Cuba’s Energy Crisis: Interview with Jorge Piñon
Jorge Piñon, Senior Research Fellow The University of Texas at Austin Energy Institute, shares his thoughts on the current state of Cuba’s energy crisis, its causes, and possible solutions.
September 2023
*The views and opinions expressed by the interviewees are their own and do not necessarily reflect the views or positions of CDA.
CEDA: Cuba is facing a severe and ongoing energy crisis that has significantly impacted the country's economy, daily life, and overall development. The crisis has been characterized by persistent shortages of fuel, electricity, and other energy resources, leading to widespread disruptions in various sectors. Can you provide an overview of the current energy crisis in Cuba and its main causes? Why is the crisis seemingly so bad? Or is it?
Cuba’s electric grid, the Servicio Eléctrico Nacional (SEN), faces far-reaching structural challenges that threaten the economic and social development of the Island. The infrastructure of its high sulfur oil-fired base load thermoelectric and distributed generation is collapsing due to its over forty years of operation and the lack of scheduled and capital maintenance.
Today, according to Cuba’s Union Electrica UNE, less than 50 percent of the sector's total oil thermoelectric based load and distributed generation capacity is operational, which is resulting in blackouts of 8 to 10 hours throughout the country.
To make matters worse, 85 percent of Cuba's thermoelectric baseload generation is fueled by high sulfur oil, which is highly corrosive with vanadium and sulfur-rich-compounds that produce ash deposits on components such as heat exchangers, boilers, or turbine blades. This situation causes more damage to the already weakened infrastructure.
It is a vicious maintenance cycle with no end in sight. Cuba cannot move forward toward a reliable, clean, and secure SEN with temporary band-aid solutions, such as the recently leased oil-fired floating power stations, to what are structural problems.
Access to efficient and clean energy is needed to ensure a positive impact on people and their environment. Electricity is essential for the well-being of households and commercial activities, as well as the quality of most public services, such as health and education, that depend on it.
There is no short-term solution to Cuba's structural electric power generation challenges. The only solution is the total recapitalization of its base load, distributed generation, and renewable electric power matrix. Regrettably, it would take time and as much as $8 to 10 billion dollars of investments.
Cuba also needs to meet the challenges of global warming and reduce its carbon footprint by reaching its optimistic 2030 target of 37 percent share of renewables; but also, by lowering the greenhouse gasses and pollutant emissions generated by the burning of highly contaminating high sulfur liquid petroleum fuels.
CEDA: Cuban officials have repeatedly said that there is no short-term solution to the frequent blackouts and failing power grid. What measures has the Cuban government implemented to address the energy crisis and mitigate its effects? Have they been successful?
NONE. NO. They don’t have any money, nor the economic model that would attract foreign investors and also allow its citizens to afford the true cost of clean and reliable electricity.
Cuba has to learn from Vietnam’s economic model. Stop fighting the “ogre” – the embargo. Face it, it is codified legislation and only Congress can change it.
Going back to my learnings at Shell and BP, project management is key. President Díaz-Canel spoke to this upon his return from China last year, as quoted in CubaDebate: “…our commitment has to be fulfilled well, how we do things well, how we take advantage of opportunities, how we are efficient, how we do not waste resources, and how we ensure that investments have an adequate return, and how we are increasingly more serious and also more effective in the projects that we propose to continue expanding cooperation.”
CEDA: Following the devastation caused by Hurricane Ian last fall, you said that Cuba’s power grid was “on life support.” Given your experience in the energy sector and studying Cuba, what steps do you believe Cuba should take to address its energy crisis and ensure energy security in Cuba? Can Cuba overcome the crisis?
As I said earlier, Cuba’s SEN’s high sulfur liquid petroleum fuels fired base load electric power infrastructure is old, tired, and highly inefficient. Years and billions of dollars would be needed to reconstruct its thermoelectric baseload and distributed generating capacity and achieve the government's stated goal of 37 percent of renewables within its electric power sector energy matrix.
Cuba faces two significant obstacles in recapitalizing its power system: time and money. To overcome these obstacles, the government must decentralize its economic model and resolve its political differences with the United States.
Cuba has to abandon its failed Soviet-style centralized command economic model based on state ownership of all means of production and industrial transformation. It should welcome a market economic system in which the decisions regarding investments and production are guided by supply and demand market forces (following Vietnam’s model). This is the real impediment for foreign investors to invest in energy generation: who is going to pay for it? The government is bankrupt and the Cuban consumer does not have the disposable income to pay for the real cost of electricity; investors would only invest if they receive an acceptable rate of return for their capital investment and to cover political risks.
Also, a political solution has to be found to The Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 (Helms–Burton Act), which codified into law several economic, financial, and commercial sanctions against U.S. and foreign companies trading with Cuba.
CEDA: What role does renewable energy play in Cuba’s energy mix, and are there efforts to expand its usage or diversify energy sources during this crisis?
If we look at the breakdown of Cuba’s 2030 target of 37 percent share of renewables, it’s regrettably a pipe-dream.
Solar 2104 megawatts (MW)
Wind 807 MW
Biomass 612 MW
Hydro 56MW
Total 3579 MW 37%
Fossil fuels 6071 MW 63%
The question is: Who is going to pay for it?
As for efforts to expand, biomass (any living or recently living organic matter, such as sugar cane, used for fuel) is out of the equation. For instance, a recent $186 million investment in a 65MW biomass plant at the Ciro Redondo sugar mill is not operating. Why? There is no sugarcane! La Herradura 1 wind project has been in its developing stage for over 8 years with the support of Chinese financing, Chinese equipment and technologies (GoldWind), and Chinese supervisory personnel.
CEDA: Cuba has a history of depending on global partners for subsidized fuel imports, namely with the Soviet Union and Venezuela. How has this dynamic impacted their current situation? Is there a future in which Cuba escapes this dynamic?
Cuba has to be very careful not to lock itself into inefficient technologies or outmoded power systems from countries that offer preferential financing terms and conditions or commit the government to politically fuel supply relationships such as with Russia or Venezuela.
Today, Europe is learning the hard way what happens to an economy dependent on fossil fuels supplied and controlled by a single import source. Europe is now paying the price of “putting all their eggs in one basket” with Russia.
Cuba also has to be sure that new electric power plants don't become “stranded technologies”; where the impact of new and more efficient future technology availability causes fossil fuel power plants to be decommissioned or underused.
For example, one path towards a reduced carbon energy system being discussed today is the use of hydrogen as a gas turbine fuel. Hydrogen-fueled gas turbines could potentially allow both new and existing power plants to continue operating for decades to come while reducing their carbon emissions.
Liquified natural gas (LNG) could play an important role in Cuba’s future energy mix. Cuba needs to decarbonize its electric power generation while still providing reliable and cost-competitive power by investing in technologies that will make this possible while avoiding stranded assets as technologies change.