The Tribune

By Roderick A. Simms II

An advocate for sustainable Family

Island growth and development

E-mail: RASII@ME.com

Reforms geared towards improving The Bahamas’ energy security are critical to building greater economic resilience and diversification. In the previous Island Insight column, I pointed out that tourism and other services-based industries are not ideal for long-term economic growth, and that exploring sectors which rely more on technology and innovation will be better for our development.

The COVID-19 pandemic could continue to have crippling economic effects on small island developing states (SIDS) such as The Bahamas, especially since we are still faced with costly Hurricane Dorian-related repairs and the need to build climate change resilience. This points to the need to start applying the transformational changes discussed in the National Development Plan (NDP), especially when it comes to energy security.

As consumers and business owners gradually embrace the phased re-opening of the Bahamian economy, returning to the so-called “status quo” is not advisable in the short to medium-term. The COVID-19 pandemic continues to impact the global economy, although countries are now easing restrictions so their domestic economies can start to function. Going back to the way things were seems like an inane way for governments to operate moving forward. For Caribbean countries such as The Bahamas, recovery will likely not be as easy as hitting the “restart button”.

COVID-19: An oil opportunity and lesson

While COVID-19 caused major disruptions in supply chains, global demand for oil fell by about 29 million barrels per day compared to about 100 million one year ago (WEF 2020). A decrease in demand for oil left a large surplus of this commodity and, as a result, US crude oil prices at one point crashed below zero and into negative territory. Many oil importing countries, where possible, stored large quantities of oil, taking advantage of the low prices. Bahamas Power & Light (BPL) stated its intent to take advantage of low oil prices by hedging its fuel supply. The idea is to generate future savings for the country’s hefty fuel bill, which hit almost $600m last year.

As crude oil fell below zero, Bahamian consumers still questioned why prices did not decrease at their local gas stations. This is because a low price per barrel of crude oil does not necessarily translate to lower prices for a gallon of retail gasoline. The idea behind this is that crude is not always the best indicator to determine retail gasoline prices. Gasoline futures should also be examined in a standalone manner, but there is still a linkage between crude and gasoline futures. For instance, the price of gasoline is comprised of other determining factors such as contracts, transportation costs and taxes. Therefore, the price at the pump is never likely to be zero. However, the sudden shock of US oil prices dropping below zero again highlights The Bahamas’ economic vulnerability to energy market volatility and the consequent lack of security.

Economic diversification and energy

A Caribbean Development Bank (CDB) Country Strategy Paper (2018-2022) on The Bahamas pointed out that the country is “overly-dependent”, relying on imported petroleum products to power about 99 percent of its economy. This alarming figure deserves more attention as it speaks to the need to diversify the economy and embrace greater energy efficiency/sustainability. The report also points out that in the 2017-2018 budget presentation, energy was flagged as a key area to be addressed in order to achieve economic competitiveness. But have sufficient or, indeed, any steps been made towards achieving these goals? A main source of energy reform starts with the supplier, yet utility operators across the Caribbean are still struggling to mesh renewable energy with the traditional fossil fuel variety. However, this has not stopped countries such as The Bahamas, Jamaica, Cayman, Anguilla and others from launching solar projects in an effort to achieve renewable energy goals. The Bahamas government’s National Energy Plan (NEP) aims for 30 percent of the nation’s power to be provided through renewable energy by 2030. The CDB noted that there needs to be an improved performance - both technical and financial - by BPL to achieve the targeted energy sector transformation.

When increasing the use of renewable energy, consideration should also be given to that equipment being hurricane resilient. In the past, powerful storms have destroyed transmission and distribution systems, and they have the ability to do the same to renewable energy. A closer look should be taken at strengthening all energy systems in the event of natural disasters. More climate change resilient infrastructure is also needed.

Circular economy: Electricity and waste

One aspect of the environment and climate change that is often overlooked is the “circular economy”, which is a system that favours keeping materials in use and is designed to better manage waste from technology and energy sources. A recent Forbes’ article (Ollagnier, 2020) pointed out that there is “limited” talk about waste within the electricity industry, but adopting “circularity” could turn out to be an opportunity worth “half a billion dollars”.

The article states that a major circular economy impact stems from the electricity industry as providers shift towards renewable energy. This can be an opportunity for countries that rely heavily on fossil fuels, but have not found efficient ways to pivot from the waste associated with this commodity. Adopting this concept will require a “little-to-no-waste” mindset, which starts with businesses and small and medium-sized enterprises (SMEs). Although this trend has not taken off yet, it is still important to keep tracking and updating the NDP as developments are made in this regard.

Conclusion

The Bahamas needs to further reduce its dependence on petroleum by adopting at more sustainable energy options. It is important to understand that doing so requires more funding, resources and experts to manage the technical and regulatory frameworks that come along with this process. It is importat to raise awareness of how renewable energy will help to build a more resilient economy in an effort to lessen vulnerability to economic shocks caused by natural disasters or crises such as COVID-19.

NB: Read NDP @ www.vision2040bahamas.org