Institutional dimension

Structural changes and reforms stated in the Law on Foreign Investments were carried out in the energy sector to allow the participation of private capital in energy industries. Foreign investment was implemented both in electricity generation and in the exploration and production of petroleum and associated gas.

2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4

0 5 10 15 20 25 30 35 40

Total final energy use per capita (GJ/cap)

GHG per capita (t CO2-eq/cap)

1990

2002 1998

1994

FIG. 2.18. Per capita GHGemissions from energy sector versus total final energy use per capita.

Source: Authors’ elaboration from Refs [2.3–2.9, 2.18].

By the end of the 1990s, oil production was shared equally between CUPET and the private sector. With respect to electricity generation, five gas turbine plants and a combined cycle plant currently operate as joint ventures among UNE, CUPET and Sherrit Utilities Inc. (a private organization), and a completely private thermal power plant operates on the Isla de la Juventud.

At present, a new law, which defines the regulatory framework of the electric industry, is under review by Government institutions. The law currently in force dates from 1975.

In addition, in 1998 a special tributary system was implemented to support the economic recovery of sugarcane agriculture. This new fiscal procedure provided for exemptions, deductions and allowances according to Law 73 of the tributary system allowing the price of sugarcane to double. As previously stated, in 2002 a restructuring process in the sugarcane industry was implemented.

2.2.11.1. Electricity sector

Since 1959, the electricity sector has experienced three clearly defined developmental stages:

First stage: Up to 1989, an expansion based on technology transfer took place (although using not very efficient technology) and a reliable supply of fuels at preferential prices was established. During this stage, the installed

0.9 1.0 1.1 1.2

6 7 8 9 10 11 12 13 14

GHG intensity (t CO2-eq/103 CUP1997)

1998 1990

2002

2000

FIG. 2.19. The CO₂ equivalent energy sector emissions intensity versus energy intensity.

Source: Authors’ elaboration from Refs [2.3–2.9, 2.18].

capacity increased from 476 MW in 1959 to 3999 MW in 1989. The major part (72%) was based on thermal power plants using fuel oil.

Second stage: From 1990 to 1995, fuel supplies were severely restricted and consequently the electricity supply and the entire national economy were seriously affected.

Third stage: Since 1996 up to the present, there has been an economic recovery and considerable changes in the energy sector have been implemented, including institutional reforms, the most important of which include:

— Creation of the National Energy Commission, which undertook, among other things, the following actions: substitution of fuel oil by bagasse in raw sugar production and reduction of fuel usage in the sugar refinement process, use of crude oil in thermal power plants in the production of cement, textiles, etc., and elaboration of the DPNES [2.10];

— Increases in the electricity tariff (stepped tariff) for the household sector;

— Introduction of the obligatory payment in hard currency for petroleum products and electricity in self-financed companies;

— Centralized control and distribution of fuels;

— Reorganization of electricity intensive industries (e.g. textile, construction materials and food industries), promotion of the general and intensive use of bicycles, trucks with trailers and railroad cars for the transport of passengers;

— Implementation of PAEC, distribution of compact lamps and subsidized energy efficient light bulbs, replacement of refrigerator gaskets and use of promotional videos and advertisements on rational energy use produced by the Ministry of Education;

— Decree Law No. 260 issued in December 1998 penalizing the illicit acquisition of electricity by altered power meters or illegal connections;

— New electric tariff for the non-household sector, differentiated by voltage levels, schedule of consumption and type of consumer (entered into force on 1 January 2001);

— Electrification of irrigation (mostly based on diesel motors) initiated in 2002.

2.2.11.2. Oil and gas sector

Activity in the oil sector in Cuba began in 1881, but only since 1960 has there been a systematic and detailed exploration programme. Since 1991, exploration programmes have been carried out with foreign companies from Brazil, Canada, France, Spain and Sweden, resulting in the discovery of new oil

deposits. The extraction of crude oil and associated gas has grown significantly during the past 12 years, as discussed previously. The current refining capacity in Cuba is 2.9 million t of crude oil in three refineries; a fourth refinery under construction is in negotiation for its completion, which will increase the total refining capacity to 5.9 million t.

Cuba has two manufactured gas production plants, two bottling plants for LPG and two compressor plants for LPG use in transportation.

Institutional reforms

Among the institutional reforms in the oil sector is the programme for the substitution of domestic naphtha in city gas production with associated gas, mainly in Havana and Santiago de Cuba, with financing provided by foreign companies. This programme allows substitution of a large proportion of naphtha while at the same time raising the calorific value of the city gas. This programme also allows the expansion of services to a greater number of consumers and the substitution by LPG of kerosene and alcohol. LPG stoves and cylinders (10 kg gas capacity) are sold at subsidized prices.

