Ten days to make our voices heard on the future of Bermuda’s energy
As I do periodically with regard to technical matters concerning the future and economic wellbeing of the island, I was recently discussing with my good friend, Mike Murphy, an issue that affects every one of us: Bermuda’s future energy policies. Where are we heading under the Regulatory Authority of Bermuda and Belco management, and will they keep the island cost-effective and competitive for future generations?
Mike was my ex-officio adviser and, eventually, partner in setting up the US/Bermuda Tax Treaty and legislative conditions making it possible to facilitate the development of the professional insurance/reinsurance industry in Bermuda. After comparing notes, Mike offered to do some research and reconvene. What follows is the result of our joint efforts and findings.
As a November 30 deadline looms for the RAB to receive public comments on Bermuda’s Energy Plan, it is essential that all of us focus on this important matter now and make their collective voices known to the RAB in writing before the deadline. The public opinion and size of the response will carry weight to determine the island’s fate with regard to future electricity costs and our environmental commitment in the world over at least the next 20 years.
The choices emerging for Bermudians are two: either the Belco Plan dated February 2018, relying almost exclusively — 85 per cent to 95 per cent — on fossil fuels to generate our electricity over the next 20 years or the more recently released Bermuda Better Energy Plan, projecting use of 64 per cent clean renewables of wind and solar power by the year 2038.
Under both plans, Belco remains the primary provider and distributor of the electricity.
Use of fossil fuels is necessarily a limited transitional part of the Bermuda Better Energy Plan, reducing fossil-fuel dependency to about 36 per cent by 2038. Under one option in the renewables plan, no new investment by Bermuda would be necessary in a fuel-processing facility. This compares very favourably with the massive estimated $120 million in new capital investment under the Belco Plan to deliver and convert liquefied natural gas to the end product of electricity. Signing up for a burdensome investment in another fossil fuel only puts Bermuda further out of step with the world initiatives to switch from fossil fuel to renewable energy.
In this rapidly changing world of technological development, climate change and increasing natural disasters, which almost all of the world’s nation states — with a few head-in-the-sand exceptions such as Nicaragua, Syria and Donald Trump — attribute to global warming, it is incredulous that Bermuda would sign on to the Belco Plan. The most recent Throne Speech stated “High energy costs are among the first factors cited by investors and developers as a barrier to doing business in Bermuda. High energy costs have hurt working-class Bermudians, forcing them to spend large amounts of their hard-earned money on an unavoidable expense, money that could otherwise be saved and pumped back into the economy. In fact, Bermudians pay the highest energy rates of any comparable jurisdiction.”
If Bermuda used mostly wind and solar from facilities established here, as suggested under the Bermuda Better Energy Plan, it would provide both much needed local jobs in the economy to install and maintain the renewable facilities and substantially reduce the valuable foreign exchange we spend to pay for the fossil fuels to generate our electricity. Moreover, through the use of renewables, we would become more independent from the wildly fluctuating fossil-fuel world prices we have experienced over the past many decades that go directly into our consumers’ bills as the fuel adjustment cost.
The supply of renewable energy could come right out of our backyard with wind and solar rather than fluctuation with every variation in weather, as natural gas does in the North American market. Should Belco commit to LNG as the answer over the next 20 years under the Belco Plan, those foreign fossil-fuel price swings remain completely beyond our control and will continue to be passed through to our already overburdened consumers.
Not only would a clear clean energy policy assimilated by Belco under the Bermuda Better Energy Plan be in sync with our government policy, but it would also showcase Bermuda to its tourist and business visitors as a location committed to avoiding the use of pollutants in our isolated but more pristine outpost, surrounded by a world drowning in an ocean of environmental problems.
The Throne Speech also commits the Government “to increase the uptake of renewable energy ... by proposing to increase distributed generation beyond the individual level, harnessing renewable energy for use on a community, commercial and utility scale”. To adopt the Belco Plan in light of our government’s existing commitments to reduce consumer energy costs and broaden the use of lower-cost renewables is grossly irresponsible. It would fly in the face of this government’s commitments and that of the rest of the world to reduce use of fossil fuels for producing energy.
