GDPE0622ICR-Cuba Power Market Outlook to 2030 Sample 1-5 ... · GDPE0622ICR / Published OCT 2012 Indicator, Market Trends, Regulation and Competitive Landscape

GDPE0622ICR / Published OCT 2012 Page 1 Cuba Power Market Outlook to 2030 - Business Propensity

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Cuba Power Market Outlook to 2030 - Business Propensity Indicator, Market Trends, Regulation and Competitive

Landscape Reference Code: GDPE0622ICR Publication Date: October 2012

Thermal Power Dominates Power Generation in Cuba

Thermal power generation accounted for a dominant share of XX% of Cuba’s installed capacity share in 2011. Of this amount, XX% was contributed by oil-fired generation, and XX% by gas-fired generation. Renewable energy usage outside of power generation is being encouraged in order to reduce dependence upon fossil fuel. The government is also evaluating the feasibility of plans to support electricity generation. Thermal installed capacity increased at a Compound Annual Growth Rate (CAGR) of XX% between 2000 and 2011 in order to meet electricity demand.

Power Market, Cuba, Installed Capacity by Type of Power Plant (%), 2011

Thermal-Oil

HydroThermal-Gas

Source: GlobalData; National Statistical Office (2010) (April 4th, 2012)

Growth Continues in Power Generation and Consumption

Electricity consumption in Cuba increased at a CAGR of XX% between 2000 and 2011. Since the 1990s, blackouts in Cuba have been numerous and frequent. This is due to the inability of the government to import sufficient amounts of fuel oil, as a result of price constraints. In 2004 and 2005 the government faced widespread electricity shortages, and imported a number of generators to cater to demand. Since 2006, the government has turned to energy efficiency and renewable power sources as the solution to fuel consumption issues. However, grid connected renewable plants represent a negligible share of overall generation at present, and the government is looking into the development of pilot projects in order to develop renewable power plants.

In 2000, the Cuba’s total electricity generation amounted to XX Gigawatt hours (GWh), which increased to XX GWh in 2011 at a CAGR of XX%. During the forecast period, between 2012 and 2030, domestic electricity generation in Cuba is expected to increase further to meet the increasing demand in the country.

Power Market, Cuba, Annual Power Generation and Power Consumption (GWh), 2000-2011

2000 2011

Ann

ual P

ower

Gen

erat

ion

& P

ower

Con

sum

ptio

n (G

Wh)

Power Generation Power Consumption Source: GlobalData; National Statistical Office (2010) (April 4th, 2012)

The Future of Renewable Energy

Cuba does not have substantial domestic potential for increased hydro installed capacity. Despite this, the country has resorted to clean, efficient and renewable energy in order to cut down its dependence on fuel, which is becoming increasingly expensive and results in dependence upon imports. Since the late 1990s, the government has encouraged the population to use renewable energy to meet their energy requirements, leading to the use of off-grid solar panels and bio waste generation from sugar cane throughout the country. Plans have been made by the government to increase electricity generation from renewable sources and pilot projects, in order to evaluate the feasibility of operating renewable energy power plants in the country.



1 Table of Contents 1 Table of Contents ............................................................................................................................ 2

1.1 List of Tables............................................................................................................................. 4 1.2 List of Figures............................................................................................................................ 4

2 Introduction ..................................................................................................................................... 5 2.1 GlobalData Report Guidance ..................................................................................................... 5

3 Cuba, Power Market, Business Propensity Indicator Methodology..................................................... 6 3.1 Methodology for Evaluating the Business Propensity Indicator for Cuba in Latin American........... 6

3.1.1 Supply Security ................................................................................................................ 6 3.1.2 Regulatory Scenario ......................................................................................................... 6 3.1.3 Infrastructure .................................................................................................................... 6 3.1.4 Macroeconomic Scenario.................................................................................................. 7 3.1.5 Competitive Scenario........................................................................................................ 9 3.1.6 Future Potential ................................................................................................................ 9

3.2 Methodology Adopted to Arrive at Final Rank ........................................................................... 10 4 Cuba, Power Market, Business Propensity Indicator ....................................................................... 12

