The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ requires “nothing short of a total energy sector transformation” to revive its economy post-COVID but faces massive “barriers” to achieving this, a multilateral lender has warned.

The Inter-American Development Bank (IDB), in unveiling a $150,000 “technical co-operation” designed to strengthen the energy sector’s oversight, warned that “current market governance and the regulatory framework pose barriers to developments in renewable energy and private sector participation”.

Arguing that reforms were critical for not just the electricity sector, but transportation (gasoline) and heating/cooling too, the IDB said: “As the country approaches a decisive moment in terms of tackling the climate crisis and the related impacts it suffers, and fulfills its climate commitments, it requires nothing short of a total transformation of the energy system.”

This, it added, necessitates a “whole sector approach” that “establishes a path for investment, innovation, policy design and implementation, technology deployment, infrastructure design and building, regional and international cooperation and many other efforts across others areas”.

The IDB said the “gap analysis” of The Bahamas’ existing energy sector laws, regulations and policy infrastructure, and the development of a “road map” for improvement as envisaged by the $150,000 project, were critical to “kickstart” reforms.

Noting that The Bahamas’ National Energy Policy, established in 2013, had set a target of producing 30 percent of the country’s electricity mix from renewable sources by 2030, the report added: “In recent years, there has been increasing interest from commercial entities to pursue renewable energy self-generation projects selling surplus energy to BPL.

“However, the current market governance and regulatory framework pose barriers to such developments in renewable energy and private sector participation.” Bahamian renewable energy providers spoken to by Tribune Business yesterday argued that the regulatory overhaul contemplated by the project was “long overdue”.

Guilden Gilbert, vice-president of Alternative Power Solutions (APS), said: “Hopefully we will see the current government be more progressive in how they handle that. They have said they are looking to advance the sector but, as they say, the proof of the pudding is in the eating.

“It comes down to allowing access, and maybe allowing BPL to engage in power purchase agreements (PPAs) with larger renewable systems, although BPL needs to determine how much solar it can accommodate without causing issues to its existing system.”

The instability of BPL’s existing electricity grid, which limits the amount of renewable energy that can be supplied to it by private solar and other systems, has long been an obstacle to greater penetration of The Bahamas’ energy mix by sustainable sources. And, with 2030 just eight years away, time is rapidly running out to hit the 30 percent renewable goal.

“It all comes down to grid stability and BPL has to be transparent in how much solar it can take on before it has grid instability,” Mr Gilbert added. “Only they can answer that. But I think it should be very easy for homeowners both to set-up and export power. It should be a very simple process between them and BPL.”

However, he argued that there was “definitely an opportunity” for state-owned BPL to exit electricity generation on sparsely populated Family Islands by handing this over to the private sector via PPAs.

With private operators providing power from utility-scale renewable systems, the APS chief argued that a generation exit would enable BPL to reduce its reliance on Nassau to subsidise the Family Islands. The state-owned monopoly would remain responsible for transmission and distribution (T&D).

As for the 30 percent target, Mr Gilbert said: “If I had to guess we’re probably somewhere in total.... maybe around 3 Mega Watts (MW) of solar throughout the entire Bahamas, if that. That’s still a long way to go for 30 percent because 30 percent is around 90 MW. If we’re at 3 MW we’re way off. 

“To get there is going to require investment upgrades at BPL. BPL could never accept 90 MW at this point... I understand their concerns about controlling the amount of solar in the system to avoid disruption in a sense, but it’s up to BPL to get their system to a point where they can accept more MW.” 

Mr Gilbert said the Government must also focus on the “ease of doing business”, and streamlining the number of agencies approvals were required from for renewable systems, as well as potentially provide waivers from VAT and other taxes on all system components to incentivise their uptake.

Bahamian energy regulators have already conceded their renewable policies are “not attractive” for companies and investors seeking to enter the sector The Utilities Regulation and Competition Authority (URCA) last year unveiled a move away from the “buy all/sell all” pricing that one provider yesterday described as “a non-starter” from the very outset.

The regulator, in a much-criticised compensation proposal for larger grid-tied renewable energy systems, had mandated that those capable of producing more than 500 kW (kilowatts) were to be compensated by BPL for selling energy to the grid via a “buy all, sell” method.

This required participants with such systems, mainly larger businesses and government facilities, to not consume any electricity generated by their renewable systems. They instead had to export all energy they generated to BPL, and consume all the electricity they need from the state-owned monopoly, at the standard retail tariff levied on all its customers.

Those who “sell all” under this arrangement have been compensated by the equivalent of BPL’s appropriate monthly fuel charge, which normally accounts for just 50-60 percent of customer bills. Such a mechanism was vehemently opposed by private sector renewable energy players on the basis that producers will not be fully compensated for what they produce.

They argued at the time that reducing the rate of return on utility investments in such a fashion will discourage Bahamians from investing in renewable systems, and URCA subsequently appeared to agree.

Meanwhile, the IDB report said: “Energy consumption in the country is dominated by gasoline (40 percent), followed by diesel with 28 percent and electricity with 24 percent.

“Transportation represents the largest energy consumption sector (around 40 percent of the total). Gasoline accounts for 76 percent of the total consumption in this sector followed by kerosene/jet fuel (12 percent) and diesel (11 percent).

“Together with an old power generation infrastructure, The Bahamas suffers from a high fuel import bill - 7 percent of gross domestic product (GDP), high electricity prices, as well as a large and financially challenged utility, Bahamas Power & Light (BPL), which experiences frequent power outages and elevated system losses.

“Volatile oil prices have contributed to making electricity tariffs among the highest in the Caribbean,” it continued. “With a tourism and services-oriented economy, electricity is consumed by large commercial users 42.6 percent (mostly hotels); residential 34.8 percent; small commercial 8.3 percent; street lighting 1.9 percent and other 2.7 percent, and is concentrated in New Providence (about 75 percent).

“Despite the potential for solar and wind power generation, and the steady cost decline of such technologies, The Bahamas ranks lowest in the region for renewable energy (RE) penetration (around 1 percent).”