Indian Council of World Affairs

Abstract: Cuba is facing significant challenges in addressing its electricity crisis and sustaining its socialist command economy until renewable energy projects are fully realised. 

Introduction 

Cuba’s recurring electricity crisis poses a significant challenge to its socialist command economy model. Persistent blackouts have fuelled public dissatisfaction, with citizens increasingly demanding government accountability and improved infrastructure. To come out of the recurring electricity crisis, Cuba is striving to replace fossil fuel-powered power plants by prioritising renewable energy sources. While Cuba’s renewable energy sector presents investment opportunities, the country’s ongoing economic crisis, coupled with US sanctions, hampers its ability to sustain the current projects as well as mobilise resources for large-scale energy projects, thereby delaying the energy transition. 

Underlying Causes of the Recurring Energy Crisis 

Cuba’s energy supply heavily relies on oil, which accounts for over 80% of its power generation. Of this, approximately 48% is imported.^[i] This dependence on imported fossil fuels makes the country particularly vulnerable to volatile global fuel prices and high transportation costs. Compounding this challenge, the country’s energy sector is plagued by several issues, including a deteriorating energy infrastructure, a dire economic situation, climate-related disruptions, US sanctions, and intermittent fuel shortages. Together, these factors contribute to a recurring energy crisis.

The electricity grid in Cuba is primarily powered by eight heavy crude oil-fired thermoelectric power plants^{[ii], [iii]} operated by the state-run Electric Union. However, these plants are ageing, with some over 40 years old, and have suffered from poor maintenance, making the system vulnerable to breakdowns, especially during periods of high demand. Fuel shortages exacerbate these issues, further limiting generation capacity. The lack of significant investment in infrastructure over decades has only worsened the situation.

Additionally, Cuba’s economic struggles have significantly hindered its ability to address energy challenges. The COVID-19 pandemic, coupled with pre-existing economic struggles, led to rampant inflation, a downturn in tourism, depletion of its foreign currency reserves, and further strain on the national budget, which has made necessary energy infrastructure upgrades nearly impossible. In January 2021, the Cuban government introduced currency and price reforms, including devaluing the Cuban peso, but inflation continued to rise. The prices of essential goods have skyrocketed, and Cuba’s economy remains far below pre-pandemic levels, with little evidence that the country’s restructuring efforts have been successful.^[iv]

The situation has become further complicated by the impact of repeated natural disasters. Cuba is frequently hit by hurricanes, and these recurrent storms place significant stress on the island’s already fragile power grid, which lacks the resilience to recover quickly from such disruptions. For instance, on 18 October 2024, Cuba’s 330-MW Antonio Guiteras thermoelectric plant in Matanzas province was shut down due to damage caused by Hurricane Oscar. Shortly after, on 6 November 2024, Hurricane Rafael triggered a nationwide blackout, illustrating the vulnerability of Cuba’s energy infrastructure. Additionally, deteriorating weather conditions affect the docking of ships carrying fuel oil, delaying fuel deliveries. 

On the external factor, the Cuban government primarily attributes its energy security challenges to US sanctions, which have been in place since 1960. These sanctions restrict access to essential equipment, spare parts, and fuel; discourage investment; and cut off vital diplomatic and political support. Thus, making it exceedingly difficult for Cuba to maintain and modernise its power plant. Many countries and companies are wary of engaging with Cuba due to the risk of secondary sanctions, which could jeopardise their access to the US market or financial systems. Ships that trade with Cuba are barred from docking at US ports for 180 days unless exempted, and goods with more than 10% of US components cannot be exported to the island. Additionally, the US banks cannot process dollar transactions involving Cuba, and foreign subsidiaries of US companies must also comply with these sanctions, thereby further isolating Cuba economically.

