Puerto Rico Keeps Getting Hammered By Political Storms

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Puerto Rico is located 1,000 miles due east of Florida. It is bounded by the Atlantic Ocean on the north and east and by the Caribbean Sea on the south and west. Following the Spanish American War, control of the island passed to the United States. Today, it remains the only commonwealth in the US — an anomaly that has bedeviled the island ever since.

In 1917, the Jones Act made all residents of Puerto Rico US citizens, but it also mandated that all shipping to and from the island take place in US-flagged ships. That provision means that the cost of just about everything that is imported to the island is higher than it would otherwise be.

Geographically, Puerto Rico has low coastlines known for extraordinary beaches, but the interior is comprised of mountains that are virtually inaccessible by anything short of goats and sheep. All the electrical generating stations that serve the island are located on the south coast. From there, the electricity is distributed by antiquated transmission lines that cross the rugged terrain in the island’s interior.

Thanks primarily to how inaccessible those power lines are, maintenance over the years has been generally lacking. When Hurricane Maria devastated the island in 2017, most of its electrical distribution infrastructure was destroyed. At the time, the US administration hired a two-person firm called Whitefish Energy located in Montana to repair the damage. The primary qualification Whitefish Energy had for the job was its friendship with Ryan Zinke, a former head of the US Department of the Interior.

The collapse of the grid in Puerto Rico after Maria made it painfully obvious that the island — like most islands — would be best served by a decentralized assemblage of rooftop solar systems, microgrids, and distributed energy resources. But the US government has insisted on rebuilding the central grid so thermal generation from burning fossil fuels can continue ad infinitum.

IEEFA Rooftop Solar Report

A report by the Institute for Energy Economics and Financial Analysis in September found that more than 10 percent of electricity consumption in Puerto Rico now comes from rooftop solar power. According to private grid operator LUMA Energy, approximately 1.2 gigawatts (GW) of residential and commercial rooftop solar had been installed under Puerto Rico’s net metering regulations as of June 2025.

IEEFA estimates those rooftop systems will produce more than 1.8 GWh of electricity annually. That figure does not capture off-grid systems, which suggests the true amount of electricity provided by solar on the island is probably higher. Over the past 12 months, about 3,200 residential and commercial solar systems have been added to the grid per month. The graph below shows how residential and commercial rooftop solar capacity has quintupled in just the last four years.

Credit: IEEFA

The reliability of the Puerto Rico grid has gotten worse in recent years, IEEFA says, with metrics for the frequency and duration of transmission and distribution system outages worsening from fiscal years 2023 to 2025. Those metrics are many times worse than the US average, which is why more than 80 percent of residential and rooftop solar systems on the island have backup batteries.

A LUMA program compensates customers who allow those batteries to support the grid. In July of this year, LUMA was able to call on these resources to dispatch an average of about 40 MW of power during times of peak demand or blackouts.

The are now 163,000 rooftop solar systems on the island, some of which are part of community solar programs. IEEFA says that is proof that residents are looking for ways to decouple from a grid that has been unreliable for decades. People did not have access to rooftop solar systems until recently, but now that they do, the number of people generating their own electricity is skyrocketing.

However, the government of Puerto Rico is doubling down on centralized generation. “Instead of planning and facilitating the installation of rooftop solar systems and bolstering the island’s resiliency to future severe storms, the government has announcement an RFP for 3 GW of large-scale power generation favoring LNG.” That proposal “would lock the people of Puerto Rico into decades of centralized infrastructure and price-volatile fossil fuel imports,” IEEFA claims.

Puerto Rico & NEPA

Earlier this month, Judge Jay Garcia-Gregory, of the US District Court for the District of Puerto Rico, ruled the Federal Emergency Management Agency (FEMA) failed to consider alternatives to fossil fuels when considering how to restore the decrepit utility grid on the island. The ruling said FEMA had acted in violation of the National Environmental Policy Act, according to Politico.