Of the world’s total amount of investment in power generation in 2017, more than $265 billion was invested in renewables compared with $103 billion in fossil fuels, according to the Renewable Energy Policy Network think-tank. These amounts clearly show that the Belco Plan’s goal of 5 per cent to 15 per cent renewables for the next 20 years is completely out of step with the rest of the world’s financial direction and economic commitments away from fossil fuels.
It’s not just the world at large, but our island neighbours and leading competitors in Caricom to the south of us, such as Cayman Islands and Barbados, who are setting targets to use up to 70 per cent renewables for their electricity production over similar time frames. Bermuda cannot afford to fossilise in their planning when so much is at stake.
The wind and solar power targets in the Bermuda Better Energy Plan can be reached more rapidly by inviting the private sector to participate. As one analogous example, Richard Branson, the billionaire owner of Virgin Group, spearheaded a plan to help Caribbean nations recover after hurricanes Irma and Maria ravaged several islands in 2017. The centrepiece of his plan is a push to replace outdated fossil-fuel power grids with renewable energy systems that can withstand extreme weather and boost economic development in the Caribbean.
Bermuda needs to open its thinking in this manner by adopting the Bermuda Better Energy Plan and by inviting well-developed and cost-effective, clean-power technology now from the foreign-owned private sector to participate alongside Belco to reduce our electricity costs.
Recently, Belco had a good opportunity to go renewable when approached by Twenty First Century Utilities, one of America’s leading, innovative, private-sector utilities in delivering clean energy at cheaper rates to the consumer.
TFC Utilities expressed intent to purchase Belco — actually, the parent Ascendant Group — for a reported price of $15 per share, about 40 per cent in excess of the share-trading value at the time the letter of intent was presented. Had the majority of Belco shareholders accepted the offer, the new owner would have set a future clean-energy course for Bermuda power generation at cost-effective rates.
Instead of exploring the details and reporting the offer to its shareholders, as a responsible board of directors should do, the Belco board stonewalled the potential purchasers.
Now it appears, from more recent changes to Belco by-laws, that the directors and senior executives of Belco have caught a bad case of gold fever, tightening their control and preparing to reward themselves with rights to own a significant amount of shares by issuing themselves risk-free options before considering the flotation of the ownership and control of the company into foreign hands either privately or on a foreign stock exchange. None of this conduct helps to formulate a sensible energy policy for the future of the island; nor does it bring down the cost of electricity for the average Bermudian.
It also appears that since the reported TFC Utilities purchase offer, Belco has spent millions of its cash to repurchase its own stock at average prices that are in excess of the premium $15 offering price. A significant amount of the rate increases approved by the RAB that we consumers all have experienced went to the pockets of a number of bought-out Belco shareholders at an inflated price rather than to a much needed sinking fund to help to satisfy the massive capital commitments that Belco — and Bermuda — require to sustain the future.
Only the existing directors, and perhaps one or two controlling Belco shareholders, appear poised to choose fossil fuels over clean energy if the public don’t weigh in before November 30 and make their voices heard for the Bermuda Better Energy Plan. Unless enough support is expressed for the Bermuda Better Energy Plan in writing to the RAB at electricity@RAB.bm, the Belco Plan is the default plan to go into effect.
Bermuda’s future energy policy must be set by socially responsible action that attempts to reduce the extremely high cost of electricity and to continue the island’s commitment to the public’s good health and stable living at affordable prices in step with the world’s dramatic movement towards clean energy.
• Sir John Swan, a businessman, was the former Premier of Bermuda between 1982 and 1995, and a former Belco board member. Michael Murphy, a former attorney for American International Group, was the chairman of the Association of Bermuda Insurers and Reinsurers between 1985 and 2005
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