Historically, the sanctions have made Cuba dependent on the erstwhile Soviet Union. Despite the embargo, Soviet support sustained the Cuban economy, particularly by supplying oil in return for sugar^[v] and also supported the construction of oil refineries. However, after the USSR disintegrated in 1991, Cuba lost these vital resources, and oil imports sharply declined, leading to widespread shortages. This triggered a severe energy crisis in Cuba known as the “Special Period”.^[vi] The situation worsened in 1996 when the US enacted the Helms–Burton Act, codifying the embargo into law and further restricting Cuba’s access to foreign investments by expanding sanctions to foreign companies trading with the country.

Despite this, in the early 2000s, Cuba managed to establish a new energy alliance with Venezuela, securing oil under preferential terms. However, owing to Venezuela’s political and economic crisis since 2014, including plummeting oil production and hyperinflation, this agreement was disrupted, leaving Cuba’s energy sector vulnerable. Without sufficient funding or consistent oil imports, Cuba’s infrastructure has deteriorated, heightening its susceptibility to outages. Though Mexico and Russia initially stepped in to fill this void, both countries have become sceptical due to Cuba’s difficulty in paying debts. 

Measures Taken and Global Support Received 

During grid failures, the Cuban government implements emergency measures to manage the crisis. These measures often include suspending classes, shutting down some state-owned workplaces and nightclubs, and cancelling non-essential services. In November 2024, the Cuban government introduced Contingency Electricity Decree-Law 110 to address the ongoing energy crisis. This law authorises planned blackouts lasting over 72 hours and outlines additional measures to conserve energy. These include suspending the use of high-consumption equipment, restricting public lighting, reorganising water pumping schedules, and imposing fines for non-compliance.^[vii]

Cuba also made efforts to stabilise the economy; however, it placed additional strain on the energy sector. For instance, the "macroeconomic stabilization program" launched in late 2022 resulted in cutting gasoline subsidies. The fuel price increase, coupled with persistent fuel shortages, has further strained Cuba’s key industries, particularly the sugar sector. The decline in sugar production is particularly concerning because Cuba’s economic model heavily depends on sugar exports to secure oil supplies from allies, such as Russia, Venezuela, and Mexico. The lack of economic diversification leaves it vulnerable to market fluctuations and curtails the resources available for expanding its energy options. Moreover, removing subsidies only adds to the financial trouble of the citizens, compelling them to rely on the black market and contributing to greater dissatisfaction amongst them. Thus, it shows that these temporary solutions may not work in the long run.

At the international level, Cuba has long advocated within the United Nations General Assembly for the lifting of the US sanctions and its removal from the list of state sponsors of terrorism, as it hinders the country’s economic development and causes significant hardship for its people. On 30 November 2024, the UN General Assembly voted in favour of a draft resolution urging the US to remove sanctions against Cuba on humanitarian grounds. A significant majority of 187 countries supported the resolution, highlighting widespread international support for Cuba’s position. However, despite these ongoing calls for action from the international community, US sanctions remain in place. On the other hand, critics argue that the US sanctions have fallen short of their intended objectives, failing to bring about significant democratic reforms in Cuba while exacerbating political tensions between the two nations. Further, they highlight that the US policy reflects an underlying intent to foster dissatisfaction among Cuban citizens with the socialist command-state model, potentially leading to internal calls for change. 

To address its energy crisis, Cuba has also received support that includes lines of credit to fund energy projects, upgrades to ageing thermal power plants, donations of shipboard generators to supplement power generation, assistance with offshore oil exploration, and initiatives to enhance disaster resilience. 

Turkey has given Cuba seven floating power plants on lease that can supply 20% of Cuba’s electricity needs. But all these plants are run by crude oil, and Cuba is facing fuel shortages.^[viii]

Russia has granted a $60 million loan to purchase fuel, essential for addressing the island’s chronic shortages.^[ix] Russia has also assisted Cuba in upgrading thermal power plants, helping to stabilise electricity generation in the country. Recent deals have focused on modernising older plants to improve energy efficiency. Further, Russian companies like Zarubezhneft are working with Cuba to explore and modernise its oil extraction and refining facilities. This includes offshore exploration for potential reserves in Cuban waters. However, their exploratory activities in Cuba face challenges in finding commercially viable reserves.

