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The Energy Sector in Cuba: Financial and Economic Considerations

The Energy Sector in Cuba: Financial and Economic Considerations. Ju an A. B. Belt Director Office of Infrastructure and Engineering USAID Presented at the Annual Meetings of the Association for the Study of the Cuban Economy (ASCE), Miami, Florida August 2008

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The Energy Sector in Cuba: Financial and Economic Considerations

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  1. The Energy Sector in Cuba:Financial and Economic Considerations Juan A. B. BeltDirectorOffice of Infrastructure and EngineeringUSAID Presented at the Annual Meetings of the Association for the Study of the Cuban Economy (ASCE), Miami, Florida August 2008 The opinions expressed in this presentation are those of the author and do not represent the views of the US Government

  2. The opinions expressed in this presentation are those of the author & do not necessarily represent the views of the US Government All information comes from public sources available in the Internet Special thanks & appreciation to my friend & colleague Luis Velazquez for his crucial support in the preparation of this paper Disclaimer

  3. Outline • Methodology • Comparisons with selected countries in Latin America • Electricity trends in Cuba • Financial & economic aspects of the electricity sector • Sector reform during a transition • Conclusions “Communism is Soviet power plus the electrification of the whole country” Cuba has continued to ignore financial and economic aspects

  4. Oil and Gas Flows 2007 ('000 bpd, MM cfd) Domestic production 24.5 LNG 3,321 GWh 53.4 FO 11,099 GWh 68.0 CO Power Generation (17,621 GWh) 404 GWh 16.4 Diesel Refineries 2,797 GWh Transportation, Industrial, Residential, and Other Fuels 15.9 Diesel 35.0 CO 33.2 RP 51.1 RP PDVSA Imports 102.0

  5. Liquid Fuels: Supply & Uses 2007

  6. Comparisons with Selected Countries Cuba Chile Costa Rica Dominican Republic

  7. GDP/Capita & Electricity 2007 • Chile & Costa Rica have increased GDP/capita much faster than Cuba in 1959-2007; social indicators are similar in the 3 countries (Carmelo Mesa-Lago book) • DR has caught up and its GDP/capita is similar to Cuba’s • All countries essentially have universal coverage • Electricity consumption/capita is similar in Cuba & DR Source: CIA – The World Factbook – https://www.cia.gov/library/publications/the-world-factbook/

  8. Electricity Consumption(kWh/capita) Since 1990 energy consumption in Cuba stagnated Chile Chile, Costa Rica, and Cuba had similar consumption in 1990 Costa Rica Dominican Rep

  9. Cotorro CTE Habana * * CTE Guiteras * CTE Mariel * * * Habana Matanzas Santa Clara * * * * Pinar del Río Cienfuegos Vicente CTE CMC * CTE 10 de Oct * * CTE Felton Camagüey * * Holguín * * * Bayamo Cueto Punta Gorda * CTE Renté Cuba: Trends & Present Financial Issues • Next Topics: • Electricity trends in Cuba • Financial & economic aspects of the electricity sector

  10. Unión Eléctrica – Nominal Installed Capacity (MW) Increase: GENSETS 1,200 MW GAS 400 MW

  11. Gensets & gas-fired plants Electricity Consumption 1958-2007 (GWh) Blackout period “Período especial” Industry & construction 28% lower in 2007 than 1990

  12. Union Electrica: Economic Profit

  13. Union Electrica: Labor Efficiency Comparisons Chile has only 0.7 employees per 1,000 connections

  14. Union Electrica: Total Unit Costs (G, T & D) • Oil & diesel accounts for 70-80% of generation costs; Cuba 5th in the World in 2003 after Yemen, Iraq, Benin & Jamaica in use of liquid fuels for generation • Labor efficiency very low • Technical losses high (16%)

  15. Reform Takes Time & Requires Planning Could be reduced to 3 years

  16. Generation • Cuba needs to diversify energy sources to reduce reliance on liquid fuels • For new generation capacity Cuba should promote greater use of • Gas (will depend on domestic availability) • Coal (will require bulk import handling facilities) • Biofuels including bagazze (would depend largely on revitalization of sugar industry) • Wind (becoming more competitive today) • Mini-hydro (fairly limited) • Solar (costs are still high) • Tariff free imports of machinery & equipment for renewable generation & reasonable tax breaks could reduce over reliance on liquid fuels

  17. Conclusions • Lack of reliable data makes analysis very difficult • Power sector suffered since the collapse of USSR but now blackouts not as common as in 2004-06 • UE rates do not cover economic costs • UE: expensive fuel, low labor productivity & high losses • UEs economic loss almost $3 billion or around 6% of GDP (oil price $140/bbl) • Reform to promote private participation would be necessary during a transition • Well-designed system of incentives to decrease reliance on liquid fuels should be implemented

  18. Any questions? Juan A. B. Belt Director Office of Infrastructure and Engineering (I&E) Bureau for Economic Growth, Agriculture, & Trade (EGAT) US Agency for International Development (USAID) E-mail: jubelt@usaid.gov

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