Cuba's power revolution

21 September 2009
Written by: Nicholas Newman

Cuba has for a long time relied on Russiato bolster its economy and electricity generation. But since the collapse of the Soviet bloc it has had to develop its own electricity market including oil and gas fired power stations and a move to renewable energy.

For tourists in Cuba, the scene of ancient American cars parked on the roadside, darkened streets and houses, and being able to see the stars clearly above old Havana may look romantic, but to the ordinary Cuban it is just another example of the deep-seated energy problems that face this fiercely independent country.

Nevertheless, a revolution, hurricanes, trade embargoes, world economic crises and the end of the Soviet Union have not stopped Cuba's energy sector from delivering a limited supply of power to the nation. In 1991, the country experienced its biggest challenge - 'la problematica energetica' and with the end of Soviet subsidies Cuba was vulnerable again to American trade embargoes resulting in "years of fuel shortages", observes energy specialist Mario Avila at Cubaenergia.

The $5bn per annum Soviet Aid, cheap oil and generous investment in the energy sector came to an end in 1991, with Moscow insisting that Cuba pay competitive prices for Russian investment goods and services. At a stroke, Havana lost the export market for its overpriced and inefficient sugar industry.

Until 1991, Cuba's centrally planned economy depended on Eastern Europe for 80 per cent of its trade. Thus between 1991 and 1993 imports fell by 50 per cent and crude oil imports by 20 per cent. This resulted in the energy sector turning into a "shambles", observes Jorge Pinion, an Energy Fellow at Miami University, as the country could no longer afford to import vital spare parts or imported fuel for its power stations.

During this period, the state electricity utility Union Electrica was forced to impose strict rationing to eke out supplies, and residents in Havana were only able to receive power for a couple of hours a week. However, by 1993 the economy began to improve as domestic crude oil production rose and limited oil imports began to increase, though even today Cuban oil consumption has still not returned to pre-1990 levels.

As a result of these geopolitical factors Havana was forced to change its approach to its many political and social problems. No longer was the classic soviet approach suitable. Cuba was forced to find its own solution; this resulted in a more flexible approach that was a cocktail of communism and business pragmatism, though still a long way from the 'market socialism' as practiced by China or Vietnam.

National energy

Part of this new approach was the institution of a national energy programme (FNE), aimed at reducing Cuba's energy imports and maximising the benefits of domestic energy resources. The results that Cuba has achieved from implementing the new energy programme have been remarkable - but would have been even better had it fully completed its market socialism reforms.

In addition, Cuba's access to American investment and advanced technology has been embargoed by Washington since 1960. Thus, after 1991, Havana had very limited resources available for investment, and what was available was focused on oil exploration, food and biotech sectors.

Demand management posed many problems because for many years Cuba refused to ration its energy supplies by use of price mechanisms. This meant for many users there were few economic incentives to use energy efficiently. Apart from rationing supplies Cuba launched, in 1993, a massive public education campaign to save energy.

Throughout the country, on advertising hoardings, in the media and the workplace, there began an ongoing campaign to achieve this end. Together with help of the Chinese government, light bulbs, kitchen appliances and water heaters were replaced with more efficient (yet dated) Chinese technology, either using electricity from the national grid or alternative fuel sources such as solar or, increasingly, from natural gas produced as a by-product from Cuba's growing offshore oil industry.

It soon became clear that such measures were inadequate to control growth in demand, and more desperate policies were implemented. This involved the introduction of electricity meters to individual households and the introduction of a stepped pricing mechanism for consumers, to penalise wasteful energy use. In the workplace strict energy usage plans were introduced. Organisations that failed to meet their targets were fined heavily and their electricity cut off for lengthy periods. In addition, Havana restructured the economy from one dominated by energy-intensive industries such as the sugar industry, mining and machinery to low-energy usage industries like tourism, biotech and remittances from Cubans working in America and elsewhere in the world.

Since 1991, limited progress in improving oil and gas supplies to Cuba's economy has been made, though hindered by restrictions on access to American technology and finance. Even so Cuba was able to attract European, Asian, Canadian and Latin American investment in all aspects of its oil fields. This investment has resulted in Cuba meeting 50 per cent of its energy needs from domestic sources, according to vice president Carlos Lage. In addition, Cuba has supplemented its oil needs both by importing mainly Orinoco Crude from Venezuela on favourable terms, and some high-quality oil from Canada.

Oil-fired power stations

One of the first problems that required urgent resolution was the unreliability of its existing network of seven ageing 3GW Soviet-built fuel-hungry oil-fired power stations, which still provided, in 2007, over 51 per cent of the country's total installed generating capacity. Before the economic crisis of 1991, these plants worked 80 per cent of the time, which fell to 50 per cent by 1993-94.

As a result of being denied access after 1991 to supporting Soviet technology and cheap oil supplies these plants were forced to use domestically produced heavy crude oil. However, as a result of foreign investment in domestic oil production and the recent completion of the Cienfuegos refinery and oil bunkering facilities at the port of Matanzas, Cuba's oil-fired power stations will soon have access to better quality oil, thus improving the reliability of electrical supplies, suggests Jorge Pinion. However, Cuba must still face the hard decisions of replacing these time expired plants.