Also, in 1998, automobile engines were changed and a shift from gasoline to diesel fuel was implemented to improve efficiency and thus reduce the environmental impact of the transport sector. Also, import standards were introduced to ensure that, in the future, means of transport will be more economic and less polluting. However, in 2002, taking into consideration the high price of diesel and the country’s dependency on diesel imports, the Government decided to end the replacement of gasoline with diesel fuelled automobiles and the import of diesel automobiles was minimized.

Finally, national banks have started financing energy efficiency programmes in the hard currency necessary to buy equipment and materials, which otherwise would not be obtainable.

2.2.11.3. Renewable energy

With respect to renewable energy sources, Cuba has developed capacities and experience in the production of solar heaters and photovoltaics, turbines for mini-hydropower plants, windmills and different hydraulic applications such as rams, siphons, water pumps, solar dryers and distillers, and controlled climate chambers.

Different projects have been implemented to assess the economic and technical feasibility of using oleaginous plants for biodiesel production. The plantations that are not used to produce edible oils are used for this purpose as biodiesel is in high demand in the country and domestic production does not

cover all the demand. Plantations of J. curcas are used to prevent desertifi-cation and to create new jobs in the semi-desert areas of Guantanamo province. Another difficult issue is the supply of fuel for diesel engines to provide electricity to rural communities in mountainous areas in the eastern part of the country. There, biodiesel production from the plant R. communis may become a local solution.

With the considerable solar energy capacities and the availability of highly qualified technical and scientific personnel and infrastructure, the country has been able to provide electricity for important community objectives. Its primary accomplishment has been the provision of electricity to more than 2400 schools, so that television and computers are accessible in remote areas (mountains and other places that are difficult to access), and to numerous community medical and social centres.

To reach 100% electrification rates in the coming years, it will be necessary to evaluate the technical and economic feasibility of the technologies available for use in each place. Possible solutions include expansion of the electricity grid, the use of photovoltaic systems, mini- or micro-hydropower plants, wind generators, biomass combustion systems, biogas, urban solid wastes and the use of residuals for energy purposes, as well as hybrid systems wherever it is considered necessary for reliability reasons.

Cuba’s potential for achieving sustainable energy development is greatly aided by the availability of a well-educated and highly trained workforce capable of developing energy projects through every stage, from compre-hensive energy planning and assessment of potential environmental impacts to project implementation.

Sugarcane biomass

In 1492, when the Spaniards arrived in Cuba, 95% of the territory was covered by forest. These forests were initially cut to provide wood and were later cleared for the cultivation of sugarcane and tobacco. This cutting reduced forest coverage to 16% of the territory by 1959 [2.19].

From 1959 to 1989, the administration and functioning of the State sugar sector was based on agro-industrial complexes, which also incorporated services and industrial transformation. There were also agricultural coopera-tives with farmers integrating their lands and goods.

The preferential sugar prices paid by the former socialist countries of the CMEA helped maintain investment in the sugar sector and the diversification of sugar products during this period. They provided for spare parts for tractors, combines, trucks and specialized machinery for the harvest and fertilization of sugarcane.

With continued investment and the expansion of commercial facilities, the land devoted to sugarcane cultivation increased to 1.4 million hectares, equivalent to 38% of the cultivatable area in Cuba [2.7]. During the 1969–1970 agricultural cycle, the largest in the country’s history, 156 sugar mills were in operation, and 81.8 million t of sugarcane and 8.1 million t of sugar were produced.

However, the preference given to the sugarcane sector did not allow other important crops to compete with sugar and consequently they were marginalized.

With the 1990s crisis, agricultural production collapsed. The Government implemented a number of fundamental reforms, such as the creation of basic units of agricultural production to facilitate the management of, and improvement in, the efficiency of large State enterprises and the liberalization of agricultural markets. A new system of payments and other incentives for the workers was established and the granting of small land parcels for the usufruct of producers was increased. However, these reforms were ultimately insuffi-cient and the sugar sector has still not fully recovered.

Another important issue is that of alcohol, which is obtained from molasses using outdated technologies with low efficiencies. Alcohol production is also very limited given the other traditional uses of molasses. An alternative would be to introduce new distilleries to produce alcohol directly from the sugarcane juice, with high efficiencies and lower production costs.

Institutional reforms

Among the institutional reforms undertaken in the renewable energy sector are the following:

— Creation of the DPNES [2.10];

— Creation of the Renewable Energy Front (14 October 2002) as a specialized State organization to coordinate and finance the different State institutions involved in renewable energy issues;

— Restructuring of the sugar sector, which started in 2002.