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The recently launched economic package with its sky rocketing prices has further blocked citizens’ access to reliable electricity service. But that is not where the problems began. After decades of negligence in repairing and modernizing the electrical infrastructure, the power generation deficit has become a permanent and increasingly acute problem for the Cuban economy and the quality of life of the population. Frequent breakdowns in power plants, the lack of fuel to generate electricity and the current absence of financing for repairing the power plants have produced prolonged blackouts and growing desperation among the population. In the 21st century, no civilized society can return to the era that preceded the invention of the electric light bulb by Thomas Edison in 1879.

The Unión Eléctrica (UE) has an availability of 2,097 MW and a maximum demand of 3,000 MW, which means a deficit of 903 MW representing 31.1%, one third of its current capacity to meet demand. This figure could be even higher in the coming weeks.

Cuba’s energy challenges have no immediate solution. The nation lacks domestic resources of oil or natural gas to meet the demand for electricity production, forcing it to rely on imports. Alternative power production is not a magic wand and takes time to develop. This situation is complicated by the Cuban government’s lack of credit because it is a bad payer. It is important to remember that the oil supplied by both Mexico and Venezuela is not paid with cash and the accounts and modalities of this exchange have not been disclosed.

Cuba’s power generation infrastructure is obsolete, and in many cases, it is impractical to attempt its repair. It will take 6 to 8 years (some estimate ten) and a multi-million-dollar investment (approximately $10 billion) to rebuild the thermoelectric generation capacity.

The goal of reaching 37% of renewable energies in the energy matrix by 2030 is a fantasy of the Cuban government. Investments in renewable energies have been insufficient and poorly planned. In 2013, the installed capacity of electricity generation in the country based on renewable sources was only 4.3%. Ten years after defining those goals, the renewable energy generation capacity grew only 0.96%.  Projects such as the biomass plant at the Ciro Redondo sugar mill have failed due to the decrease in sugar cane production. Wind energy has also faced difficulties in materializing.

The Cuban government has just announced a set of highly unpopular economic measures (paquetazo), such as the increase in fuel and electricity prices, which will not solve the energy crisis. The low number of cars in circulation in Cuba does not justify the fuel hike. The main consumers of fuel in the country are precisely the power generation plants and inefficient industries.

Raising the prices of domestic tariffs and fuels will only increase inflation, distort the prices of products and services in the market, increase the distortion of wages and will not contribute to a stabilization of the economy.

The current economic model is not attractive to attract the foreign investment that the country needs to replace the current energy plants with modern and efficient ones. There is no mechanism to return the capital invested to investors by consumers, since their purchasing power is very low and they cannot pay the real cost of the energy they consume.

The solution to blackouts

There are three important factors that prevent this energy problem from being solved in the short term.

  1. Due to its lack of responsibility in honoring the interest on acquired debts, the government lacks credibility -even with its close allies- and therefore has no financial resources or access to lines of credit to make the US$10 billion investment needed to replace its obsolete, inefficient, and aging power generation plants.
  2. The current totalitarian state controlled economic model cannot attract the foreign investment that the country needs to replace the current energy plants with modern and efficient ones, since there is no domestic market capable of returning capital to investors from consumers, since their purchasing power is very low and they cannot pay the real cost of the energy they consume.
  3. There is no willingness to change in the Cuban government. They refuse to move to a market economy, which in the current circumstances would be the only way to open doors for developing the economy and for investment capital to flow into the country.

The only possible solution is to eliminate the state controlled (totalitarian) economy and move to a free market economy. This is the path for the Cuban economy to rebuild itself. It must eliminate the internal blockade that prevents citizens from generating wealth. It must implement a profound internal structural reform that truly liberates the productive forces of the country, under a legal regulatory framework that guarantees, protects, and stimulates productive development mostly based on private property. This is the only way that energy production can be commercially inserted into the national economy and that an attractive market environment can be created for the flow of investment capital from abroad based on trust, security, and opportunity. In short, until the current totalitarian system is eliminated, Cuba will be beyond repair.

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