This conclusion is not in our national interest. We have not adequately considered the option to pivot towards renewable energy; in fact, in the medium to long term, extensive renewable energy is probably our best option.
There are three reasons why changing our national policy and transitioning our energy investment away from diesel-fuel oil and natural gas to renewable energy makes sense:
1, The absolute cost of renewable energy continues to fall: recent energy auctions in Mexico and Morocco ended with winning bids from solar and wind companies that promised to produce electricity at the cheapest rate, from any source, anywhere in the world
2, Investment in renewable energy keeps the investment on the island rather than sending it overseas to pay for diesel. Keeping it here has knock-on benefits for the broader economy, such as increased spending in grocery stores and on healthcare. This multiplier effect could double the economic value to the island
3, In Paris last year, 195 countries, including Bermuda represented by Britain, committed to “decarbonise” their economies in the next 30 years to reduce the long-term impact of climate change. This is not only an international commitment, but is also in the best interests of the island; intensifying climate change could wreak havoc on our infrastructure and our economy
It is worth asking why renewable energy is becoming ever cheaper. And will this trend continue? Improvements in technology efficiency are driving down costs to some extent, but the primary driver is economies of scale. For example, the cost of solar power has fallen to 1/150th of the level in the 1970s. Paul Krugman, the Nobel Prize-winning economist, recently wrote in The New York Times: “The numbers are really stunning. [The cost of renewable technology is falling] at rates we normally only expect to see for information technology. And this puts the cost of renewable energy into a range where it’s competitive with fossil fuels.”
Because solar power cells, and other renewable energy sources, are technologies and not fuel, efficiency will continue to increase and prices will continue to fall as time goes on. Renewables, of course, pose special problems: consumers may want power when the wind doesn’t blow and the sun doesn’t shine. However, technology is coming to the rescue here as well: the price of batteries to store power for when we need it is falling in a similarly stunning arc, and “smart grids” and “demand response” management — paying consumers to cut energy use during peak periods — is making it dramatically easier for renewable energy to replace coal or oil-fuelled power.
So if renewable energy is in our best interests, why has the Government not considered it? Actually, the answer is not economic, it is political. The problem is that the short and medium-term costs and benefits are unevenly distributed between the different players in our energy system. In fiscal year 2014-2015, the Government earned $67 million in taxes on imported fuels. To encourage renewable energy, the Government has granted import tax relief on renewable energy, but this places it in a bind because reducing oil imports and increasing renewable energy installations will result in significantly lower income for the Government.
Similarly, the financial incentives are further skewed because reducing electricity use through efficiency would reduce Belco’s income and, in addition, technical requirements for integrating renewable energy — and other associated technologies such as battery storage and microgrid developments — in the short term mean that Belco would have a significant upfront investment in technical and operational changes. The benefits, on the other hand, accrue to the residents of Bermuda through lower pollution and lower electricity bills in the medium and long term. Increased investment in renewable energy installations also leads to support of many small businesses in Bermuda and increased spending power for Bermudians. Thus, the power for change is in the hands of the Government and Belco, but their incentives are heavily skewed towards the status quo, which prevents residents from benefiting from change.
The estimated cost of converting the island’s electricity system to liquefied natural gas is between $250 million and $320 million. This pathway would commit us to a fossil fuel-based future for the next 25 to 30 years at a time when the rest of the world is moving in the opposite direction. No report has been commissioned, which tells us how much it costs to install smart grids and demand management software, or to invest in renewable energy to meet demand. The entire community stands to benefit from the transition to a more sustainable electricity sector; we deserve a true assessment of the alternatives — not just a proposal to switch to LNG.
• Judith Landsberg has a PhD in physics and a master’s degree in environmental management. She is also a director of Greenrock and has been involved in energy problem-solving and energy advocacy in Bermuda for the past four years.
Article 1 of 3 articles first published in the Royal Gazette in June 2016.
