The Energy-Growth Nexus

The relationship between economic expansion and energy consumption is not decoupling; it is strengthening. As artificial intelligence scales, the demand for power will only intensify, making the source of that energy a primary driver of future cost structures.

During the Caribbean Utilities Company’s Women in Energy Conference held on 22 May, economist Marla Dukharan addressed the critical intersection of energy use and economic stability. In her keynote, Dukharan argued that switching to renewable energy will cut the Cayman Islands' cost of living, while simultaneously defending the necessity of high energy consumption for poverty reduction.

The current trajectory for the Cayman Islands is defined by rapid population and economic growth, which has pushed energy demand toward the limits of current installed capacity. While some economists in developed economies suggest that energy consumption is no longer linked to economic growth—often citing periods where energy use flatlined due to outsourcing manufacturing—Dukharan presented global statistics that demonstrate a positive correlation between GDP expansion and energy consumption.

The emergence of AI introduces a new variable. Dukharan noted that because AI is a big consumer of energy, the energy intensity of GDP is not declining. Instead, we should expect a strengthening of the relationship between economic activity and the amount of energy used.

For the Caribbean, this is a strategic inflection point. If the relationship between growth and energy use is strengthening, then the volatility and cost of the energy supply become direct threats to economic progress. Relying on traditional capacity as demand approaches its limits creates a ceiling for growth. Transitioning to renewable sources is not merely an environmental consideration; it is a structural requirement to decouple economic expansion from the rising costs of traditional power.

The winners in this transition will be those who secure scalable, low-cost energy inputs before capacity constraints force expensive, reactive measures. The losers will be those who assume that technological shifts like AI will somehow reduce the fundamental need for a robust energy foundation.

As the Cayman Islands approaches the limits of its current capacity, the central question is whether the region can integrate renewable energy fast enough to sustain its growth trajectory without inflating the cost of living.