The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light (BPL) needs more than 400 mega watts (MW) of new generation capacity to address a “dire” situation requiring between 60-80 percent of its existing plant to be replaced within five years.

Ryan Pinder KC, the attorney general, addressing the Senate in yesterday’s debate on the Electricity Bill 2024 and Natural Gas Bill 2024, sought to justify the Government’s plans for fundamental energy sector reform by affirming that both BPL and the Public Treasury “cannot afford” the estimated $291m required to invest in new generation engines nationwide.

Affirming that 60 percent of New Providence’s existing generation capacity, and 80 percent of what is present in the Family Islands, will be “at or near the end of their useful life” by 2029, he added that BPL’s financing needs to effect change for Nassau alone are some $211m.

Mr Pinder said BPL’s reliance on rental generation for 113 MW of power on New Providence, and 32 MW in the Family Islands, is costing the state-owned utility an “unsustainable” $42m per annum that it is unable to fully recover from household and business customers.

And, with BPL needing to replace some 72 percent of its own “peak load generation” capacity for New Providence over the next five years, and energy demand anticipated to increase by an average 5 percent per annum, the Attorney General argued that the “status quo” was untenable given the financial numbers involved.

“BPL has severe generation constraints, and the picture is not looking any better going forward under the status quo,” Mr Pinder said. “It is a safe estimate that 60 percent of BPL’s plant in New Providence and 80 percent in the Family Islands needs to be replaced within the next five years due to the generation engines being at or near the end of their useful life.

“Accounting for contingencies, at least 340 MW is needed in New Providence. This is to account for peak load, which was 281 MW in 2023 plus what’s called the N-2 contingencies in case you lose your two largest generators. We also anticipate a 5 percent growth in generation demand each year going forward.

“As to the generation needs, BPL requires replacement for 113 MW of rental generation and 203 MW of aged or obsolete generation fleet. Look at those numbers again: More than 40 percent of the peak load generation is rented by BPL, and over 72 percent of peak load generation that BPL owns needs replacement in the near future,” he added.

“It is estimated in New Providence alone, BPL anticipates needing more than $211m to replace the ageing fleet, to incorporate renewables and to facilitate maintenance/overhauls and other auxiliary needs.”

Seeking to make the case for reform, and the potential break-up of BPL into three separate entities for generation, transmission and distribution, and billing/customer service via public-private partnerships (PPPs) that outsource management to private energy firms, Mr Pinder said: “The story in the Family Islands isn’t much better.

“At least 100 MW of new generation is needed in the Family Islands to account for the replacement of 32 MW of rental generation, replacement of aged and obsolete fleet and to account for new load growth as a result of population shifts and anticipated development.

“BPL anticipates needing more than $80m for this new Family Island generation. That is an immediate need of almost $300m just to replace current generation; current generation which is also insufficient to meet the current demand loads plus contingencies,” he continued.

“Notwithstanding the above, BPL has a current generation shortfall, taking into the industry contingency requirements, of 64.4 MW today and, if all things stayed the same, increasing to a generation shortfall in New Providence of 130 MW in just five years.

“The new generation requirements for BPL are dire, and the cost to acquire new generation to meet this demand and replace rentals and aging fleet is prohibitive. BPL cannot afford the cost of new generation, nor can the Government. This is the unfortunate reality...

“The high reliance on rental generation by BPL has also caused exorbitant costs to BPL, much of which is not passed on to the consumer. Renting generators costs BPL more than $32m annually in New Providence, and more than $10m annually in the Family Islands, totalling more than $42m a year. This is unsustainable.” BISX-listed FOCOL Holdings is among the major suppliers of rental generation.

As for BPL’s transmission and distribution infrastructure, Mr Pinder said its New Providence network is “frankly on the verge of complete collapse” and requires a minimum capital investment of $100m. He added that estimates suggested an upgraded network could save between $10m-$30m.

“In order to support the generation upgrades discussed for New Providence, including the increased generation capacity as well as integrating solar energy on a utility scale, we require a fundamental upgrade to our transmission and distribution assets,” the Attorney General added.

“Our current transmission and distribution infrastructure is old, outdated, cannot transmit the volume of electricity necessary today and, frankly, is on the verge of complete collapse. This is likewise an urgent upgrade required for BPL.

“Some of the transformers and substations date back to around independence, and we are still using them after almost 50 years of energy growth. BPL estimates that an upgraded transmission and distribution infrastructure can save as much as $10m to $30m,” he said.

“BPL also estimates it requires a minimum of $100m of capital expenditure to undertake basic necessary upgrades to the transmission and distribution infrastructure. Money it nor the Government has to invest.

“We are working on a transmission and distribution upgrade plan that incorporates improving our transmission lines with larger higher capacity lines installed in a loop to improve reliability. Our switching stations and substations will undergo upgrades and storm hardening, and with respect to distribution we will rebalance the load to reduce voltage fluctuations.”

Mr Pinder said there had been “a very strong response” to the bidding process seeking independent power producers (IPPs) to supply BPL with renewable energy in the Family Islands. “The overarching goal is to get BPL out of the rental business and to partner with the private sector, under the build/own/operate/transfer model to meet the energy demands with limited capital cost to BPL,” he added.

“The economic modelling does not support the rental of generation as it is very costly, and the ability to pass through those costs is limited. Continuing to rent for increased generation requirements is not an option for BPL.”