“The record clearly shows that renewable energy alternatives were reasonable and feasible,” said the judge, who added he was “not persuaded” by FEMA’s claims that it did not have to consider renewable energy projects that weren’t presented by project applicants seeking funding from the agency. “Adopting this argument would effectively allow an agency to bypass NEPA’s requirements merely because an applicant did not provide alternatives,” he said.

While rooftop solar is gaining acceptance on the island, the typical rooftop solar and battery storage system costs around $30,000. The average household income in Puerto Rico is $25,000, according to E&E News. During the same week of the federal court ruling, the Department of Energy announced it would reallocate $365 million away from solar technology and use it to improve the central grid. The move is in line with the offensive against renewable energy being promoted by the current administration.

The Oversight Board Is Gutted

While all this is going on, Andrew Biggs and David Skeel, Jr have penned an op-ed in the New York Times excoriating the administration for continuing to punish Puerto Rico for sins it didn’t commit. Biggs is an expert on public pension plans and Skeel is an expert in bankruptcy law. Both served on Puerto Rico’s financial oversight board, a seven-member organization that is now down to one member after the Moron of Mar-A-Loco fired the other six.

That board has only one major task left — restructuring the Puerto Rico Electric Power Authority, known as Prepa. After decades of mismanagement and neglect, it is in dreadful shape, Biggs and Skeel wrote. Grid failures are so common, the rapper Bad Bunny immortalized them in a song.

Bondholders — including a prominent hedge fund, bond insurers, and mutual funds — are demanding full repayment of principal plus interest, for a total of about $12 billion. That could require sharply raising rates for consumers. “But Puerto Rico’s electricity rates are already among the highest in the country, and its median household income is just half that of Mississippi, the poorest state in the union. After concluding that full repayment would burden Puerto Ricans and hamper efforts to repair the dilapidated energy system, the oversight board decided that Prepa could repay only a small fraction of the total,” they said.

The White House, which has not yet replaced the six fired members, claims the oversight board is inefficient, but there are fears the new appointees will favor the creditors. “Such an arrangement would echo past colonialist blueprints in their most offensive, extractive forms,” Biggs and Skeel said.

“Throughout the imperialist era, Western powers used gunboat diplomacy to force debtor nations to repay their obligations. In 1881, Britain and other European powers effectively took control of many of the Ottoman Empire’s revenue streams to ensure repayment of loans made by European creditors. The United States did something similar in the Dominican Republic in 1905, installing federal officials in the customs office to force repayment of debt.

“As disgraceful as these episodes were, a takeover of Puerto Rico’s financial board could be worse. [The oversight] board members have a legal and fiduciary duty to represent Puerto Rico’s bankrupt institutions and, by extension, the people of Puerto Rico. The board must seek the most favorable terms for Prepa and Puerto Rico before a federal judge overseeing the case. Bondholders themselves are represented before the judge, as they should be. But appointing board members who would operate as proxies for the island’s creditors would make a sham of the process.”

Those bondholders have argued that Prepa’s debts should be paid using money from Puerto Rico’s government, which played no part in the loan transactions. That is a “tacit acknowledgment that Prepa cannot afford to pay its own debt. To put Puerto Rico’s taxpayers on the hook for billions that they did not borrow and do not owe is both unfair and saps crucial resources that should be earmarked for the island’s economic recovery,” Biggs and Skeel wrote.

“If the board were to lose its independence, and lobby on behalf of the island’s creditors instead of its inhabitants, Puerto Rico could find itself right back in the financial morass that forced Congress to intervene nearly a decade ago. The consequences for Puerto Ricans are almost too depressing to contemplate.”

Given the bizarre and tumultuous political and financial history of Puerto Rico — which is a litany of corruption and self dealing — any investor should know the odds of being paid in full are dismal at best. The best thing that could happen for the people of the island would be for all that lovely money to be invested in localized renewable energy and battery storage so they can finally break free of a failed electrical grid that has been an albatross around their neck for generations.