Electricity Reform Can Help Usher in Sustainable Growth in Bahamas Against Climate Change

GlobalWarming & ClimateChange News Desk – The archipelago is taking bold steps to transform its electricity sector and build resilience to climate change

Modernising electricity grids and increasing the share of solar energy and liquefied natural gas (LNG) in electricity production will deliver significant macroeconomic benefits for the Bahamas. These essential transformations will reduce fossil fuel imports, fortify the country’s resilience against volatile global fuel prices, substantially decrease CO2 emissions, and drive national output upward. Enhancing the long-term growth potential from 1.5 to 2 per cent presents a clear opportunity for economic advancement. The findings, utilising the International Monetary Fund’s innovative Renewable Energy Balance of Payments tool, underscore the profound impact that a shift in the energy production mix can have on the nation’s economic transactions with the global community.

An ambitious energy transformation

For years, Bahamians have suffered from frequent power outages. At the same time, the reliance on imported fossil fuels—one of the highest in the Caribbean—for electricity generation – leaves consumers and businesses vulnerable to high and volatile energy prices. 

To address these hardships, the government announced plans in June 2024 to invest in a modern electricity transmission and distribution infrastructure in partnership with the private sector and increase the share of renewable energy in its mix of electricity generation. Specifically, the government is taking advantage of the abundance and intensity of solar energy available to the Bahamas all year round by increasing the share of solar energy to 30 per cent by 2030. Investing in solar also minimises the adverse environmental impact and logistical challenges associated with other forms of energy. A small share of electricity will still be produced using diesel, but much will be replaced with cleaner LNG. 

While a transformation of this magnitude can be expensive, the government’s partnerships with private power producers and investors can help the Bahamas achieve its mitigation goals. The transition to a greener electricity mix, while meeting growing electricity demand, requires multi-year investments expected to be financed by the private sector. However, carefully managing fiscal risks will be necessary to avoid adding to the government’s already high public debt.

Investing in resilience

Unfortunately, even with these investments, the threat of climate change is here to stay. IMF analysis suggests that rising sea levels could place up to 41 per cent of the land in The Bahamas and 22 per cent of its population below sea level by the end of this century. Moreover, the country is positioned within the Atlantic hurricane belt, leaving it at a high risk of hurricane damage. Left unaddressed, more severe natural disasters and slow-moving impacts from climate change could reduce The Bahamas’ national output by up to 11 per cent by 2100, with larger losses in the islands whose economies rely most on hospitality and real estate.

Given these risks, investing in The Bahamas’ capacity to adapt to climate change and preserve its natural capital could increase national output by up to 9 per cent over the long term, including through sustainable tourism. Building resilience to climate change would require diversifying away from vulnerable activities and undertaking investments to protect physical assets and natural capital (for example, breakwater construction, coral reef and mangrove protection, and beach nourishment programs).

Investing in climate resilience can be expensive, with financing needs exceeding those of the energy transformation. Fortunately, the ongoing electricity sector reform, if executed successfully, can serve as a blueprint for countries to partner with private businesses to finance climate adaptation. Moreover, innovative financing solutions, including refinancing expensive debt with cheaper funding, could free additional public resources to preserve the country’s natural habitats. The private sector can be vital in financing climate resilience, working with the public sector, and supporting the international community (including grants). By working together, this trio of partners can help small states like The Bahamas secure a prosperous future for their citizens and protect their natural beauty and capital for future generations.

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