On the other hand, countries are sceptical of Cuba’s ability to pay loans and access lines of credit. For instance, Russia gave Cuba 1.2 billion euros to build new thermoelectric plants. In September 2022, the Vice Minister of Energy and Mines of the Republic of Cuba stated that Cuba had not been able to access the Russian credit of 1.2 billion euros for thermoelectric plants as it had not managed to secure the 10% upfront payment (120 million) needed to access this credit.^[x] Besides, in 2014, 90 per cent of the debt was written off.^[xi]For Russia, supporting Cuba stems from both geopolitical and ideological considerations, even as the country itself contends with US sanctions. However, the long-term sustainability of this support remains uncertain. 

Challenges for Implementing Sustainable Solutions 

To come out of the recurring electricity crisis, Cuba is striving to replace fossil fuel-powered power plants by prioritising renewable energy sources, such as nuclear, solar, wind, and biomass. As part of its Nationally Determined Contribution (NDC) under the Paris Agreement, Cuba aims to generate 24% of its electricity from renewables by 2030 from its current capacity of 5%, with specific targets of 755 MW from biomass, 700 MW from solar parks, 56 MW of small hydroelectric generation, and 633 MW from wind farms.^[xii]

To help the country meet its renewable energy goals despite the challenges posed by the US sanctions, Cuba has received support from many countries including India, which are contributing technology, investment, and lines of credit. India’s assistance to Cuba, including its invitation to join the Coalition for Disaster Resilient Infrastructure (CDRI) and Global Biofuel Alliance (GBA), underscores its commitment to fostering South-South solidarity and mutually beneficial partnerships through sustainable development and capacity-building initiatives.

Solar: Currently, solar energy accounts for only about 2% of Cuba’s total energy production, with solar plants generating 258 MW. To address this crisis, along with other countries, India, a global leader in solar energy and a founding member of the International Solar Alliance (ISA), is also actively involved in supporting Cuba’s solar energy development through its National Thermal Power Corporation (NTPC), which is collaborating with Cuba under the ISA. India has extended a line of credit of  $75 million for developing solar plants totalling 75 MW.^[xiii] NTPC is also involved in several projects, including a 60 MW grid-connected solar plant and a larger proposal for generating 1,150 MW solar power. Additionally, a solar PV park is being developed which is expected to generate 2,160,000 MWh of electricity.^[xiv]

Nonetheless, despite these efforts, the long lead times for solar projects raise concerns about their ability to provide immediate relief to Cuba’s ongoing energy crisis.

Wind: Cuba currently has four wind farms with more than 9,300 windmills and 20 generators located in the provinces of Las Tunas and Holguin. The total installed capacity currently is 11.7 MW, and the goal is to achieve 633 MW by 2030. To reach its target, the country presently has many projects running in both provinces, like the Punta De Mulas wind farm, Rio Seco wind farm, La Herradura 1, La Herradura 2, etc. 

India is also involved in this sector by extending support to Cuba for building a wind farm. The Export-Import Bank of India (Exim Bank), under the Indian Development and Economic Assistance Scheme (IDEAS), has approved financing a 51 MW wind farm project in Río Seco, located in the Holguín province of Cuba.^[xv]

Hydro: Cuba has 176 hydroelectric power plants with a total installed capacity of 71.9 MW. However, the country’s hydroelectric potential is limited due to the lack of large rivers and reservoirs.^[xvi] Additionally, some of the hydroelectric plants are currently non-operational. Nonetheless, to address these challenges, countries are providing technological assistance to renovate these facilities. 

Biomass: Cuba primarily utilises biomass power through its sugarcane industry, which produces bagasse, a byproduct of sugarcane pulp. This bagasse is converted into energy, providing low-cost electricity. During the sugarcane off-season, power plants burn marabou, an invasive weed that has spread across much of the island’s agricultural land. 

