Energy Revolution

Cuba is a planned economy and the government intends to serve the interests of the majority of the working people (Cameron 2009). The Cuban government intends to motivate “people power” to achieve a goal.
This was crucial in the beginning of the 21st century when an already poor electricity infrastructure was devastated when hurricanes hit the country in 2004 and 2005. Seifried points out that during 2005, there were large blackouts on 224 days. As electricity is vital for social and economic development of every country, the “Revolución Energética” was proclaimed.
Cuba’s ties with the Chinese government, having been established since the 1980s, proved beneficial to both. For China it has been an opportunity to expand a foreign market. Cuba, where Chinese appliance manufacturers have been operating, is also seen as an economic hub for the whole Latin American continent.
Due to these ties and the traditionally rather bad relations with the OECD world, China was probably the best option for Cuba to support the appliance exchange programme discussed here (Hearn 2009, p. 3).

The aim of the “Energy Revolution” was to raise the Cuban`s capacity for electricity generation, to reduce the number of blackouts and to decrease energy import dependency. Another aim of the programmes was to save money.
To reach these overaching aims, the “Energy Revolution” aimed at exchanging most or the whole stock of inefficient residential lighting and appliances to energy-efficient new light sources and appliances. Some pieces of equipment such as light bulbs and fans were exchanged and distributed for free, while energy-efficient refrigerators had to be financed by households. For low-income households, soft loans were offered.

It is a national policy

Relevant sectors

• Residential

Related appliances

• Refrigerators & Freezers:
• Stoves & ovens:

By exchanging energy wasting appliances and pieces of building equipment with energy-efficient ones, the Cuban government has been seeking to increase Cuba’s energy efficiency. Measures to achieve this goal were replacement programmes and information and education campaigns.
There must have been technical requirements for each product group. However, information is not available to shed a light on this issue.
Seifried (2013, p. 8) estimates new refrigerators consume 350 kWh each year.

Relevant target groups

• Investor The “Revolución Energética” required Cubans to purchase energy-efficient appliances, such as refrigerators. Furthermore light bulbs and fans, on the other hand, were exchanged and provided to the population for free. Low-income households also benefited from soft loans.
• User Users were informed through education campaigns and information programmes. Furthermore light bulbs and fans, on the other hand, were exchanged and provided to the population for free.

Direct beneficiaries

• Manufacturer

  Chinese manufacturers benefited directly and massively because appliance and other products were required to be bought from Chinese manufacturers. Hearn (2009, p.3) names some manufacturers located in Cuba.

• Recycler

  Recyclers were responsible for avoiding the resale of exchanged and energy-inefficient appliances and benefited from this policy.

• Investor

  Investor-users of refrigerators benefited from energy savings turning into monetary savings. Low-income households in addition also benefited from soft loans.

• User

  Some appliances such as energy-efficient light bulbs and fans were exchanged for free, meaning that no upfront investments were necessary. Thus, energy savings and, ultimately, energy bill savings will contribute to households’ income. Households that had cooked with kerosene or liquefied petroleum before had experienced bad air quality, also impacting Cuba’s health system negatively. New, electricity based stoves avoid indoor pollution and reduce the risk of fire (Seifried 2013, p. 9).

Indirect beneficiaries

• Energy company

  Energy efficiency reduces the need to construct new power plants. However, in particular, as according to Belt (2007, p. 8) the Revolucíon Energetica was “reasonably successful in reducing daily peak demand.”

Relevant barriers

• Lack of interest and motivation in energy efficiency-improvement: For people living in developing countries, there are more pressing concerns than to exchange of appliances. However, the top politicians made it a top priority for the whole country to save energy.
• Knowledge and information barriers: The fact that there are ways to reduce energy bills may not be as obvious in developing country contexts as for instance in the OECD world. Through the top-down exchange of electric appliances, the government obliged the consumer to buy and use energy-efficient products. In addition, information and education campaigns were a central element of the policy package.
• Technical barriers: Probably only the technology import from China to Cuba made this large-scale exchange of appliances possible.
• Economic and financial barriers: Cuba is still a developing country with a population struggling to pay high upfront costs for energy-efficient appliances, although, in general, such costs are (over)compensated by energy-savings during the life span of a products. Regulation completely levelled off this barrier, as the exchange of most appliances/pieces of building equipment was mandatory. Regarding those appliances that had to be purchased (refrigerators, television, etc.) the government offered soft loans.

Relevant incentives

• Saved energy costs: End users get new products at no costs or soft loans were offered. Consumers save electricity and money.
• Directly increasing earnings or profits for actors on the supply side: For the Chinese government and manufacturers, this deal has been attractive due to the large-scale demand by Cuba.

Although the renewal of old appliances and pieces of building equipment has been an important pillar, the “Revolución Energética” is more than this one measure.
First, to replace the inefficient refrigerators, Cuban technicians were trained in the different stages of the refrigerator production line. Study tours to gather experience were carried out (Belt 2007).
Second, the exchange of energy-inefficient refrigerators was coupled with a recycling programme for this product group. Many thousands of old refrigerators were taken to junkyards, where technicians recycle the appliances (NY times 2007).
Third, training measures were integrated neatly into the “Revolución Energética”. Since 2006, 13,000 social workers have visited homes, and factories taught people how to use their new products and spread information.
Fourth, in order to raise the population’s awareness to Cuba’s energy efficiency challenge, an energy education initiative was implemented. The Programa de Ahorro de Energia por el Ministro de Educacion (PAEME) is a national energy programme introduced by the ministry of education in 1997. Its objective is to teach students, workers, and communities about energy-saving programmes and renewable energies. PAEME has studied different classes (school and university) and inserted energy issues into their curricula (United Nations 2010). The programme has also organised energy festivals to educate thousands of Cubans (Guevara-Stone 2009). Another tool of the awareness raising campaign has been a printing on Cuba's ten pesos banknote.

