Economic dimension

The drastic changes that affected the Cuban energy system were driven mainly by economic changes brought about by the crisis that hit the country in the early 1990s. Other driving forces included urbanization processes, the decrease in demographic growth rates, the development of both the education and health systems, and the increase in life expectancy.

2.2.8.1. Activity effects Population and GDP

The Cuban population has doubled in the past 50 years. The annual growth rates per thousand inhabitants were at or above 10 until 1990. The crisis of the 1990s, combined with higher levels of education, improved medical care, sexual education programmes, migration, etc., led to a decrease to the very low value of 2.7 in 2003 (Fig. 2.6).

From 1970 to 1990, the GDP at 1997 constant prices⁹ increased 2.7 times.

However, during the crisis, activity levels decreased and GDP fell by 33% from

9 Exchange rate 2005: 1 peso = US $0.9259.

0 2 4 6 8 10 12

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003

Population (million)

0 5 10 15 20 25 30

GDP (billion CUP1997)

Population GDP

FIG. 2.6. Population and GDP. Source: Refs [2.1–2.9].

1990 to 1993. The economic recovery that began in 1994 put a stop to the decline of the previous years, and between 1995 and 2003 the average annual GDP growth rate was 4.1%. Nonetheless, GDP in 2003 was still 2% lower than in 1990 (Fig. 2.7).

Energy use per capita

The effects of economic and social activities on energy use are reflected in a variety of ways, including the per capita use of different types of energy.

Table 2.8 and Fig. 2.7 present Cuba’s per capita energy use for the period 1970–

2003. Figure 2.7 also includes the corresponding per capita GDP.

The economic and social development of the 1970s and 1980s led to a sustained increase in per capita electricity use rates, which were 2.4 times higher in 1990 than in 1970. The TPES per capita increased only moderately until 1985 (1.3 times) and then followed a decreasing trend. Biomass use per capita (which includes fuelwood and bagasse from sugarcane) was highest in 1975 and then progressively decreased up to 2003 with only a temporary increase around the 1990–1995 crisis period. By 2003, the use of biomass per capita had decreased five times with respect to 1970 levels (Fig. 2.7).

0 1 2 3

1970 1974 1978 1982 1986 1990 1994 1998 2002

1970 = 1

TPES/cap Electricity/cap Final use/cap

Biomass/cap GDP/cap

FIG. 2.7. Indices of energy use and GDP per capita. Source: Authors’ elaboration from Refs [2.1–2.9].

TABLE 2.8. ENERGY USE PER CAPITA (Authors’ elaboration from Refs [2.1–2.9]) 197019751980198519901995200020022003 TPES (GJ/cap)62.858.070.784.569.742.547.743.342.4 Final energy use (GJ/cap)50.344.549.748.654.629.028.724.323.0 Electricity (kW·h/cap)463.0589.1884.5977.51120.8841.01052.51097.01106.1 Household energy (GJ/cap)3.64.24.85.44.92.93.23.03.5 Household electricity (kW·h/cap)113.0139.9215.2264.2310.1301.5379.0436.9456.2

In general, owing to the crisis in the 1990s, per capita energy use (TPES, final and electricity) fell between 1990 and 1993. The lack of fuels during this period was compensated in part by an increase in the use of fuelwood (Fig. 2.7).

The result of economic and energy efficiency programmes implemented in Cuba since 1995 can be observed in the slight decreases in final energy use per capita during recent years (Table 2.8). In 2003, final energy use per capita was still 2.2 times lower than in 1970.

Figure 2.8 shows the relation between per capita GDP and per capita electricity use. The effect of the 1990 crisis is reflected in these indicators during 1990–1994. In general, per capita electricity use increased through the 1980s while the per capita GDP was increasing. However, by 1990 a reverse trend was observed in both indicators which lasted until 1994. Then, with the economic recovery, both indicators experienced an increasing trend, but by 2003 per capita electricity use and the per capita GDP still remained lower than the 1990 level.

The energy intensity (TPES per unit of GDP) decreased from 1970 to 1992 for a number of reasons (Fig. 2.9). First, during the 1970s and 1980s, GDP grew more rapidly than the TPES. Despite being inherently energy intensive, the accelerated expansion of the industrial sector resulted in higher rates value added than industrial energy demand. Later, in the 1990s, at the beginning of the crisis, energy intensity continued its decline – now due to a faster reduction in the TPES than the drop in GDP. Between 1990 and 1994, the TPES dropped by 38% because energy imports were reduced by 45% and domestic primary

400 600 800 1000 1200

1000 1500 2000 2500 3000 3500 4000

GDP1997 per capita (CUP/cap)

Electricity use per capita (kW·h/cap)

1975

1985 2003 1990

1980

1993

1970

2000

FIG. 2.8. Electricity use per capita versus GDP per capita. Source: Authors’ elaboration from Refs [2.1–2.9].

energy production decreased by 27%. On the other hand, although some energy intensive industries were closed and others reduced their production, the tourism sector increased its activity, thus limiting the drop in total GDP to 31%. After the most critical year of the crisis (1993) and with the beginning of the economic recovery in 1994, there was a slight increase in the energy intensity of the TPES owing to the rise in domestic crude oil and associated gas production. However, this intensity later dropped as a result of structural changes in the overall economy and the implementation of energy conservation and efficiency programmes, reaching the value of 16.8 GJ/1000 pesos (0.4 toe/

1000 pesos) in 2003.

