Puerto Rico’s energy sector has entered a period of rapid transformation, one shaped by ambitious renewable targets, regulatory momentum, and the growing need for infrastructure resilience. The island faces both critical challenges and unprecedented opportunities. From comprehensive energy planning to high-stakes M&A and public-private infrastructure investments, Puerto Rico is crafting the blueprint for a more secure and sustainable energy future.
In this piece, we explore the latest policy shifts, procurement challenges, infrastructure updates, and legal frameworks shaping Puerto Rico’s energy and infrastructure landscape. These developments are particularly relevant to stakeholders navigating energy M&A, project finance, and public policy in Puerto Rico.
The Legal Framework: A Foundation for Energy Transition
Two landmark pieces of legislation,Act 57-2014 (RELIEF Act) and Act 17-2019 (Puerto Rico Energy Public Policy Act),anchor Puerto Rico’s energy transition. These laws set the statutory foundation for a decarbonized, diversified, and resilient energy grid, mandating 100% renewable energy generation by 2050.
Central to this framework is the Integrated Resource Plan (IRP), a 20-year roadmap developed and regulated by the Puerto Rico Energy Bureau (PREB). The IRP lays out a phased approach to grid decarbonization through renewable procurement, battery energy storage system (BESS) deployment, and the retirement of outdated fossil fuel infrastructure.
However, implementation remains complex. The PREB’s October 2024 Order (NEPR-AP2023-0004) highlighted over 100 loss-of-load events and denied LUMA Energy’s request for delay in submitting the 2025 IRP, underscoring the urgency of addressing the island’s generation gaps. These operational pressures have reshaped the energy procurement schedule and raised questions around long-term grid reliability.
Procurement and Planning: M&A Opportunities in a Shifting Market
The IRP originally envisioned six tranches of renewable energy and battery storage procurement, with aggressive MW targets through 2023. Yet, delays in permitting, financing, and developer participation, particularly in Tranche 3, have underscored systemic barriers to execution.
In response, PREB and LUMA consolidated procurement goals into Tranche 4, with bids were due in November 2024. Early filings revealed modeled scenarios for future energy demand, potential retirements (including AES coal-fired units by 2028), and proposals for biodiesel conversions. Notably, 578.8 MW of solar PV and 710 MW of BESS are currently in development under Tranche 1 and ASAP (Accelerated Storage Addition Program).
From an M&A perspective, these procurement cycles are catalyzing opportunities for project consolidation, strategic investment, and technology integration. As federal funding flows in, such as $1.2B from the U.S. Department of Energy (DOE), developers and investors alike are evaluating joint ventures, acquisitions, and long-term PPA structures that align with Puerto Rico’s clean energy mandate.
Infrastructure Reliability: Bridging the Generation Gap
Despite progress, the island’s grid remains fragile, with average reserve margins falling below the 750 MW threshold in early 2024. The grid’s over-reliance on aging fossil fuel units has resulted in blackouts, brownouts, and increased public scrutiny of LUMA and PREPA’s performance.
Public-private partnerships (P3s) have emerged as critical tools in addressing generation shortfalls. For example, the Puerto Rico P3 Authority’s agreement with Energiza LLC to develop an LNG-to-hydrogen convertible power plant reflects a hybrid approach to grid stabilization while supporting long-term decarbonization.
Meanwhile, transmission and distribution (T&D) upgrades continue through LUMA’s federally backed repair programs. Yet, integration of distributed energy resources (DERs) and microgrids remains limited, highlighting the need for regulatory modernization and investment coordination.
The Rise of Battery Storage: A Cornerstone of Energy Resilience
The role of battery energy storage systems (BESS) cannot be overstated. As solar and wind penetration increase, BESS ensures dispatchability, voltage support, and peak demand responsiveness. The PR100 Study, led by the U.S. DOE, projects thousands of MWh in required BESS capacity for Puerto Rico to reach its 2050 clean energy target.
In 2024, PREB approved ASAP, LUMA’s two-phase initiative to rapidly integrate 360 MW of BESS, prioritizing low-barrier sites. Projects like Convergent Energy’s 100 MW solar + 55 MW storage array and Pattern Energy’s standalone battery ventures offer templates for scalable storage implementation, driven in part by DOE incentives.
Still, cost and regulatory friction persist. Long-term investment certainty, including tariff design, grid interconnection rules, and permitting reforms, will be vital to sustaining BESS development and maximizing its value for investors and consumers.
Energy Equity and Policy Shifts Under the New Administration
Under the administration of Governor Jennifer González, energy has been elevated as a state priority. Her appointment of Josué Colón as “energy czar” and head of P3A reflects a hands-on approach to stabilizing and reforming Puerto Rico’s energy system. A 12-member advisory board has issued recommendations (some of which have already been implemented) including:
- Streamlined permitting for energy projects
- Expansion of PREB’s regulatory authority
- A controversial proposal to eliminate interim renewable targets (40% by 2025, 60% by 2040)
These developments signal a shift toward pragmatic centralization and investment acceleration, but raise concerns about transparency and long-term policy consistency. For M&A players, navigating this environment will require close attention to evolving regulatory priorities, especially in the context of IRP execution and energy equity initiatives.
The Net Metering Debate: Financial Sustainability vs. Solar Expansion
Net metering has fueled Puerto Rico’s distributed solar boom, particularly among residential customers post-Hurricane Maria. Yet, fiscal concerns from the Financial Oversight and Management Board (FOMB) have led to proposals for reduced compensation, sparking concern among advocates and solar adopters.
Critics argue that scaling back net metering would disincentivize clean energy adoption and disproportionately affect low- and middle-income households. As such, balancing net metering’s financial sustainability with social equity and grid resilience remains a live policy challenge.
A New Energy Landscape
Puerto Rico’s energy transformation is unfolding against a backdrop of climate urgency, financial instability, and stakeholder complexity. And yet, the island is progressing toward a more modern, renewable, and resilient grid, guided by the IRP, federal studies like PR100, and a growing ecosystem of private investors and public sector collaborators.
As new actors enter the field, through project development, acquisitions, or strategic partnerships, legal counsel will play a pivotal role in structuring deals, navigating regulatory frameworks, and managing risk in an evolving energy market.
At Ferraiuoli, we remain committed to supporting clients at every stage of this transitionoffering legal insight, sector expertise, and forward-looking strategy to help shape Puerto Rico’s energy future.
For tailored guidance on Puerto Rico’s evolving energy and infrastructure landscape, we invite you to connect with Eidalia González-Tosado, Senior Member at Ferraiuoli. With deep expertise in environmental law, energy regulation, land use, and commercial real estate, Eidalia provides strategic legal counsel to developers, investors, and stakeholders shaping the future of Puerto Rico’s energy sector.
