Cuba´s bad decisions and energy crisis

Cuba´s bad decisions and energy crisis

HAVANA, June 23th In recent days, blackouts have exceeded twelve hours in the interior of the country. Such a serious situation had not been experienced since the mid-1990s.

The magnitude of the crisis is attested by the changes in the official discourse, which practically no longer speaks of “work in the plants to face the summer in better conditions,” but of “breaks in which they are working intensely.”

The current electrical “situation” began in early April, due to generation deficits of around 200 megawatt-hours (MWh). Since then that deficit has tripled.

The Ministry of Energy and Mines (MINEM) points to the increase in heat — and, therefore, consumption —, breakages in thermoelectric plants and generator sets, and the lack of diesel, as reasons for the crisis. And it is partly right.

But, along with these variables, others must be taken into account. These are erroneous decisions of the last decade that weigh heavily on the current crisis. These are, in my opinion, the five most significant.

I. The non-implementation of the Russian credit for new thermoelectric plants

This year the first of four 200 MWh units paid for with a Russian loan from October 2015 should have been connected to the National Electroenergetic System (SEN). That agreement between the Electricity Conglomerate (UNE) and the Inter RAO Export Company planned for the transfer to Cuba of 1.2 billion euros for the assembly of new units in the Santa Cruz del Norte (Ernesto Guevara) and Mariel (Máximo Gómez) thermoelectric plants.

The investment would have increased by 25% thermal generation capacity, the base of the Cuban electricity industry.

The investment schedule projected that the new blocks would come into operation, successively, between 2022 and 2024. Together with their energy contribution, they would have had the benefit of efficiency.

“The fuel saved…will be exported and sold to pay the income into an account and thus offset the credit,” anticipated the director of Development of Thermal Power Plants of the UNE, Edier Guzmán.

However, the investment never materialized. The last official reference to the new blocks was published in November 2019, when President Miguel Díaz-Canel visited the Santa Cruz del Norte plant. There, the work was “in its initial phase of execution, (in) land preparation and cleaning work.” The note did not explain why after more than three years the project was still in its infancy.

II. The cancellation of the Energy Revolution

“Pinar del Río will never experience blackouts again. Who was going to say it? Regardless of the national supply, 164,000 kilowatts/hour of new generating capacity supports the provincial service… There may be a power failure due to a tree falling on the distribution network…or a hurricane… but in that case, the family unit has a reserve of liquid gas or kerosene to cook their food.”

Thus declared President Fidel Castro on January 17, 2006, in a speech in the capital of Pinar del Rio. Less than a month before the National Assembly of People’s Power had agreed to name 2006 as “Year of the Energy Revolution in Cuba.”

Few programs have had such a great impact on the quality of life of Cuban families. Millions were able to stop cooking with coal or oil and get new home appliances. In parallel, the power generation capacity doubled, with the start-up of thousands of diesel and fuel oil generator sets, and the networks benefited from investments unparalleled in decades; for example, the national production of transformers tripled, reaching 15,000 per year.

But by 2012 the Energy Revolution had already lost its momentum. The interruption of processes of change of articles ― like TV sets ― and the recurring shortage of spare parts were the first symptoms. In March 2014, then Vice President of the Council of Ministers Marino Murillo called for “an immediate solution to the problems associated with the repair of equipment.”

The last success of the Energy Revolution took place in February 2015, when the sale of non-rationed liquefied gas was authorized in the provincial capitals. That decision, which was part of the guidelines of the 6th congress of the Communist Party, was a relief for the SEN, which was once again overloaded by demand.

However, in subsequent years the promise to extend the gas service to all municipalities was not fulfilled, and in March 2019 Cupet suspended the opening of new contracts.

The replacement of the old burners with induction cookers “and other advanced technologies” never materialized. In March of this year, the Camilo Cienfuegos electronics industry enterprise announced that it had reactivated the assembly of induction modules, producing an average of 10,000 per month.

If this rate is maintained, it would take 31 and a half years to sell a module to each of the 3.8 million “family units” in the country.

III. Obstacles to the import of solar panels by the population and their non-sale in Cuba

It was not until the end of July last year that the Ministries of Finance and Prices and Energy and Mines authorized individuals to import photovoltaic panels without tariffs. Until then, the entry of this technology into Cuba had been subject to high customs payments and discretion when deciding which components of the systems were admissible or not.

It was a de facto ban, all the more insane if one takes into account the contributions that panels can make to meeting the national energy demand. In December 2020, the UNE estimated the average consumption of its private customers per year at 2,220 kilowatts/hour (kWh). Little more than the solar radiation received by each square meter of surface in Cuba in that same period: 1,825 kWh, according to a study by the Carlos Rafael Rodríguez University of Cienfuegos.

The same research cites a MINEM project to produce photovoltaic modules of up to 15,000 kWh at the Camilo Cienfuegos enterprise, capable of covering the needs of six average families for a year. Each square meter of photovoltaic cells in operation would save 170 kilograms of oil per year, adds the report.

Supplying part of the domestic consumption with solar energy would represent a notable relief for the SEN. Since 2000, demand from the residential sector has grown three times faster than electricity production. In 2020, homes consumed 55 percent of electricity, well above averages for the region.

However, there is no incentive policy for the installation of photovoltaic panels by private clients or new forms of management. Neither imported nor sold in the country.

IV. The search for FDI only for renewables

Cuba has been publishing its portfolios for Foreign Direct Investment (FDI) Opportunities for a decade. Significantly, in all that time the only projects that have been proposed in the field of electricity are related to renewable sources. This is also the case in the latest edition, which lists eight bioelectric plants and seven photovoltaic parks.

The lack of interest in attracting foreign investors toward thermoelectric generation or generator sets is more inexplicable if it is remembered that both technologies will continue to be the mainstay of the electricity industry in the near future.

The “Policy for the Perspective Development of Renewable Sources and the Efficient Use of Energy,” of the MINEM, has been proposed as the best scenario in which it would achieve that 24 percent of that resource would be obtained in 2030 from non-polluting sources.

The Cuban government has mentioned on several occasions the difficulties it encounters in accessing credit and technology. The search for foreign counterparts could be a viable alternative that, however, is not exploited.

V. The collapse of wages in the electricity sector due to the reorganization

In September 2021, Félix Duarte Ortega, member of the secretariat of the Central Committee of the Party, acknowledged in Nuevitas that from January to August of that year “more than 3,450 workers had dropped out of the National Electroenergetic System.”

His statements are the only official ones that have so far provided information on the subject, and its main cause.

Duarte had traveled to the Diez de Octubre plant to “talk about other salary concepts” which it was intended to interrupt the exodus of the qualified workforce. But after almost a year at that plant, there continues to be job instability among its pending issues.

It is a national problem, assured a worker from the Power Plant Maintenance Enterprise consulted for this note. Although it is common for the brigades of that enterprise to move to other provinces to help with large-scale investments, in the last year and a half they also had to do it for smaller jobs, due to the lack of local specialists to face them.

“We have much better salaries than the direct workers of the plants — up to more than 20,000 pesos per month, but with today’s prices, that money is not enough either. And less, when one has to spend weeks away from home or working after hours,” he commented.