The Electric Power Authority (PREPA) expects that the conversion, from oil to natural gas of units 5 and 6 of the San Juan plant may generate between $ 325 million and $ 380 million in savings over a five-year period.
In theory, these savings would help to lower electricity rates.
However, the problem is that a good part of those funds would have to be used to pay the private firm managing the project, to cover the expenses of the conversion of the units, as well as the construction of the tanks and the port infrastructure that needed to dispatch that fuel.
So far, 14 companies have shown interest in the San Juan Power Plant project.
Fernando Padilla, director of PREPA’s Office of Restructuring and Fiscal Affairs, said yesterday that it is still not clear what the economic balance of the transaction during the first years will be. The matter will depend on the proposals made by interested companies.
However, he explained that the initiative entails relatively few risks from the economic point of view. He said that fuel cost projections reflect that, even with natural gas prices rising significantly, there would be a financial scenario similar to that with the use of diesel at its cheapest value.
"The Authority will not enter into a capital investment. The cost of the investment will come from the proponent. The idea is that, in a five-year period, they can recover the investment with profits ", said, on the other hand, Jaime Umpierre, Generation director at the public corporation.
These expressions came during a visual inspection of the House Committee on Economic Development, Planning, Telecommunications, Public-Private Partnerships and Energy, at the San Juan Power Plant.
Currently, the use of diesel in units 5 and 6 sets production costs at 13 cents per kilowatt-hour. The expectation is that, with this project, that cost will be reduced to about 8 c/kwh. It is a production cost similar to that of the Costa Sur Power Plant, in Guayanilla, which operates with natural gas.
This does not imply that citizens would see a decrease in the same proportion in their bill, since, to calculate how much PREPA charges its customers, it is necessary to consider the production costs of its other plants, as well as the cogenerators AES-PR and EcoEléctrica.
With the changes, PREPA would retain the capacity to use diesel in units 5 and 6, so that if fuel prices change, they would have that option.
However, the use of natural gas would be preferable because it is a less dirty fuel that would help PREPA to comply with the Mercury and Air Toxics Standards (MATS).
The improvements would be made in the most modern units of San Juan Power Plant, since they were built in 2008. The rest of the equipment in this plant dates from the 1960s, Padilla said.
"PREPA’s Cadillacs are the (units) 5 and 6 of San Juan, which are the most efficient, together with the EcoEléctrica units. Right now, the units operate with diesel, which is quite clean, but more expensive than Bunker C and natural gas," said Padilla.
To questions of representative Victor Pares - chairman of the Commission - Umpierre explained that, for the conversion of the units, some external components would have to be changed, mainly to accommodate the flow of natural gas in the equipment, including combustion. These changes would simplify the process because the units’s generator or turbine would not have to be altered.
In total, it is estimated that the investment for the units to operate with natural gas would be $ 20 million. Another investment, not specified, would be needed to take natural gas from the ships to the PREPA plant, which would involve the construction of tanks and port infrastructure.
On Thursday, the orientation period ended for the 14 companies that showed interest in the initiative, which is currently in the process of requesting proposals. PREPA intends that, by November 23, the project will be granted, so that the selected company can begin its work quickly.