The Tribune

By NEILL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas cannot “bank” the projected $210m annual savings from the Government’s energy reforms without further structural changes at Bahamas Power & Light (BPL) to make private investment in the industry more appealing, a multilateral lender is warning.

The Inter-American Development Bank (IDB), in a report detailing a $200,000 initiative to boost BPL’s “capacity to de-risk investments” and further attract private financing to boost The Bahamas’ energy reliability and resilience, said the state-owned utility’s perilous financial condition - with $500m in “deferred” improvements inherited by the Davis administration when it took office in September 2021 - remains the main barrier to realising the “transformation” benefits.

As a result, it argues that achieving - and maximising - the potential benefits from “the most ambitious energy reform in The Bahamas’ history” depends on addressing BPL’s “institutional and structural constraints” to the point where it can “engage credibly” with private capital and industry investors, then “accelerate” renewable energy roll-outs and electricity cost reductions.

The IDB paper, whose release coincides with the spread of BPL’s multiple system outages and blackouts from the Family Islands to New Providence, conceded that getting the utility into a position where it can translate the Government’s reforms “into bankable, executable investments” is no easy task given a $600m legacy debt burden.

Together with the deferred system and network improvements, this means BPL is carrying a combined $1.1bn in debt and capital improvement needs - a sum equal to the $1bn investment in the Government’s energy reform initiatives, which involve outsourcing New Providence’s baseload generation and transmission and distribution (T&D) grid, plus Family Island generation, to the private sector and independent power producers (IPPs).

“The Bahamas faces a complex energy challenge rooted in resource dependency and geography. With no domestic fossil fuel reserves, the country relies entirely on imported fuels, which account for around 99 percent of primary energy supply ,” the IDB report said.

“Unlike most Caribbean peers that operate a single interconnected grid, Bahamas Power & Light (BPL) manages 29 generation plants across 30 inhabited islands and dozens of isolated mini grids that function as multiple small utilities rather than one system.

“This structure eliminates the benefits of reserve-sharing, load balancing and renewable integration that interconnected grids provide, while driving up costs across every island. Current limitations in grid management systems, outdated metering infrastructure and insufficient digitisation underscore the need for modernisation of physical systems and human capital.”

And, while hailing the Government’s energy reforms, the IDB report identified BPL’s financial weakness as the main drawback that could prevent Bahamian households and businesses from fully realising the cheaper, cleaner and more reliable power promised by these initiatives.

“The Government of the Bahamas has responded with the most ambitious energy reform in the country's history, a $1bn-plus investment programme targeting grid modernisation, LNG conversion and 128 mega watts (MW) of solar capacity by 2030, bringing renewables to 32 percent of the energy mix,” the IDB said.

“When the current administration took office in 2021, BPL carried over $600m in debt and $500m in deferred upgrades. The reform agenda is projected to generate over $210m in combined annual savings, improving BPL's financial position and reducing electricity costs for households and businesses. 

“However, BPL cannot finance this transformation alone. Its legacy debt burden and the logistical complexity of serving small, isolated island systems limit its ability to attract private investment without risk mitigation support,” the IDB added.

“Expanding IPP participation and mobilising private financing are essential to accelerate renewable deployment, ease fiscal pressure on the utility and bring tariffs down, but this requires strengthening BPL's institutional capacity to structure bankable transactions and engage credibly with private financiers and development partners.”

Describing its $200,000 technical assistance as “critical at this juncture”, given the stage the Davis administration’s energy reforms have reached, the IDB reiterated: “BPL's institutional constraints, combined with the structural complexity of serving dispersed island systems, create a clear need for specialised support in de-risking investments and mobilizing financing.

“The technical co-operation will also support… helping BPL translate the reform programme into bankable, executable investments.” EA Energy’s solar generation project on Eleuthera is to be used as the model for designing “more resilient energy infrastructure” for the Family Islands, including microgrids, while the IDB initiative will also focus on developing a workforce for “grid modernisation, renewable integration and improved reliability”.

“There is thus a critical need to design and implement a structured, competency-based workforce development programme to prepare technicians and engineers capable of supporting BPL's evolving operational requirements, particularly in distribution planning, protection systems and digital grid technologies,” the IDB added.

The project’s unveiling has occurred in the aftermath of two island-wide outages/blackouts in New Providence, with sections of Nassau and the island also enduring repeated load-shedding after BPL’s electricity grid proved unable to cope with the extra demand sparked by consecutive hot days that has driven energy consumption above last year’s peak twice already.