4.1 Cuba, Power Market, Supply Security ...................................................................................... 12 4.2 Cuba, Power Market, Regulatory Scenario ............................................................................... 12 4.3 Cuba, Power Market, Infrastructure.......................................................................................... 12 4.4 Cuba, Power Market, Degree of Competition............................................................................ 13 4.5 Cuba, Power Market, Macro-Economic Factors ........................................................................ 13 4.6 Cuba, Power Market, Future Potential ...................................................................................... 13 4.7 Cuba, Power Market, Business Propensity Indicator Ranking.................................................... 14

5 Cuba, Power Market Analysis, 2000-2030 ...................................................................................... 15 5.1 Cuba, Power Market, Cumulative Installed Capacity, 2000-2030............................................... 15

5.1.1 Cumulative Installed Capacity: Breakdown by Type of Power Plant .................................. 15 5.1.2 Cumulative Installed Capacity and Annual Power Generation........................................... 16 5.1.3 Thermal Installed Capacity and Thermal Power Generation, 2000-2030 ........................... 18 5.1.4 Cumulative Hydro Installed Capacity and Hydropower Generation, 2000-2030 ................. 20 5.1.5 Renewable Installed Capacity and Renewable Power Generation, 2000-2030.................. 22

5.2 Cuba, Power Market, Annual Power Consumption, 2000-2030 ................................................. 22 5.3 Cuba, Power Market, Demand and Consumption Scenario....................................................... 24

6 Cuba, Power Market, Leading Active and Upcoming Projects.......................................................... 25 6.1 Cuba, Power Market, Leading Active Power Projects................................................................ 25

6.1.1 Leading Thermal Power Projects..................................................................................... 25 6.2 Cuba, Power Market, Leading Upcoming Power Projects.......................................................... 25

6.2.1 Leading Thermal Power Projects..................................................................................... 25 6.3 Cuba, Power Market, Transmission Overview........................................................................... 26 6.4 Cuba, Power Market, Distribution Line Length .......................................................................... 27 6.5 Cuba, Power Market, Power Trading........................................................................................ 27

7 Cuba, Power Market, Regulatory Structure..................................................................................... 28 7.1 Cuba, Power Market, Regulatory Structure, Overview............................................................... 28

7.1.1 Cuba, Power Market, Market Structure............................................................................ 28 7.1.2 Cuba, Power Market, Energy Revolution ......................................................................... 28 7.1.3 Cuba, Power Market, Renewable Energy ........................................................................ 29

8 Cuba, Power Market, Competitive Landscape: Snapshot of Government Utility................................ 30 8.1 Cuba, Power Market, Market Share of the Key Market Players, 2011........................................ 30 8.2 Cuba, Power Market, Key Company: Union Eléctrica................................................................ 30

8.2.1 Union Eléctrica, Company Overview................................................................................ 30 8.3 Cuba, Power Market, Key Company: Energas.......................................................................... 30

8.3.1 Energas, Company Overview.......................................................................................... 30 8.3.2 Energas, Business Description........................................................................................ 30 8.3.3 Energas, SWOT Analysis................................................................................................ 31

9 Appendix....................................................................................................................................... 34 9.1 Market Definitions.................................................................................................................... 34

9.1.1 Power............................................................................................................................. 34 9.1.2 Installed Capacity ........................................................................................................... 34 9.1.3 Active Installed Capacity ................................................................................................. 34 9.1.4 Electricity Generation...................................................................................................... 34 9.1.5 Electricity Consumption................................................................................................... 34



9.1.6 Thermal Power Plant ...................................................................................................... 34 9.1.7 Hydropower Plant ........................................................................................................... 34 9.1.8 Nuclear Power................................................................................................................ 34 9.1.9 Renewable Energy Resources ........................................................................................ 34

9.2 Abbreviations .......................................................................................................................... 35 9.3 Bibliography ............................................................................................................................ 35 9.4 GlobalData’s Methodology....................................................................................................... 36

9.4.1 Coverage ....................................................................................................................... 36 9.4.2 Secondary research and analysis.................................................................................... 36 9.4.3 Primary Research and Analysis....................................................................................... 36

9.5 Contact Us .............................................................................................................................. 37 9.6 Disclaimer ............................................................................................................................... 37



