Cuba’s electric future: Lessons learned and pathways forward

A new report from Environmental Defense Fund (EDF) highlights lessons learned and recommendations for the future of Cuba’s electric sector. These include the benefits of Cuba’s decentralized grid, the potential benefits of fueling the grid with more clean energy, and new financing opportunities. The full report is entitled The Cuban Electric Grid, and an abridged version appears in The Electricity Journal. The report builds upon more than a decade of EDF engagement in Cuba.

Here are five key takeaways from the report.

  1. A Decentralized Grid

Most electric grids rely on large, centralized power plants to make electricity. In contrast, a decentralized grid uses distributed generation where electricity is made from more numerous, smaller power sources (such as rooftop solar or a city microgrid).

Distributed grids support resilience and are able to quickly recover from power problems, helping ease crippling outages that contribute to $250 billion in economic losses globally ever year.

Denmark leads the world in installed distributed generation. The second country on that list? Cuba, with 42 percent of its generation capacity – the maximum amount of electricity the country can produce – coming from distributed sources.

Responding to widespread damage from hurricanes, Cuba in the 2000s installed large amounts of distributed generation. Not all distributed generation is equal, however. One critical difference between Denmark and Cuba is that the former’s distributed generation is more modern and made up of clean energy resources, whereas heavily-polluting fuel oil makes up the backbone of Cuba’s power mix.

Since Cuba already relies on a fairly distributed grid, the country may have strong reason to investigate whether cleaner sources of distributed energy could be installed.

  1. Clean energy: A cost-effective way to reach Cuba’s climate goals

Cuba actively participates in international climate agreements, including signing the Paris Climate Agreement. As part of the agreement, the country intends by 2030 to use renewable resources to make 24 percent of its electricity. This is a laudable and praiseworthy goal, but very real issues must be addressed, particularly as Cuba’s renewable resources currently only make up 4 percent of all generation.

Cuba is at a proverbial “fork in the road” between continuing to rely on fuel oil and switching to renewable resources. In addition to being environmentally friendly, clean energy can also be the most cost effective way to make electricity, particularly in island nations. A low-carbon future could secure a low-cost future, as well.

  1. Island economics invite innovative answers 

    Cuba mainly uses heavily-polluting fuel oil to drive its electric sector. This source of electricity comes at a significant price.

Again, Cuba mainly uses heavily-polluting fuel oil to drive its electric sector. This source of electricity comes at a significant price, both financial and in the form of serious public health and environmental risks.

Fuel oil is, simply put, an expensive option to power an electric grid. Costs are generally even higher in island nations like Cuba, which import the majority of their fuel (adding to the ultimate cost).

In previous years Cuba was able to import fuel oil through subsidized, non-commercial barter agreements. Going forward, the country may instead need to rely upon cheaper sources of electricity and commercial contracts, making renewable resources like solar and wind power attractive alternatives.

  1. Opportunities to learn and lead

Countries are increasingly turning to cleaner, more affordable resources to power their electric grids. And although Cuba – and its grid – are unique, there are incredible opportunities to learn and build upon global successes.

Some island nations that traditionally relied on imported fuel have already begun replacing diesel generators with renewable resources. Likewise for Cuba, countries and localities with heavily decentralized grids can be important sources of technical knowledge and experience.

Cuba faced energy shortages in the mid-2000s, and the Cuban government swiftly enacted an energy efficiency program throughout the country.

Knowledge sharing should be a two-way street, and Cuba has already achieved several of its own successes that, if replicable, could be widely beneficial. For example, Cuba faced energy shortages in the mid-2000s, and the Cuban government swiftly enacted an energy efficiency program throughout the country. In only six months, the program succeeded in replacing millions of inefficient appliances with more efficient models. Energy consumption dropped an incredible 3 to 4 percent a year as a result.

  1. Figuring out financing

Cuba has generally imported much of its fuel through non-commercial barter agreements. Moving forward, and potentially without the same support of these agreements, Cuba should consider the array of potential financing options available to spur clean energy resources.

Cuba should consider the array of potential financing options available to spur clean energy resources.

Financing could take a variety of forms, including understanding and resolving foreign investment restrictions, working with international development agencies, crafting guarantees to help mitigate credit risk, entering into public-private partnerships, and joining international entities that can provide access to otherwise unavailable forms of financing. Each potential pathway should be closely evaluated to determine the best way forward.

Cuba has already shown interest in stimulating investment, particularly around renewables. Allowing some renewable projects to be 100 percent foreign owned, for example, underscores the seriousness of the government’s interest in boosting clean energy.

Our report overviews next steps Cuba should consider moving forward. These five quick takeaways only touch the surface, and we invite you to take a closer look in the full report.

Photo by Eva Blue on Unsplash.

This entry was posted in Clean Energy, Energy Financing, Energy Innovation, Grid Modernization. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • About this Blog

    EDF Energy Exchange - Accelerating the clean energy revolution

    EDF's energy experts discuss how to accelerate the transition to a clean, low-carbon energy economy.

    Follow EDFEnergyEX

  • Get new posts by email

    We'll deliver new blog posts to your inbox.

    Subscribe via RSS

  • Categories

  • Authors