Paul Maynard, the former Bahamas Electrical Workers Union (BEWU) president, yesterday told Tribune Business that successive administrations have “kicked the can down the road” for at least a decade on much-needed electricity grid upgrades and improvements to the point where “the road has run out”.

He affirmed that New Providence’s transmission and distribution network has failed to keep pace with the island’s growth and development, with the last major grid upgrade completed almost 30 years ago, leaving it unable to meet ever-increasing consumer demand from businesses and households as new customers are added.

As a result, Mr Maynard said much of the electrical equipment in sub-stations at the distribution level is “old and obsolete” to the point where it has reached “a real critical stage” of end-of-life. He added that BPL staff “risk their lives every day touching this stuff”, and said that - while the necessary improvements to the New Providence electricity grid will be made - these will take time to execute and not be felt before summer 2027 at the earliest.

BPL executives have confirmed that New Providence has sufficient available generation to meet peak load summer demand, and Mr Maynard yesterday agreed that the island’s recent woes have stemmed from a lack of distribution system capacity. This has created structural network bottlenecks, where not enough power is able to reach end users to meet heightened demand, resulting in critical system components becoming overloaded and failing.

“They’re going to get there,” Mr Maynard said of BPL and Bahamas Grid Company, the entity that has taken over ownership and management of New Providence’s energy grid for at least 25 years. “They’re going to make some adjustments, and so some things over the fall, winter and Spring so that this shouldn’t happen any more. It will take time, but I know they are capable of dealing with the situation. Next summer, they’ll be ready.”

The former union president suggested that New Providence’s energy grid has received insufficient attention when compared to BPL’s generation capacity. Issues with the latter were responsible for frequent outages and load shedding under the Minnis administration in 2018, which it sought to resolve with a $90m investment in six Wartsila engines, but the latest energy woes stem from transmission and distribution (T&D) deficiencies.

“It has been going on for over 16 years,” Mr Maynard said of the need for urgent electricity grid upgrades. “They kept kicking the can down the road. The road has run out. The can cannot be kicked any more….. It is what it is. I’m sure they are make some adjustments, do what they have to do and whatever has to be done.”

Well-placed Tribune Business sources last week questioned whether BPL has conducted sufficient summer preparation and maintenance, especially on the transmission and distribution network. They also suggested that Bahamas Grid Company and its contractor, Pike Electrical, had in their $130m “foundational upgrades” focused largely on the transmission side and left distribution largely untouched at the neighbourhood level where much of the recent woes occurred.

Feeding into this, and compounding the challenges, are two unresolved problems related to the grid’s transition from BPL’s to Bahamas Grid Company’s control. The transfer of grid assets has yet to be completed, with these placed “in escrow”, leaving them in legal limbo or a ‘no man’s land’ of uncertainty. As a result, it is unclear whether BPL or Bahamas Grid Company has responsibility for these assets, the maintenance and repair, and which set of workers can handle them.

In addition, BPL’s 120 New Providence-based transmission and distribution workers have largely declined to switch to Bahamas Grid Company, fearing they would lose their union benefits, pension and years of service if they do so. As a result, Bahamas Grid Company has lacked key knowledge for its grid upgrades, since the location of key electrical equipment has not been documented but, instead, rests in the mind and memories of these workers.

“A lot of the knowledge people have of the distribution network is not documented clearly or mapped out,” one well-placed source, speaking on condition of anonymity, said. Mr Maynard, signalling that the Bahamas Grid Company transition issues have been a factor, acknowledged that electricity distribution at the neighbourhood and community level remains the major impediment.

He added, though, that the last major grid upgrade on New Providence began in the early to mid-1990s, and was completed in around 1998 with new sub-stations and poles installed. That, though, was almost 30 years ago, and Mr Maynard described much of the equipment brought in then as “old and obsolete”, and at a “real critical” end of life stage.

“When I was there it was obsolete, so can you imagine now?” the former union president said. “We have to realise the [BPL] staff are going through a lot. They have been stressed. I cannot imagine what they are going through, working day and night, day and night. The fatigue has to be setting in. Every day they risk they risk their lives touching this stuff, a lot of which is obsolete; it shouldn’t be on the system.

“Now the road is finished. The road is gone. It’s not there any more. I’m pretty certain they’ll be able to figure it out. The transmission and distribution grid has been ignored for 16 years. It’s bad for the public. It is bad. It is what it is. We are where we are.”

Mr Maynard urged BPL and its two unions, the BEWU and the Bahamas Electrical Utility Managerial Union, to urgently meet and resolve all issues impeding the transfer of the utility’s line staff to Bahamas Grid Company.