I've been absent from this board for a while for various reasons. I'll start by saying I'm here not to judge or bash anyone and won't participate in any of that. I'm here to learn and better understand my investment in GRB and take advantage of the unique opportunity to tap into Jeff's vast technical knowledge of the renewable industry. I thought of just emailing Jeff personally but I think there are many other silent stockhouse members that would enjoy reading his response. So Jeff, If you are able to, I would really appreciate your thoughts on a few topics concerning the RFP and the current state of the grid.
There was an interesting article published in April titled:
"Puerto Rico weighs options for expanding renewable power, hardening grid" Under the heading "PREPA'S 10 year plan" the article says:
PREPA announced on 28 January 2021 a request for proposals (RFP) for 1 GW of PV capacity and 500 MW of battery storage, which would be the first of six solicitations over the next three years.
The RFP is superficially impressive because, if implemented, it would create one of the largest battery story operations in the world. For a sense of scale, the entire US electricity grid had just 1.03 GW of storage as of the end of 2020, and Tesla's highly publicized solar-plus-battery project in Australia that began operation in July 2020 has storage capacity of 150 MW.
But it's a tall order for a utility that has been almost exclusively focused on fossil fuel power. "To outsiders, it might seem like PREPA is going to do something big," said Wilson. "But it's … traditionally [been] anti-renewables and has never done much in energy efficiency. We are waiting to see the results here."
In fact, there are early signs are that the RFP is less than it appears to be. For example, despite saying that it is soliciting for 1 GW (1000MW) of renewable power, PREPA stated that the grid can support only 650 MW of new renewable capacity unless transmission lines and control systems are upgraded — expenditures not yet approved.
I believe you mentioned before that the grid cannot support all of the renewable projects so this is not new information to us. In my opinion, this was why it was so important to get selected as one of the 150mw projects, or be approved in the ongoing first tranche 1GW (1000mw) RFP. However, what most of us on this board might not realize is the amount of time it will take to rebuild the grid to handle this huge capacity.
In a new report released this week by Sargent & Lundy titled "Plan To Address Longer-Term Integration Issues" it states on page 4, topic #3 Distribution Model:
"Gathering the data to model the distribution system... will take more than four years to complete. Without a model... integration of future resources at the distribution level is not possible."
The report seems to make it clear that the current grid is in a severe state of disrepair and will not be able to handle the massive amount of renewable projects slated to be developed under the first tranche of the RFP, let alone the sixth.
It appears that PREPA/PREB is putting the cart before the horse and will be approving a huge amount of renewable projects 4+ years before the grid can even accomodate them.
And the current RFP process appears to be experiencing delays and issues causing confusion amongst proponets as brought out in this letter to the PREB:
RFP ISSUES
The deadline to submit bids has already been extended from May 3rd to May 28th and SESA would like to see PREB extend this even further to the end of June.
SESA also lists 3 issues that are causing bidders great difficulty:
-lack of availability of MTR's
-excessively high Performance Security requirements
-excessively high Performance Bond requirements
So Jeff, I know you and your team have quite a bit of experience submitting RFP's.
Does this RFP process seem a little bit of a disaster to you, perhaps a little rushed and not quite ready? (The first tranche seems to be an "experiment" (my words) and PREB requires PREPA to provide a progress update to them on tranche one so they can make improvements on tranche two. PREPA is past due on this report and requested an extension to Aug 31. Extension Request . This was shot down by PREB and is now due on June 15. Extension Granted )
Also any comments on the 3 issues raised by SESA? Is this to our advantage if other bidders cannot meet these requirements or is there a reason they are so high?
And one more question. Since the current grid can only support 650mw of new projects, do you feel a sense of urgency to get Montalva approved and built asap or do you think the grid can be built out in conjuction with new renewable projects? Waitng 4+ years would be tough on shareholders.
From my point of view PREPA is overwhelmed and struggling to keep up. Perhaps Luma will do a better job when they take over, unless they hire the same PREPA employees. The grid is so dated it's just not capable of rapid adoption of renewable projects without massive funding (which I believe they have through FEMA) and years of work. Without your experience and educated opinion on the grid and insight into PREPA's RFP process it's tough not to expect ongoing delays with Montalva.
What I'm banking on is your knowledge and preparedness when it comes to RFP's and the fact that Montalva is shovel ready so we can avoid some of the issues the other bidders are having with MTR's etc and we'll breeze through the RFP, be one of the first to build, and secure a place under the so called "650mw" of crappy grid capacity.
Any insight would be appreciated. Thanks.