There are several key benefits achieved, for both individual islands and the region, by interconnecting the islands into a regional grid. In short, they are:
Reliability
The amount of renewables required to significantly reduce dependence on imported fossil fuels will require many measures to mitigate the variable capacity impact of these renewables and grid frequency implications, manage the balance of dispatchable and non-dispatchable generation, as well as promoting demand-side management. If each individual island were to attempt to accomplish this on its own, the investment required to provide system reliability would be more costly, and far more difficult than it would be if they were able to leverage the grid resources of other islands. The ability to shift load and supply, share spinning reserve and standby generation, and provide autonomous stability control among multiple participants will provide more flexibility and capability for the utilities managing the impact of renewables.
Economics
In a market-based grid environment, there are several significant benefits achieved by interconnecting the Caribbean Islands:
- Maximizing penetration of lower-cost renewable technologies
- Investment cost avoidance for standby/reserve generation. By utilizing the excess generation capacity of other islands, utilities can achieve their same reliability goals while avoiding the costly and unnecessary duplication otherwise required to build and maintain excess generation – reducing total investment and delivering savings for ratepayers. At the same time, utilities with excess generation will be able to increase revenues by selling that into the market.
- Enabling market based investment. Under a common regional market framework, the Caribbean grid will create the opportunity for meaningful investment in the region that leverages the respective strengths of each island. For example, islands rich in geothermal resources that have the ability to produce more than they consume will be able to bid into the grid their excess capacity, utilizing “benefits of scale” to attract the type of investment needed for economic geothermal development. This same principle would apply to other islands and technologies that have the ability to produce more than they consume. Additionally, the ability to monetize ancillary benefits such as frequency regulation and “renewables firming” can further provide benefit to the economics of the system.
- Benefit to regional economies. One of the consequences of lower-cost/more reliable energy is the positive impact on the attractiveness for investment for manufacturing and other production industries. The appeal of the relatively lower cost of labor in the region has been offset by the higher cost of energy and lower reliability, facts that force industry to look elsewhere to invest. One of the most impactful elements of the proposed regional system is the macroeconomic benefit to the economies of the region; the potential for market transformation cannot be understated.
- Protection and growth of the energy labor force. Puerto Rico currently has an excess capacity of generation and these underutilized assets threaten the current stability and growth of PREPA’s labor resource pool. By creating additional demand for electricity, these assets would be better utilized, thereby solidifying existing jobs. The opportunity to grow the installed generation base for export will consolidate job growth for this sector.