Chairman's Message
ANOTHER CALL FOR ACTION!
Heat, drought, fires, floods, and storms are all well-known consequences of climate change. Over the past decade, average global temperatures have risen, leading to a corresponding increase in the frequency and intensity of these extreme weather events. The ten warmest years in global recorded history have all occurred within the last decade (2014-2023). If the current warming trend continues unaddressed, we can expect the frequency and severity of heatwaves, droughts, fires, floods, and storms to rise in the future.
Here in Belize, we have experienced these climate impacts firsthand over the past year. Heatwaves, drought and wildfires have been more intense and frequent than ever before, significantly affecting BEL’s bottom line. These conditions have driven up both the demand for electricity and the costs associated with producing, transmitting, and distributing it. Unfortunately, we should anticipate that this challenging operating environment will persist and worsen in the medium term.
In an operating environment characterized by excessive heat, droughts and wildfires, BEL has faced surging electricity demand and rising costs, resulting in steadily declining profits. If current trends continue, losses are projected to begin next year, and without decisive action, these losses may persist unless aggressive action is taken to change the operating environment. While BEL is doing all it can to address these challenges, the required changes extend beyond the capacity or control of BEL alone. It requires the intervention of shareholders - not only in terms of finances – but by also contributing to the fostering viable operating conditions.
Demand and Profit Dynamics
In the current operating environment, there is an obvious inverse relationship between the demand for power and the profits of BEL. As demand has increased, profits have declined due to the rising costs of procuring additional electricity. The rate at which these costs rise has outpaced revenue growth. In times of high demand, such as those experienced this past year, BEL is given the proverbial basket to carry water; but carry it we must.
It is clear that, at current demand levels, BEL cannot generate profits while relying on existing sources under legacy contracts. The solutions are evident: either rates must be adjusted upwards, or new, lower-cost sources of electricity must be integrated into the supply mix—or, ideally, a combination of both strategies. The national energy policy supports an aggressive shift toward renewable energy, which aligns with the fight against climate change. That approach fits neatly with an aggressive call for the introduction of renewable sources of electricity at lower costs into the supply mix. If this is realized, it would help mitigate the adverse conditions BEL currently faces and restore profitability. Achieving this goal will require urgency and coordinated effort. We must all, therefore, do all within our power to realize the introduction of lower-cost electricity into the supply mix as a matter of urgency. In the next five years, utility-scale solar generation and battery storage must be integrated into the grid. The Government of Belize is currently actioning these efforts, having secured financing for these projects.
While these projects will go a long way to ameliorate some of the challenges, they are not sufficient on their own to counter the impacts of increasing climate volatility. We must also rethink our approach to energy procurement and find innovative ways to attract private sector partners into the market. I call for a new, more effective regulatory framework that supports our shared objectives. The stakes are too high to continue on the current path.
We therefore must also address generation procurement in an effective way which is very different from the model recently introduced. We also need to find new ways to attract and introduce private sector partners into the market that are more creative and practical than by the current licensing regime. I make a public call for a new innovative regulatory regime designed to suit existing market conditions in Belize that will assist rather than detract from the achievement of well-known common objectives. The stakes are just too high to continue upon the regulatory path now laid out before us.
Energy Security and Strategic Planning
Last year I had reported that Belize could not meet the demand for electricity solely from local sources of electricity generation and that Belize relies on Mexico to supplement in-country generation capacity. As I warned then, we remain vulnerable to changes in the Mexican energy market. I further reported that indications were then that Mexico will itself begin to experience shortages of its own and concomitant higher prices. I therefore made a call for urgent action to build in- country generation capacity and reminded that such capacity is critical if BEL is to have any realistic prospect of realizing its mission statement in the medium term.
Unfortunately, despite the call for urgent action, little progress has been made beyond BEL’s upgrade of 10 MW of capacity at the Westlake Gas Turbine. This is simply not enough. And through next June when the same conditions might repeat themselves, or worsen, there is no additional in-country generation expected to be provided apart from 19MW to be produced by the newly acquired GT being commissioned by BEL in San Pedro. That too will not be enough. Additional in-country generation is essential to safeguard the reliability and stability of our grid.
Therefore, I must renew the call for urgent investment in local generation capacity and make clear that the required action is now even more urgent than it was last year. Without action, we risk not only supply shortages and rising costs, threatening the availability of electricity supply to Belizeans but also the reliability of supply, which will by extension negatively impact the modern way of life to which we have all grown accustomed.
Andrew Marshalleck
Chairman of the Board of Directors
Belize Electricity Limited (BEL)