic advantages of Montalva be properly incorporated into PREPA’s and NEP’s evaluation and that PREPA submit a revised ranking to FOMB and the Puerto Rico Energy Bureau for their review and approval.
In the interim, we ask that PREPA suspend and delay execution of any PPOA’s with Xzerta Tec Solar LLC and CIRO One Salinas LLC until a corrected and revised evaluation can be resubmitted to FOMB and PREB for their input and approval.
Best
Jeff Ciachurski