Nonetheless, Cuba’s biomass power generation has been facing challenges due to poor sugarcane harvests,^[xvii] outdated sugar mill infrastructure, storm-related damage to mills, and lately, rising fuel prices, which have affected the logistics of biomass fuel supply. 

Cuba has sought expertise from India, in biomass utilisation from sugarcane, which ranks second globally in sugarcane production and had 7,547 MW of bagasse cogeneration capacity installed as of 2020, contributing to 70% of the total installed biomass power capacity. India’s National Sugar Institute in Kanpur has been approached for assistance by the Cuban Research Institute on Sugarcane Derivatives (ICIDCA) for the revival of its once-iconic sugar industry. India has also invited Cuba to join the GBA, promoting deeper cooperation in biofuel research and development.^[xviii]

Nuclear: In 1974, President Castro announced Cuba’s intention to pursue nuclear power for electricity generation. By 1976, Cuba entered into agreements with the Soviet Union to develop nuclear energy capabilities. The construction of Cuba’s first nuclear power plant, the Juraguá Nuclear Power Plant, began in 1983 in the central part of the island, with the Soviet Union providing technology, expertise, and financial support. However, progress was slow due to several factors, including the collapse of the Soviet Union and Cuba’s own domestic challenges. The end of Soviet subsidies and technical support significantly hindered the development of nuclear energy projects in Cuba. 

Although the Cuban government still acknowledges the need to explore nuclear energy, the US sanctions have hindered the country’s nuclear ambitions. The 1996 Helms–Burton Act includes provisions that prevent foreign states from helping Cuba finance the construction of nuclear power plants, further restricting Cuba’s efforts to advance its nuclear energy plans. 

Thus, though Cuba’s renewable energy sector brings investment opportunities, the US sanctions, coupled with the country’s ongoing economic crisis, characterised by inflation, a shortage of hard currency, and a fragile financial system, limit its capacity to mobilise the necessary resources for large-scale energy projects. Moreover, Cuba’s ability to secure financing for renewable energy projects is hindered by its exclusion from international financial institutions, such as the World Bank and the International Monetary Fund. As a result, Cuba’s target of generating 24% of its energy from renewable sources by 2030 is delayed, along with its decarbonisation efforts and net-zero goals at risk. 

Conclusion 

Cuba faces mounting challenges in managing its electricity crisis. Despite access to international lines of credit, economic challenges faced by the country limit their effective utilization. The US embargo further isolates Cuba by restricting its access to global financial markets, making it difficult to secure loans, import fuel and essential goods, and modernise energy infrastructure. While renewable energy projects offer a potential long-term solution, progress has been slow due to climate-related risks and sanctions that hinder foreign partnerships. Additionally, recurring defaults have raised concerns about the sustainability of external support for essential fuel supplies, infrastructure upgrades, and renewable energy transitions. This raises a pressing question: can Cuba address its electricity crisis and sustain its socialist command economy until renewable energy projects are fully realised?  Is the electricity crisis which adversely affects the provision of basic needs to the Cuban people a manifestation of a larger malaise in its economy and polity and its external relations calling for serious introspection? Nonetheless, the crisis presents an opportunity for Cuba to develop a comprehensive energy security reflecting on its internal issues. Moreover, easing trade restrictions from the US could pave the way for a more sustainable and resilient energy future for the country if Cuba sees opportunity for itself in the backdrop of current geopolitical shifts.

*****

*Girisanker SB, Research Associate, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal. 

Endnotes

[i] Silverman-Roati, Korey, Daniel Whittle, Romany Webb, Jeffrey P. Fralick, and Daniel Whittle Korey Silverman-Roati. “Illuminating a Path to a Cleaner and More Resilient Energy System in Cuba.” Climate Law Blog, April 17, 2024. https://blogs.law.columbia.edu/climatechange/2024/04/17/illuminating-a-path-to-a-cleaner-and-more-resilient-energy-system-in-cuba/.

[ii] “Power Plants in Cuba.” Accessed December 1, 2024.  https://database.earth/energy/power-plants/cuba.