1.1 List of Tables Table 1: Ease of Doing Business - Categories and Definitions ............................................................. 8 Table 2: Country Risk - Categories and Sub-categories....................................................................... 8 Table 3: BPI Scoring Parameters...................................................................................................... 11 Table 4: Power Market, Cuba, Cumulative Installed Capacity: Breakup by Type of Power Plant (%),

2011................................................................................................................................... 15 Table 5: Power Market, Cuba, Cumulative Installed Capacity (MW) and Annual Power Generation

(GWh), 2000-2030.............................................................................................................. 17 Table 6: Power Market, Cuba, Thermal Installed Capacity (MW) and Thermal Power Generation (GWh),

2000-2030.......................................................................................................................... 19 Table 7: Power Market, Cuba, Cumulative Hydropower Installed Capacity (MW) and Hydropower

Generation (GWh), 2000-2030 ............................................................................................ 21 Table 8: Power Market, Cuba, Annual Power Consumption (GWh), 2000-2030.................................. 23 Table 9: Power Market, Cuba, Breakdown of Electricity Consumption, By Sector (%), 2010 ............... 24 Table 10: Power Market, Cuba, Leading Thermal Power Project (MW), 2011....................................... 25 Table 11: Power Market, Cuba ,Top Upcoming Thermal Power Project (MW) ...................................... 25 Table 12: Power Market, Cuba, Transmission Line Lengths (Ckm), 2000-2020 .................................... 26 Table 13: Power Market, Cuba, Distribution Line Lengths (Ckm), 2000-2020 ....................................... 27 Table 14: Power Market, Cuba, Installed Capacity Share of Major Power Generating Companies (%),

2011................................................................................................................................... 30 Table 15: Energas, SWOT Analysis.................................................................................................... 31 Table 16: Abbreviations...................................................................................................................... 35

1.2 List of Figures Figure 1: Weights Assigned to the Six Factors (%), 2000-2020 ........................................................... 10 Figure 2: Power Market, Cuba, Business Propensity Indicator Ranking............................................... 14 Figure 3: Power Market, Cuba, Cumulative Installed Capacity: Breakdown by Type of Power Plant (%),

2011................................................................................................................................... 15 Figure 4: Power Market, Cuba, Cumulative Installed Capacity (MW) and Annual Power Generation

(GWh), 2000-2030.............................................................................................................. 16 Figure 5: Power Market, Cuba, Thermal Installed Capacity (MW) and Thermal Power Generation (GWh),

2000-2030.......................................................................................................................... 18 Figure 6: Power Market, Cuba, Cumulative Hydropower Installed Capacity (MW) and Hydropower

Generation (GWh), 2000-2030 ............................................................................................ 20 Figure 7: Power Market, Cuba, Annual Power Consumption (GWh), 2000-2030.................................. 22 Figure 8: Power Market, Cuba, Breakdown of Electricity Consumption, By Sector (%), 2011 ............... 24



2 Introduction Cuba is a Latin American island country which borders the Caribbean Sea and the North Atlantic Ocean. It ranks as the XXth largest country in the world, with a total area of XX square (sq) kilometer (km). The country ranks XXth in terms of population, according to estimates made in July 2012 (CIA, 2012).

The country has a communist government system. All sectors in Cuba are nationalized, and the country has a planned economy that is primarily state-controlled. Recently however, there has been a growing number of private players in dominant public sectors. In 2011, a communist party congress was conducted for the first time in nearly 13 years. During this congress, a number of changes regarding the economic model of the country were approved.

In the past, Cuba relied heavily on subsidized goods such as oil and other aids from the Soviet Union. The Soviet Union’s fall in the 1980s, along with the US embargo imposed on Cuba, resulted in the Cuban economy descending into a rapid recession. Cuba has been trying to recover from this economic downturn since the 1990s. In 1993 and 1994, a number of market-oriented reforms were made in the country, including the opening up of the tourism industry to allow foreign investment, legalization of the dollar and the permission of self-employment. Since 2000, oil has been imported from Venezuela, in return for medical personnel and medical care to Venezuela (CIA, 2012). The country has experienced various natural disasters such as hurricanes and drought which have increased its external debt and weakened its economy. However, improved investment has been recorded in tourism infrastructure, which has contributed to high GDP growth in the country. In 2010, the country recorded a GDP of $XX billion. It is estimated that XX% of GDP was contributed by the service sector and around XX% by the agriculture sector.