Figure 2.9 shows that electricity intensity increased throughout the considered period, experiencing major fluctuations in the 1980s (from 0.38 in 1970 to 0.45 in 1994 kW·h/peso). Electricity conservation programmes, reductions in electricity losses and an increase in efficiency contributed to maintaining electricity intensity stable at around the same level between 1997 and 2003 (0.44–0.45 kW·h/peso).

The relation between the electricity intensity and the per capita GDP is presented in Fig. 2.10. From 1970 to 1985, although the per capita GDP followed an increasing trend, the electricity intensity fluctuated. During the crisis, the per capita GDP contracted while the electricity intensity increased.

From 1995 to 2003, GDP started to grow again while electricity intensity remained fairly constant. The different energy programmes implemented

0.1 0.2 0.3 0.4 0.5

1970 1974 1978 1982 1986 1990 1994 1998 2002

Electricity intensity (kW·h/CUP)

10 20 30 40 50

Energy intensity of TPES 3 CUP)

Electricity intensity Energy intensity

(GJ/10

FIG. 2.9. TPES and electricity intensities. Source: Authors’ elaboration from Refs [2.1–2.9].

during the economic recovery helped to keep electricity intensity at practically the same level as in the last several years.

2.2.8.2. Structural effects

The Cuban economy has experienced significant structural changes in the last several decades. Until the middle of the 20th century, the country’s economy was based almost entirely on agricultural production, with only moderate industrial development limited to activities related to the sugar industry. Industrialization began in 1959, with the development of energy intensive industries such as nickel, steel, cement and engineering. The industrial sector represented 34% of the value added in 1990, while services represented 50%, agriculture 10% and transport 6%¹⁰ (Fig. 2.11).

During the crisis of the 1990s, the industrial sector contracted for a number of reasons, including the partial closure of certain industries and the decline in production due to the lack of raw materials. During this time, the services sector played a more predominant role. The share of agriculture in GDP decreased, and that of transport increased. In 2003, industry represented only 21% of GDP, services increased to 65%, agriculture dropped to 6% and

10 GDP data disaggregated by sector are not available for years prior to 1990.

0.2 0.3 0.4 0.5 0.6

1200 1500 1800 2100 2400 2700 3000

GDP per capita (CUP1997/cap)

Electricity intensity (kW·h/CUP)

1970

1985 1990 2003

1975 1993

1980

1995 2000

FIG. 2.10. Electricity intensity and GDP per capita. Source: Authors’ elaboration from Refs [2.1–2.9].

transport increased slightly to 8% (Fig. 2.11). Structural changes also took place within these sectors¹¹ and major changes occurred as a result of an increase in tourism activities and improvements in biotechnology, education and health.

Figure 2.12 shows the final energy intensity by sector. All of the sectoral intensities show declining trends during the considered period. The industrial sector with the highest intensity decreased by 19% between 1990 and 2003.

Partial data for the transport sector show its intensity dropping by 74%.¹² The declining trends in sectoral energy intensities result from a more efficient use of limited fuels during the 1990s followed by effective programmes implemented in energy conservation and efficiency.

11 Structural changes in economic sectors are described in Section 5.

12 Available transport data do not represent the whole transport sector but only the transport activities of MITRANS.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Industry Transport Agriculture Services

FIG. 2.11. Value added by sector. Source: Refs [2.1–2.9].

2.2.8.3. Technological effects Supply side

The increase in the production and use of domestic crude oil for electricity generation and for cement and nickel production has been signif-icant. In 2003, almost all electricity was generated using domestic fuels, which is an important achievement of the Government’s policy to reduce the economy’s dependence on imported fuel. In 1998, associated gas (which had previously been flared) began to be used for electricity generation and for city gas production. In addition, the modernization and modification of the thermal power plants have made it possible to reduce specific fuel consumption.

Maintenance work, investments in electric transmission lines and measures adopted to reduce commercial losses have allowed the reduction of total electricity losses from 23.2% in 1997 to 17.5% in 2003. Refining capacity has also been rehabilitated and fuel transport has been significantly improved through the construction of oil and gas pipelines that connect the most important supply points and consumption centres.

0 10 20 30 40 50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

GJ/103 CUP1997

Industry Transport Agriculture Services

FIG. 2.12. Final energy intensity, by sector. Source: Authors’ elaboration from Refs [2.1–2.9].

Demand side

In 2002, a new electricity tariff system¹³ came into force that encouraged a more rational use of electricity by consumers. However, in the public and household sectors, there is still room for improvement, as in these sectors the electricity is subsidized.

In the framework of the Cuban Electricity Rational Use Programme (PAEC), load supervisors assigned to the largest users contribute to achieving reductions in electricity demand. The benefits obtained from PAEC were used to subsidize the sale of more efficient equipment — such as compact lamps, and fluorescent and energy efficient light bulbs — to the public, with the aim of advancing rational energy use. The programme included the replacement of refrigerator gaskets and other parts, which also contributed to the reduction in electricity demand. In this way, PAEC has had a significant impact on reducing electricity demand and this has allowed the avoidance or rather postponement of the installation of more than 150 MW of electric generating capacity.