Cut bacon into 1/4-inch thick strips (lardons). Slice squash and set aside.
Cook bacon lardons in a saucepan over medium heat until crispy, 5 to 7 minutes.
Add squash, onion, sugar, salt, and pepper to the bacon and bacon grease. Add enough water to cover and cook over medium-low heat for 45 minutes. Much of the water will evaporate; add more if needed.