The electricity industry comes under the purview of the Basic Industry Ministry (MINBAS). Union Eléctrica is specifically in charge of monitoring all electricity activity in the country, and manages generation, transmission and distribution activity across Cuba. Since the recession period of the 1980s, Cuba has been faced with continuing electricity shortages, and has only been able to make limited investments in power generation infrastructure. The country has also had difficulty with blackouts, since a substantial amount of installed capacity is very old and requires extensive repair work. Since the 1990s, the government has been trying to maintain its systems. However, losses due to poor infrastructure are substantial. Following the economic recession and the widespread electricity shortages of 2004 and 2005, the government acquired a number of small generators as a temporary measure in order to be able to cater to demand. However, the government could not rely on increasing oil prices to cater for demand; therefore in 2006 they began their energy revolution. Cuba has been encouraging the use of renewable energy sources, and in 2006 they entered into an energy revolution to actively promote the development of renewable power generation.

2.1 GlobalData Report Guidance The report comprises an executive summary capturing key growth trends in the Cuban power market.

Chapter three covers the methodology for evaluating the Business Propensity Indicator (BPI).

Chapter four covers BPI analysis between 2000 and 2020.

Chapter five covers cumulative capacity and power generation information, and the segmentation by source of energy between 2000 and 2011, with forecasts provided to 2030. This is followed the consumption scenario of the market and the power consumption patterns from 2000 to 2011 with forecasts to 2030.

Chapter six provides information on and overview of Cuba’s infrastructure. This includes leading active and planned power plants, segmented according to source of energy and data on the electricity transmission infrastructure and future development plans.

Chapter seven on regulatory structure provides brief descriptions of power regulatory structure, prominent policies and policies influencing the future of the power market.

Chapter eight describes the competitive landscape of the Cuba’s power market, with a complete description and SWOT analysis of Energas and company description of Union Eléctrica.



4 Cuba, Power Market, Business Propensity Indicator

4.1 Cuba, Power Market, Supply Security In 2011, Cuba had an estimated installed capacity of XX Megawatt (MW). Oil-fired power plants account for a share of XX% of installed capacity, followed by gas, which accounts for a share of XX%.

4.2 Cuba, Power Market, Regulatory Scenario The electricity industry comes under the purview of the Basic Industry Ministry (MINBAS), which is responsible for energy, geology and mining, and basic chemistry. It is also in charge of managing imports of raw materials and supplies, alongside the construction, maintenance, production, research and other related activities in the above sectors.

4.3 Cuba, Power Market, Infrastructure Electrification in the country was recorded at XX% in 2010. Approximately, XX% of the installed capacity in the country is expected to require upgrade and restoration work in the near future, which will increase investment opportunities.



4.4 Cuba, Power Market, Degree of Competition Union Eléctrica accounts for a XX% share of the market, and the single Independent Power Producer (IPP) Energas power plant in the country accounts for the remaining XX% of the market.

4.5 Cuba, Power Market, Macro-Economic Factors The country has high corruption and bureaucracy with non-transpired laws, which results in a poor environment for doing business. Cuba ranked 123 of 140 countries in terms of overall country risk, according to the World Bank (World Bank, 2011).

4.6 Cuba, Power Market, Future Potential Hydropower installed capacity is expected to remain constant during the forecast period. The main reason for this is that the country’s existing hydro potential is situated in sensitive areas and it is likely that no major hydropower plants will be constructed during the forecast period.



4.7 Cuba, Power Market, Business Propensity Indicator Ranking Figure four illustrates Cuba’s rankings in comparison with XX other Latin American countries. It also provides comparison differentiated according to ranking parameter for the countries ranking immediately above Cuba.

Figure 2: Power Market, Cuba, Business Propensity Indicator Ranking

0 2 4 6 8 10 12 14 16

Source: GlobalData

Cuba is ranked the lowest country amongst the seven Latin American countries in the BPI. This is mainly due to low fuel supply security, a poor regulatory and macroeconomic scenario, and weak infrastructure.