Natural gas-powered stations

A new source of reliable energy arose; in 1997, Cuba began to utilise the natural gas that had previously flared off in the production of oil from its offshore fields. This meant the gas was brought on shore and processed, and then delivered to over a million people in the Greater Havana area for domestic use. In addition, natural gas is now being used to generate 376MW of electricity by 2007, for sale to Electrica. Eventually, this private-public partnership between Canadian energy company Sherritt International and state oil company CUPET and Union Electrica aims to supply 20 per cent of the country's electricity in this manner.

A new energy revolution

2004 proved a turning point in Cuba's 'La Revolucion Energetica'. World economic circumstances had forced Cuba to cut back on fuel imports, and one of its main oil-fired power stations had to be taken off line for several months in order to tackle severe mechanical problems. Emily Morris, director at the International Institute for the Study of Cuba at London Metropolitan University, reported: "the national grid system collapsed in 2004". Jorge Pinion says this is not surprising: "given that the system had been deteriorating because of lack of maintenance".

Nor did it help that Cuba experienced some of the worst hurricanes in its history at this time: winds of 145 mph cut the east-west national grid several times, leaving the country's regions cut off from major power plants for several weeks, and, in Havana, blackouts lasting six hours a day occurred. The resultant damage cost the island's economy $200m in lost production alone in 2004, reports the Havana Journal. Union Electrica instituted a programme in 2006 costing $362m to improve the national grid's reliability and reduced transmission losses.

Distributed energy networks

2004 saw a dramatic change in policy that was to prove revolutionary, which resulted in improved energy efficiency through use of new technology, energy planning and the price mechanism. However, the most revolutionary part of this policy was not the increased emphasis on renewable energy, but the introduction of distributed electricity generation networks. This system involves a large number of clusters of small-scale power plants linked to the national grid throughout the country at strategic points using a variety of technologies and types of fuel from diesel to wind power. Today, more than 40 per cent of the country's installed electricity production comes from this source, reports Maria Avila.

Such a system has several advantages, including having a more robust system able to cope better with mechanical breakdowns and natural disasters. It also has the added advantage over large power plants in being relatively cheap and quick to install. Cuba is becoming less dependent on costly large power plants and more able to adjust its fuel mix to meet changes in energy supplies and natural conditions.

However, the disadvantage of this approach, suggests Jorge Pinion, is that "it fails to cater for Cuba's long-term energy challenges that will arise from future economic growth and rising living standards". Emily Morris adds: "The recent investments solved many of the short-term problems, as evidenced by the lack of power cuts over the past year. However, the renewed energy-saving measures demanded by the authorities in the past couple of months are proof that the medium to long-term energy problems are not solved. Cuba still relies on imported oil."

Today's main source of distributed generating capacity comes from generators fuelled by diesel supplying 1280MW and 540MW from oil fuel. In addition, combined heat power plants provide 529MW of excess power to the grid. There are also 6,000 emergency mini portable generators with total capacity of 690MW located at economically and socially important centres.

Renewables

The contribution made by renewables is modest, though there is plenty of potential. So far, the output at 69MW is limited. Morris comments: "Renewables are not huge. So far, bagasse is the most important, while hydro, solar and wind are very small." Bagasse is gas derived from sugar cane waste. This contribution could be higher if Cuba is allowed to produce ethanol, for export to the USA, from sugar cane.

The use of other types of renewables has proved difficult due to droughts, hurricanes and floods. In some cases hurricanes have caused considerable damage to wind farms. Researchers are examining wind farm plant that can be safely packed away before such storms.

Also the year-on-year droughts experienced by Cuba's eastern provinces have severely limited hydro-electric power generation.

Clearly, Cuba has made significant progress in resolving many of its energy problems. However, if future economic growth and a rising standard of living is to be achieved, a competitively priced, environmentally sound and long-term economic and politically sound strategy must be created. This will involve a new relationship with its neighbours and in this way provide national and foreign firms with investment opportunities essential for further progress.

 

Oil sector

It is not widely known that Cuba has its own oil fields. There are predictions from the US Geological Survey (USGS) that under its seabed in the Gulf of Mexico could exist 4.6 billion barrels of undiscovered oil reserves, while others have suggested even higher figures. If the conservative estimate of the USGS is accurate, Havana could become a significant regional net exporter of oil in the future. It is not surprising energy companies including Norsk Hydro, Sherritt International and Petrobras are taking an active interest in the country.

Currently, the domestic offshore oil fields produce 60,000 bbl/ d due to the $1 billion in foreign investment in the industry since 1991. The rest of its oil needs are at present met from mainly donated oil imports from its ally Venezuela.

 How other countries are benefiting

The achievements of the Cuban energy revolution have spread abroad with the work of Cuba's energy aid workers. Cuba has taught people in developing countries about the hard lessons it has learnt in achieving its energy aims. Already Cuban aid workers have installed over two million energy-efficient light bulbs in Haiti alone and installed over 1MW of solar electric panels in Venezuela, Bolivia, Honduras, South Africa, Mali and Lesotho, notes Laurie Guevara-Stone, the international programme manager at Solar Energy International.

Originally published in http://eandt.theiet.org/magazine/2009/16/cuba-power-revolution.cfm

 

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