A new energy for Cuba

A new energy for Cuba

Arianna Pescini
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At the center of a momentous political and economic change, the island is now also planning out its energy future, focusing on renewables and on foreign capital

The government of Fidel Castro already made an attempt to reduce Cuba's oil and gas dependency years ago, ushering in the so-called state controlled "energy revolution" which improved the electrification of the country and led to the widespread distribution of energy saving lamps. However, fossil fuels still today account for 95% of the sources of supply for producing electricity on the island. Now Havana is opening up to foreign investors to achieve an ambitious project: to attain 24% of electricity from clean sources by 2030 (the current figure is 4%) by promoting solar-, wind and hydropower as well as biomass. A forward-thinking choice in a particular period for the oil market, on which Cuba has depended over the past decades.

Venezuela: the unknown quantity

#Cuba is planning an energy future, focusing on renewables and on foreign capital #renewables

Raul Castro and his own will have to start by overhauling the traditional energy sector. The oil the island needs in fact come for more than 60 per cent from abroad, aboveall from Venezuela. This is where, via favourable agreements, the mineral oil resources come from which are then processed in local refineries. Often, the communist state paid part of the imports by sending military personnel, doctors, and teachers to Caracas. Of 140 thousand barrels of crude oil stored every day, only 50 thousand are extracted from Cuban soil, the vast majority of which are not used for primary energy sectors. The drop in prices and the crisis in the South American country have changed everything, bringing back the fear of the deficit days following the collapse of the Soviet Union: "Cuba is reducing its imports of oil from Venezuela - explains Carlos St. James, senior executive of the company Santiago & Sinclair, LLC and a member of the Latin America & Caribbean Council on Renewable Energy - The likely end of the relationship with Caracas is a cause for great worry, but it is also true that there are many countries like Russia, Britain, the US and France, who are keen to increase Cuban crude oil resources". Crude oil which among other things is not of high quality. The Caribbean island has a better extraction potential offshore, which though for the time being however, does not appear to be that appetising. "The offshore fossil fields are located to the north, at great depths, and their exploitation would prove costly. Hence for the time being the eligible investors and the Havana government are geared to favouring onshore development." In this climate of uncertainty Cuba seeks to exploit the new political and economic course by also looking towards clean energy.

"The availability of natural resources such as wind and the sun is huge and so to is that of is sugar cane, whose residues deriving from crushing can be used to produce electricity"

Objective + 2GW

The country’s total energy capacity is currently now only 6 GW, just above Puerto Rico, that though has a third of Cuba’s population. The objective is to add 2.1 GW of power through renewable sources, building solar power plants, wind farms and plants producing biomass, which already contribute 80% to the alternative energy developed so far, fundamental in providing power to the sugar processing industry: "The availability of natural resources such as wind and the sun is huge - continues St. James – and so to is that of sugar cane, the residues of which deriving from the crushing can be used to produce electricity. One of the first joint ventures for a biomass power plant, the Havana Energy Ltd, has British origins and dates back to 2010 ". Recently though another British company, the Hive Energy Company, signed an agreement with the state-owned Union Electrica de Cuba (UNE) for the construction of a 50 MW PV panel power plant. The structure will be completed by 2018 and will produce more than 93 GW/h of electricity a year. The island has for some time already had a solar park near the city of Cienfuegos (14 thousand panels) and a 4.5 MW facility near the US naval base at Guantanamo.

Carlos St. James

Carlos St. James

Managing Director of Santiago & Sinclair, LLC

Carlos St. James is the Managing Director of Santiago & Sinclair, LLC, which provides advisory services for investors and technology providers seeking to enter and expand their presence into Latin America. He is also the chairman of the Middle East-Americas Energy Council and a board member of the Latin America and Caribbean Council on Renewable Energy. He obtained his undergraduate degree in international economics from DePaul University (Chicago, USA) and his masters in international relations from the Fletcher School at Tufts University (Boston, USA).

Investments

According to an official government estimate, Cuba’s energy objectives require an investment of 3.5 billion dollars, but the fund-raising and the banking situation are not that simple, nor are they solvable in a short period of time. "The Republic's policy in this area is changing radically - underlines St. James - and is now more open to sources of foreign capital. But let us not forget that Cuba does not belong to any international financial organization, such as the World Bank, the Inter-American Development Bank or the Caribbean Development Bank. Hence extensive work is needed to ensure that foreign investors receive proposals, incentives and guarantees. This is also why the government is preparing to sign power purchase agreements (PPAs) for 25 years, in US dollars. Updates on the situation will be provided at the The Havana Investment Forum in late October, which will also be attended by the Santiago & Sinclair, LLC. "What is needed is therefore a clear and forward-looking energy plan. An opportunity for the island but also for future business partners, which might include numerous Latin American countries and even the United States itself, as soon as the restrictive rules of the market are definitively changed.