5.1.2 Cumulative Installed Capacity and Annual Power Generation The cumulative installed capacity for power in Cuba increased from XX MW in 2000 to XX MW in 2011 at a CAGR of XX%. Of these total amounts, the majority represents thermal capacity additions. Annual power generation increased from XX Gigawatt hours (GWh) in 2000 to XX GWh by 2011 increasing at a CAGR of XX%. Fluctuation in capacity and generation between 2000 and 2011 occurred due to the inefficiency and poor maintenance of power plants.

During the forecast period, cumulative installed capacity is expected to grow from XXMW in 2012 to XX MW in 2030 at a CAGR of XX%. Similarly, annual generation is expected to increase from XX GWh in 2012 to XX GWh by 2030 at a CAGR of XX%.

Figure 4: Power Market, Cuba, Cumulative Installed Capacity (MW) and Annual Power Generation (GWh), 2000-2030

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Inst

alle

d C

apac

ity (M

W)

Pow

er G

ener

atio

n (G

Wh)

Total Installed Capacity (MW) Total Power Generation (GWh)

Source: GlobalData; National Statistical Office (2010) (April 4th, 2012) Please note: 2011 numbers are estimates



Table 5: Power Market, Cuba, Cumulative Installed Capacity (MW) and Annual Power Generation (GWh), 2000-2030

Year Total installed capacity (MW) Total power generation (GWh)

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Source: GlobalData; National Statistical Office (2010) (April 4th, 2012) Please note: 2011 numbers are estimates



5.3 Cuba, Power Market, Demand and Consumption Scenario Residential consumers accounted for the dominant share of total electricity consumption in Cuba in 2011, accounting for a share of XX%, followed by industrial customers, with a share of XX%. XX% of electricity is used by the commercial sector. Construction, transportation and agriculture represent major shares of the remaining electricity consumption.

Figure 8: Power Market, Cuba, Breakdown of Electricity Consumption, By Sector (%), 2011

Residential

Industry

Commercial

Others


Table 9: Power Market, Cuba, Breakdown of Electricity Consumption, By Sector (%), 2010 Sectors Percentage (%)

Residential

Industry

Commercial

Others




9 Appendix

9.1 Market Definitions The geographical coverage of the report is Cuba. The report covers market segments related to installed electricity capacity, generation, consumption, power infrastructure and power regulations. The report covers the whole of Cuba for a quantitative and qualitative assessment of its power market.

9.1.1 Power The rate of production, transfer, or energy use, usually related to electricity. Measured in watts and often expressed in kilowatts (kW) or Megawatts (MW), it is also known as "real" or "active" power.

9.1.2 Installed Capacity Installed capacity refers to the generator’s nameplate capacity as stated by the manufacturer or the maximum rated output of a generator under given conditions. Installed capacity is given in Megawatts (MW) on a nameplate physically fixed on the generator.

9.1.3 Active Installed Capacity Active installed capacity refers to that component of electric power that actually performs work. It is given in Kilowatts (kW) or Megawatts (MW).

9.1.4 Electricity Generation Producing electric energy by transforming other forms of energy. Also refers to the amount of electric energy produced, expressed in Gigawatt-hours (GWh).

9.1.5 Electricity Consumption Consumption of electricity calculated as generation, plus imports, minus exports, minus transmission and distribution losses and measured in Gigawatt-hours (GWh).

9.1.6 Thermal Power Plant A plant in which turbine generators are driven by burning fossil fuels.

9.1.7 Hydropower Plant A plant in which turbine generators are driven by falling water.

9.1.8 Nuclear Power The electricity generated by the use of the thermal energy released from the fission of nuclear fuel in a reactor.

9.1.9 Renewable Energy Resources Naturally replenishing energy resources limited in the amount of energy that is available per unit of time. For example, biomass, geothermal, solar, wind can all be termed as renewable resources.



9.2 Abbreviations Table 16: Abbreviations Abbreviations Full Form

CAGR Compound Annual Growth Rate

CCGT Combined Cycle Gas Turbine

Ckm Circuit kilometer

CUPET Cubapetroleo

Energas Energas S.A.

