Many countries, including the U.S., are in the midst of thinking about changes to their electric power and transportation energy systems as new technologies, new sources of energy, and new energy and environmental policies reshape energy sector dynamics globally. Cuba is one country where change will come perhaps most quickly. The reestablishment of diplomatic relations between the U.S. and Cuba, opening of new markets, and expected rise in tourism and economic activity are driving Cuban leaders to think about rapid transformation of their energy system.
As Cuba considers its energy future, there is no single “silver bullet” design solution, but there are several design variables which are worth analysis. That is the conclusion of a new paper by Duke University Associate Professor Dan Vermeer, PhD and his co-authors, Carlos Fernandez-Aballí Altamirano, PhD, Chief Strategy Consultant with Cuba Strategies Inc., and Duke University Masters of Environmental Management/MBA student Harry Masters.
The paper’s conclusions are drawn from insights gathered at an annual graduate school case competition called the Energy in Emerging Markets Case Competition, held at Duke in November 2016. The competition attracted more than 30 teams from business schools in the U.S., Canada, and Hong Kong. Twelve finalists were asked to submit written proposals addressing the question: What vision should guide Cuba’s energy infrastructure investment and development to meet its future needs?
Ideas abounded in this competition, but Vermeer and his co-authors focused on the common threads: a set of variables that Cuban decision makers should consider when trying to balance the needs for reliability, affordability, and environmental sustainability in energy system planning.
These design variables broadly fall into three categories: technology, policy, and finance. On the technology front, the authors conclude that Cuba must consider ways to secure dispatchable generation while also introducing variable renewable energy resources. Cuban decision-makers will also need to carefully consider the siting of new energy resources. In considering energy policy, decision-makers need to weigh options for setting and regulating tariffs, encouraging foreign investment, pursuing climate policy, and educating and training stakeholders. And finally, in considering how to finance this energy future, Cuban leaders will have to navigate strategies for not only structuring deals but also partnering with the right institutions.
The paper is not a prescription for Cuba’s energy future, but instead a tool for decision-makers who are thinking through a complex system of variables. As Cuba prepares to spend $3.5 billion to develop the new generation, transmission, and distribution systems, Cuba’s energy system designers must take a systems approach, and anticipate potential risks. By working together across its diverse energy stakeholders and external partners, the authors conclude, Cuba has a compelling opportunity to transform its energy system dramatically in coming years.
- Partnering for Cuba’s energy transition
- Video: Carlos Fernandez-Aballi talks about renewable energy investment in Cuba