Unlocking the Future of Renewable Energy in Cuba

The island nation of Cuba, located in the Caribbean, is at a critical juncture in its energy development. Cuba has considerable renewable energy resources, including sunlight, wind and biomass. However, its energy grid relies heavily on imported fossil fuels, especially from Venezuela, making it vulnerable to price volatility, geopolitical changes and concerns over energy security.

Renewable energy in Cuba has the potential to be about more than just technology; it can offer economic independence, a climate-resilient future and sustainable development opportunities in a country where energy development has long been constrained by existing energy infrastructure and a lack of foreign investment options.

Renewable Energy in Cuba
Currently, renewable energy sources contribute to less than 5% of Cuba’s total electricity generation. This is incredibly low compared to the government’s target of 24% renewable energy generation by 2030. Cuba’s energy infrastructure remains outdated, inefficient and frequently experiences breakdowns. The result is regular blackouts and, in rural areas particularly, energy poverty complicating any efforts for economic activity and the modernization of living standards.

Notably, Cuba has significant untapped solar capacity, receiving an average of 5.4 kWh/m2 per day and significant capability in wind, biomass and small hydro. The potential for real transformation is incredible. However, the challenge is fostering the conditions to attract investment, skills, capabilities and partnerships to harness that potential.

For investors, Cuba’s renewable energy sector is a largely untapped multibillion-dollar market that could encourage local job development, reduce carbon emissions and modernize the energy grid. If successful, Cuba could gain some degree of economic sovereignty through a low-carbon energy project.

However, foreign investors face numerous complications and sometimes, impenetrable obstacles, including red tape, legal uncertainty and financing. Furthermore, U.S. sanctions present an additional layer of difficulty in exploring partnership possibilities, which, in many cases, innovative financing and creative partnerships can help to advance projects.

Public-Private Partnerships Gaining Traction
In light of these challenges, there are hopeful signs on the horizon. Public-private partnerships (PPPs) are starting to emerge. These partnerships allow foreign firms to contribute equity and technology as partners with the Cuban state-owned enterprise. New financing options, including green bonds and blended finance models, may provide a pathway to mitigate the risks of investing in Cuba’s renewable energy market.

Cross-border projects, particularly with European countries and Latin American neighbors, demonstrated a potential for scaling renewable projects. For example, Spanish and Chinese firms have engaged in various levels of partnership with Cuba, committing to constructing solar parks and wind farms. These cross-border collaborations have revived the feasibility of industrial-scale renewable energy projects across the Cuban landscape.

What Cuba Needs for a Successful Energy Transition
Interviews with Cuban engineers and energy policy specialists suggest that Cuba’s transformation to renewable energy will depend on three factors. The first is regulatory reform, which could streamline the approval of renewable energy projects by dealing with the current layers of licensing and approval that can be cumbersome.

The second relates to financing mechanisms, which may require the government to establish ways to de-risk investments for foreign entities interested in participating in the energy transformation. Third is capacity building, which includes developing a local skilled workforce.

There are lessons that Cuba can learn from other emerging economies, such as Costa Rica’s remarkable transition to renewables to achieve 99% of its electricity from renewables and Uruguay’s successful public-private partnerships.

Socioeconomic Benefits of a Greener Grid
Cuba’s renewable energy implications extend beyond electricity. From a microeconomic perspective, a greener grid could mean lower household costs. This could have a ripple effect in reducing risk from air pollution-related health outcomes, creating thousands of new jobs in installation, maintenance and manufacturing.

From a macroeconomic perspective, decentralized power using solar and biomass could facilitate reliable access to power in rural regions. It could unlock local economic development through agricultural growth, small and micro-enterprises development and improve educational delivery.

In urban agglomerations like Havana and Santiago de Cuba, renewable-powered public transit, such as electric vehicles or other clean energy systems, offers a promising shift in urban mobility. Paired with new energy-efficient infrastructure designed to meet local environmental conditions, these developments could significantly transform both the economy and the environment in these regions.

Yet, any sustained progress will rely on long-term commitments and funding. Most of Cuba’s renewable energy projects are funded through one-off grants, pilot programs or developmental loans and lack funding to assist with continued operational costs. Cuba could struggle to reach its renewable energy commitments and aims without stable policy frameworks and continued periodic financial assistance from rich states and multilateral institutions.

Conclusion
Cuba’s renewable energy sector may be nascent, but the possibilities are considerable. Through the appropriate policy alterations, financial instruments and international arrangements, Cuba may become a model of clean energy development in the Caribbean. The opportunities remain largely unrealized, coolly waiting for much political, economic and technological convergence, potentially to reshape Cuba’s energy future.

– Sophia Scelza

Sophia is based in Lindenhurst, NY, USA and focuses on Business and Global Health for The Borgen Project.