FITs Feed in tariffs

GDP Gross Domestic Product

GW Gigawatt

GWh Gigawatt-hours

HHI Herfindahl-Hirschman Index

km kilometer

kV kilovolt

MINBAS Basic Industry Ministry

kWh kilowatt hours

MW Megawatt

Sherritt Sherritt International Corporation

sq square

TWh Terawatt hours

T&D Transmission and Distribution

Source: GlobalData

9.3 Bibliography Belt, JAB (2009). The Electric Power Sector in Cuba: Potential Ways to Increase Efficiency and

Sustainability. US Agency for International Development (USAID). Accessed from: http://pdf.usaid.gov/pdf_docs/PNADO407.pdf

Central Intelligence Agency (CIA) (2012). The World Factbook. Available from: https://www.cia.gov/library/publications/the-world-factbook/geos/cu.html [Accessed on March 19, 2012]

Cereijo, M (2010). Republic of Cuba: Power Sector Infrastructure Assessment. Accessed from: http://ctp.iccas.miami.edu/Appendices/Appendix_D_Power/Cereijo_2010a.pdf

National Statistical Office, Cuba (2010). Annual Statistics 2010. Available from: http://www.one.cu/aec2010/esp/10_tabla_cuadro.htm. Accessed on: April 4th, 2012

World Bank (2011). Country Risk Ranking. Available from: [http://www.google.co.in/url?sa=t&rct=j&q=world+bank%2Bcountry+risk+list&source=web&cd=7&ved=0CFIQFjAG&url=http%3A%2F%2Finfo.worldbank.org%2Fgovernance%2Fwgi%2Fpdf%2FPRS.xls&ei=QWIWT8AkiIesB5DImEk&usg=AFQjCNGjw1HjYXgaQQCJMUUGoS3crIkBEQ&cad=rja [Accessed on Mar 20, 2012]



9.4 GlobalData’s Methodology GlobalData’s dedicated research and analysis teams consist of experienced professionals with backgrounds in marketing, market research and consulting in the power industry, and advanced statistical expertise.

GlobalData adheres to the codes of practice of the Market Research Society (www.mrs.org.uk) and the Strategic and Competitive Intelligence Professionals (www.scip.org).

The following research methodology is followed for all country outlook reports.

9.4.1 Coverage This report gives detailed information on the country’s power market. It examines the country’s power market structure and provides historical and forecast numbers for generation, capacity and consumption up to 2030. The report provides insights on the market’s regulatory structure, import and export trends, competitive landscape and leading active and upcoming power projects.

9.4.2 Secondary research and analysis The capacity, generation and consumption data is collected and validated using a number of secondary resources including but not limited to:

Government agencies, ministerial websites, industry associations, the World Bank, statistical databases

Company websites, annual reports, financial reports, broker reports and investor presentations

Industry trade journals, market reports and other literature

Globaldata’s proprietary databases like the Capacity and Generation Database, Power Plant Database and Transmission and Distribution Database.

Further to this, the following secondary information is collected and analyzed to project the country’s power market scenario through to 2030, analyzing factors such as the following:

The country’s macroeconomic scenario

Government regulations, policies and targets

Government and private sector investments

Contract and deal announcements

Utility expansion plans

The sector’s historic track record

Other qualitative insights built through secondary research and analysis of company websites, annual reports, investor presentations, industry and trade journals, and data from industry associations.

9.4.3 Primary Research and Analysis Secondary research is further complemented through primary interviews with industry participants to verify and fine-tune the market numbers obtained through secondary research and get first-hand information on industry trends.

The participants are drawn from a diverse set of backgrounds, including equipment manufacturers, industry associations, government bodies, utilities, distributors, and academia. The participants include, but are not limited to, C-level executives, industry consultants, academic experts, business development and sales managers, purchasing managers, plant managers, government officials, and industry spokespeople.



9.6 Disclaimer All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, GlobalData.

This report is a licensed product and should not to be reproduced without prior permission.

Documents

GDPE0622ICR-Cuba Power Market Outlook to 2030 Sample 1-5 ... · GDPE0622ICR / Published OCT 2012 Indicator, Market Trends, Regulation and Competitive Landscape