New Law in Cuba Makes Investing in Renewable Energy Sources Mandatory

Félix Morfis, next to photovoltaic panels installed on his house in Regla municipality, Havana. Credit: Jorge Luis Baños /IPS

By Dariel Pradas
HAVANA, Dec 12 2024 (IPS)

With Decree 110, published on 26 November, Cuba made it mandatory for major consumers, whether they are state or private entities, to invest in the use of renewable energy sources, while the energy crisis facing the country worsens.

According to the decree, state and private economic actors, representations of foreign institutions and associations must guarantee in new investments regarded as “major consumers of energy carriers” that half of the electricity they consume during daylight hours comes from renewable energy sources.

If they cannot install solar panels, due to the infrastructure of their premises, these entities must enter into contracts with the state-owned Unión Eléctrica – the guarantor of the generation, transmission and commercialisation of electricity – and connect to photovoltaic parks.

Breaking these provisions can lead to fines, interruption of electricity service for up to 72 hours and other sanctions.

“The measure reflects a failure in the policy of incentives for investment in renewable energy sources. It may favour the general population, but it doesn’t change the fact that the change in the energy matrix is being imposed with an iron fist,” Daniel López, a self-employed Havana resident, told IPS.

Entities considered major consumers – those that, in the last 12 months, have an average consumption of 30,000 kilowatts (KW) or 50,000 litres of fuel – will have three years to make investments to cover the 50% daytime use requirement.

Reactions on social media immediately followed the news: many internet users celebrated the decree, some were sceptical about its implementation, and a significant number feared for the impact it could have on the private sector.

“Is it viable providing a better service or increasing my production to have to pay more (by investing in solar panels), and not just in taxes? How many businesses are we going to lose because of this decree? Investment in Cuba is increasingly difficult,” commented user Horus in an article on the subject, published in Cubadebate, the most widely read state-run news website in the country.

Indeed, the law could discourage entrepreneurship in mini-industries or productive areas that normally consume a lot of electricity, or even cause businesses to raise the prices of some products and services to recoup investment costs.

Since 2020, this Caribbean island nation with 10 million people has been facing great difficulties in meeting its domestic electricity demand with its production plants.

The instability of the electro-energy system has been so evident that, in less than two months, Cuba has suffered three general power cuts – the latest on Wednesday 4 December – that have left hundreds of thousands of people without electricity for days.

In the absence of incentives

The Patio El Triunfo project, located in the capital’s Regla municipality, is an example of a private business that is self-sufficient in renewable energy sources. It has installed photovoltaic panels with a generation of 10 kilowatts (KW), as well as solar heaters and dryers, and a 0.5 KW wind turbine.

This “clean” energy covers the daytime demand of the house and four businesses that are leased on the premises, including an auto mechanic’s workshop and a lathe shop.

Although the workshops have been in existence since 2010, in 2018 the project began the autonomous production of electricity, the surplus of which it sells to Unión Eléctrica.

The leader of the project, Félix Morfis, who is also the Regla representative of Cubasolar, a non-governmental organisation that has been promoting the use of renewable energy sources in Cuba since 1994 to replace polluting ones, criticises the prices of solar panels and the bureaucratic obstacles to accessing credit and buying them.

“It seems that the Cuban government has no interest whatsoever in people putting up solar panels. They advertise it, they hype it a lot, but actually there is nothing in hand,” he told IPS.

In the retail markets of the state-owned company Copextel, a basic one-kW generation module costs 2,551 MLC, the freely convertible currency, which is virtual and whose reference value is the dollar.

The average wage in Cuba is 4,648 pesos, about US$38.7, according to the official exchange rate of 120 pesos to one dollar.

In 2021, the Ministry of Finance and Prices issued Resolution 359,, which set the price for energy – from renewable sources – delivered to the National Electricity System (SEN) by independent producers in the residential sector: 3 pesos per kilowatt hour (kWh), about 0.025 dollars at the official exchange rate.

In October 2023, the same ministry approved Resolution 238, which doubled that amount.

“They are paying us 6 pesos (US$ 0.05) per kWh, but what I spend, they charge me through the normal system. They sell it to me at a high price and pay me cheaply. There is no incentive,” Morfis added.

The “normal system” that Morfis mentions is a progressive tariff that applies to the residential sector, which after exceeding 450 KWh of accumulated consumption, starts to cost more than six pesos per KWh, until it reaches 20 pesos per KWh (about US$ 0.17).

In any case, it is a subsidised price, according to the authorities, so that the cost of paying for electricity through the national electricity system is only marginally lower than importing or buying solar panels in foreign currency. In the end, it is more profitable not to invest in renewable energy sources.

Even so, more and more people are investing in solar panels with batteries, and private businesses that commercialise these devices have multiplied due to recurrent power outages and fuel shortages.

With no new cards in hand, the government imposed investment in renewable energy sources through Decree 110.

“The most difficult thing is how to make it easier for all the companies to pay for these panels,” Néstor Pérez, a member of the Patio El Triunfo project, told IPS.

Overview of renewable energy sources

In addition to decentralised energy generation and reducing the burden on the state, the new decree aims to reduce on imported-fuel dependency.

Since 2019, when the government issued Decree-Law 345 on the “development of renewable sources and the efficient use of energy”, this policy has been a priority.

Cuba aims for renewable energy sources to account for 24% of its energy matrix by 2030.

President Miguel Díaz-Canel announced on 27 November that more than 2,000 megawatts (MW) of photovoltaic energy, equivalent to two million KW, is planned for the next three years.

However, of the 19,825 gigawatt hours (GWh) produced in 2023, 46% came from thermoelectric plants and 12.6% from using thermal energy from oil-fired natural gas, according to data from the  National Statistics and Information Office (Onei).

Likewise, 13.8% was produced by gensets, electricity generators interconnected to the system that run on diesel and fuel oil, and 22.7% from the six floating plants contracted to the Turkish company Karpowership.

Only 0.5% came from hydroelectric plants and 1.2% from wind and photovoltaic power.