Puerto Rico closes $861M DOE loan guarantee for huge solar, battery project

The federal government has just finalized a $861 million loan guarantee to fund what will be Puerto Rico’s largest utility-scale solar and battery storage installations.

In July, the Department of Energy’s Loan Programs Office announced a conditional commitment to finance two solar-plus-storage facilities on the southern coast of the island, plus two standalone battery energy storage systems. The solar plants combined will have 200 megawatts of solar capacity — enough to power 43,000 homes — while the battery systems are expected to provide up to 285 megawatts of storage capacity.

The installations, collectively called Project Marahu, will be led by Clean Flexible Energy LLC, an ​“indirect subsidiary” of the U.S. energy companies AES Corp. and TotalEnergies Holdings USA. Facilities will be located in the municipalities of Guayama and Salinas.

The DOE offers loans for clean energy projects on the condition that borrowers meet certain financing and administrative requirements. According to the agency, the company has now met all those conditions — meaning soon, hundreds of millions of dollars will start flowing toward construction.

Project Marahu is expected to come online sometime in 2025.

Jigar Shah, director of the DOE’s Loan Programs Office, told Canary Media that the loan presents a major opportunity to diversify and stabilize Puerto Rico’s grid, which currently relies on fossil fuels to produce more than 90 percent of its electricity. ​“There’s a huge potential for additional projects like this,” he said.

The loan is somewhat of a departure for Shah’s office, which typically invests in emerging clean energy technologies that have yet to be commercialized. In this case, the Puerto Rico government sought federal assistance to replace some of its oldest diesel-fired power plants with solar and storage projects through the Energy Infrastructure Reinvestment Program, which was created by the Inflation Reduction Act to help repurpose or replace existing fossil fuel infrastructure, Shah said.

As the island moves toward its clean energy goals, shifting away from those aging fossil fuel plants will become increasingly urgent. In 2019, Puerto Rico legislators voted to phase out coal-fired power by 2028 and switch to all-renewable energy by 2050. (In 2022, renewables only provided 6 percent of Puerto Rico’s electricity.)

Meanwhile, a series of devastating hurricanes in the past few years have revealed the fragility of the island’s fossil-fuel reliant grid. In 2017, following Hurricanes Irma and Maria, 1.5 million customers lost power — some for nearly a year.

Shah noted that this latest loan represents one step by the federal government to ensure a ​“full upgrading of the system after Hurricane Maria” to provide ​“reliable electricity and affordable electricity.”

But so far, most of Puerto Rico’s clean energy has come from small-scale rooftop solar systems, rather than utility-scale projects.

Frustrated with chronic power outages and local power companies’ continued reliance on fossil fuels, Puerto Rico residents have in recent years led an extraordinary push for rooftop solar, which can provide reliable, off-grid power and reduce energy costs. According to the Institute for Energy Economics and Financial Analysis, rooftop solar installations have driven a surge in renewable power generation in Puerto Rico — from 2 percent of all electricity produced in 2017 to 9 percent in 2024.

Rooftop solar and other small-scale projects will likely continue to lead Puerto Rico’s clean energy growth. According to the energy consulting firm Wood Mackenzie, over the next 10 years, more than 90 percent of solar capacity in Puerto Rico will come from distributed resources like rooftop solar.

One reason is that Puerto Rico simply has less land available for large solar and wind farms. Another barrier is its lack of durable long-distance transmission lines to transport electricity to urban centers. Still, an analysis by the DOE found that utility-scale projects are essential for Puerto Rico to reach 100 percent clean energy — even if rooftop solar is a more accessible option.

Shah hopes that installations like Project Marahu could have a multiplying effect on clean energy investments in Puerto Rico. ​“Having this loan close, I think gives the Puerto Rico government a lot of confidence that this partnership with DOE is working, but also gives confidence to the private sector that’s investing in Puerto Rico to continue those investments,” he said.