[iii] Freyman, ByNeal. “Cuba’s Blackout a Symptom of Economic Mess.” Morning Brew. Accessed November 24, 2024. https://www.morningbrew.com/stories/cuba-s-blackout-a-symptom-of-economic-mess.

[iv] Forsans, Nicolas. “Cuba’s Power Grid Collapse Reveals the Depth of the Country’s Economic Crisis.” The Conversation, October 23, 2024. http://theconversation.com/cubas-power-grid-collapse-reveals-the-depth-of-the-countrys-economic-crisis-241819.

[v] Note- The Soviets took sugar from Cuba twice the world price at that time and subsidised it.

[vi] Note- The Special Period refers to a severe economic crisis in Cuba that began in the early 1990s following the collapse of the Soviet Union. This crisis had a profound impact on the energy sector, with acute oil shortages causing blackouts that lasted up to 16 hours a day, severely disrupting daily life and industrial production.

[vii] CiberCuba. “The Cuban Regime Plans Scheduled Power Outages of More than 72 Hours in a New Emergency Electricity Decree,” November 27, 2024. https://en.cibercuba.com/noticias/2024-11-27-u1-e207888-s27061-nid292815-gobierno-cubano-planificara-apagones-72-horas-nuevo.

[viii] See endnote [iii]

[ix] “Russia and Cuba: Strengthening Energy Cooperation Amid Hurricanes and Crises.” Energynews (blog), November 14, 2024. https://energynews.pro/en/russia-and-cuba-strengthening-energy-cooperation-amid-hurricanes-and-crises/.

[x] “What Did Cuba Do with the €1.2 Billion Offered by Russia to Build Thermoelectric Plants? | Www.Eca-Watch.Org.” Accessed December 5, 2024. https://www.eca-watch.org/publications/newsletter-items/what-did-cuba-do-%E2%82%AC12-billion-offered-russia-build-thermoelectric.

[xi] Robinson, Circles. “Russia Contemplates Improving Cuba’s Power Plants.” Havana Times, September 8, 2023. https://havanatimes.org/news/russia-contemplates-improving-cubas-power-plants/.

[xii] Sanchez, Amaury Perez. “Projected Development of Renewables in Cuba.” POWER Magazine, December 1, 2020. https://www.powermag.com/projected-development-of-renewables-in-cuba/.

[xiii] The Economic Times. “India Extends USD 75 Mn Line of Credit for Solar Parks in Cuba.” January 3, 2020. https://economictimes.indiatimes.com/small-biz/productline/power-generation/india-extends-usd-75-mn-line-of-credit-for-solar-parks-in-cuba/articleshow/73086379.cms?from=mdr.

[xiv] “Power Plant Profile: NTPC Cuba Solar PV Park, Cuba.” Power Technology (blog), January 25, 2022. https://www.power-technology.com/data-insights/power-plant-profile-ntpc-cuba-solar-pv-park-cuba/.

[xv] Shetty, Sangita. “Exim Bank Invites Applications from Eligible Indian Entities for Prequalification of EPC Contractor for 51 MW Wind Farm in Cuba.” WindInsider, August 20, 2022. https://windinsider.com/2022/08/20/exim-bank-invites-applications-from-eligible-indian-entities-for-prequalification-of-epc-contractor-for-51-mw-wind-farm-in-cuba/.

[xvi] See endnote [xii]

[xvii] “Cuba Laments Collapse of Iconic Sugar Industry.” BBC. May 18, 2024. https://www.bbc.com/news/world-latin-america-68935247.

[xviii] “Keynote Address by h. E. Smt. Meenakashi Lekhi, Hon’ble Minister of State for External Affairs and Culture, Government of India at the Panel Discussion on ‘India-Cuba Relations: Present Trajectory and Way Forward: On the Occasion of the 50th Anniversary of Fidel Castro’s Visit to India’, Sapru House, 27 September 2023 - Indian Council of World Affairs (Government of India).” Accessed December 2, 2024. /show_content.php?lang=1&level=1&ls_id=9987&lid=6371.