Federal Department of Energy Offers Financing for Large-Scale Solar Projects in Puerto Rico, but Highlights Role of Private Capital

Although he Federal Department of Energy (DOE) has held talks with the 10 private developers of the first round of large-scale solar projects, with a view to offering them financing for the construction of the works, the head of the Loan Program Office (LPO), Jigar Shahwarned that the expectation is that, during future sections, proponents will resort to private capital.

“Our goal is to build trust between the different actors, so that we attract more capital from the private sector to Puerto Rico. We see ourselves as a bridge to the future; “The goal is not to be the main source of financing forever,” Shah said.

The federal official explained that the Reinvestment Program in Energy Infrastructure – one of the initiatives under the LPO – allows the DOE to make loans to projects that aim to replace fossil energy sources with renewable alternatives.

Under the first tranche or “tranche” of acquisition in accordance with the Integrated Resource Plan (PIR), he Energy Bureau (NEPR) gave way to 11 solar energy initiatives in the hands of 10 proponents, since Clean Flexible Energy – a subsidiary of AES – owns two projects. All these investments are accompanied by five battery energy storage proposals.

LPO financing can cover 80% of eligible costs, Shah said, at an interest rate equivalent to the rates set by the Treasury Department American plus 0.375%.

“The loans have to be repaid, so there is no forgiveness, but we are willing to take risks that, perhaps, a private bank would not take,” stated the director of the LPO.

Obstacles with the first section

The 11 photovoltaic and five battery projects must have an interconnection agreement with LUMA Energy on or before November 30, but, as of last week, only four proponents had signed the document with the consortium.

The president of the Governing Board from Electric Power Authority (AEE), Francisco Berrios Portela, acknowledged that increases in costs, compared to initial projections, have complicated the negotiations. The NEPR, in recent months, determined that developers would not assume the differences that would have occurred as a result of factors such as inflation.

“Loans are just that, they are not a magic wand. But I would say that because we do all the due diligence for the loans, we can close the trust gap between the Fiscal Oversight Board (JSF), the NEPR and the developers. There are many parties that do not trust each other,” said the federal official.

Shah could not say whether all the developers of the first “tranche” had applied for a loan with the LPO or how many have been approved, stating that this is confidential information. According to the contractually stipulated dates, all projects must be built and supplying energy to the grid between September and November 2025.

“I can’t say which ones are applying, but we have contacted all 10 (developers) and we are meeting with all of them this week,” he said. In an interview with this newspaper during her visit to Puerto Rico at the beginning of the month, the Secretary of Energy, Jennifer Granholmstated that “almost all” the designers had requested a loan with the LPO.

In September, the Board gave way, with certain conditions, to amendments to the power purchase contracts between PREPA and the 10 developers, but he pointed out that they implied a 34% increase in costs compared to the original agreements. However, Shah stressed that, despite the amendments, the price will continue to be “competitive” for consumers.

“We believe that, as the loan is extended, (the projects will provide) some of the cheapest energy in Puerto Rico”, he opined. The “Tranche 1” power purchase contracts extend until 2047.

The NEPR, according to the PIR, must complete six rounds of procurement, as part of the effort to meet the renewable energy portfolio required by law.