Fifth, a media campaign complements awareness-raising activities. There is no advertisement for commercial products on Cuban highways; instead you see billboards promoting energy savings. There was also a TV show with energy-related issues, and articles were published in national newspapers. In 2007 alone there were more than 8000 articles and TV spots related to energy efficiency issues.
Sixth, financial disincentives were established in order to limit the overall energy consumption of households. A new tariff structure allows people who consume less than 100 kWh per month (first tariff zone) to stay at the current low rate of 0.09 pesos/kWh (0.3 Eurocents/kWh). For the second tariff zone (101 and 150 kWh/month) consumers pay 0.3 pesos per KWh, which is an increase of 0.1 pesos per kWh. The tariff structure increases systemically, but is capped at 1.3 pesos per KWh for consumers of more than 300 kWh/month (sixth tariff zone).

Some aspects of the policy package can be regarded as innovative.

The most innovative feature is probably the approach to target virtually 100 % exchange of old, inefficient light bulbs and appliances through a combination of free delivery for some goods, bulk purchasing to reduce cost, and making the exchange mandatory. The later is of course a very strong provision that may not be feasible everywhere. While the exchange of light bulbs and fans with energy-efficient ones was completely free of charge for consumers, these were obliged to purchase energy-efficient refrigerators. Although little information about opposition to this coercive policy exists, resistance may have been mitigated by offering soft loans to low-income households.
Moreover, the government tried to pro-actively persuade the population about the benefits of the appliance exchange by using information and educational measures.
This informational and educational campaign was carried out (to an extend, which is not covered in the literature examined here) by social workers and volunteers. This is an innovative way to limit the impact of policy implementation costs on the public budget.
Capacity building measures for the local technicians can be regarded as a valuable add-on. Eventually, this may increase Cuba’s competitiveness on the global market for energy-efficient appliances.
Moreover, the credit deal with China and, thus, provided products by Chinese manufacturers offers the opportunity to carry out a “big push towards energy efficiency”.

Most importantly, Cuba did not opt for the most energy-efficient appliances (BAT), so this is a lost opportunity for even higher energy and cost savings.

The policy package can be optimised.
Providing the entire population with energy-efficient appliances in one step will leave almost no domestic demand for the respective appliances for roundabout the life span of the product. This is a likely to be serious problem for building up a sustainable domestic production of appliances.
Informing the remaining demand on energy efficiency via an appliance-labelling scheme together with financial incentives only for BAT or nearly BAT products would be important for future energy efficiency improvements.
International cooperation with e.g. the Global Environment Facility can, among other things, enhance the innovation potential of Cuban domestic appliance suppliers.

The following pre-conditions are necessary to implement the “Revolución Energética”
Agencies or other actors responsible for implementation
Key actors are several political-institutional organisations (Ministries, National Electricity Union etc.) and a national energy efficiency and saving group. In 2007 an advisory group for the purpose of coordinating all actions related to energy efficiency was formed.
The implementation of the policy, i.e. the exchange of old appliances with energy-efficient ones, rested to some extend on the shoulders of social workers and volunteers.

Funding
The funds for the energy efficiency programmes come from national budget. The Cuban government has invested several billion pesos in the “Energy Revolution” (United Nations 2010).
According to Seifried (2013, p. 23) almost every product purchased by the Cuban government from China within the framework of the “Revolución Energética” were financed via a large credit deal between the two actors. Presumably, credits can be served via energy import savings.
In addition the Cuban government received economic aid from Venezuela and Russia, which gave Cuba a $350 million credit package. The money was partly used to upgrade the energy and transportation systems. A large part of Cuba´s revenues now comes from tourism, which helps to finance many of the energy programmes.

Other pre-conditions
A stable political system able to circumvent people’s opinion also helped implement the “Energy Revolution”.

Quantified target
The targets vary regarding the product category. For example, the goal for refrigerators was to exchange and recycle 100% of all old, energy-inefficient refrigerators (consuming around 800 kWh per year) with efficient appliances (consuming around 450 kWh per year). That was due to their large share (around 50%) on a Cuban household’s overall energy consumption. Similarly, the government aimed to exchange 100% of all old light bulbs.
Further product categories were also exchanged, but literature available gives no indication whether the government of Cuba set any targets for these appliances.

International co-operations
China, which has several appliance manufacturers located in Cuba, was the primary partner for this policy.
Furthermore Cuba has exported its experiences to other countries like Venezuela and Bolivia. Cuban scientists and technicians have also installed solar electric panels in Venezuela, Bolivia, Honduras, South Africa, Mali and Lesotho (Guevara-Stone 2009).

Actors responsible for design
Key actors are several political-institutional organisations (Ministries, National Electricity Union etc.) and a national energy efficiency and saving group.
In 2007 an advisory group for the purpose of coordinating all actions related to energy efficiency was formed. Nowadays there are fifteen groups that are working on national strategies to develop renewable energy technologies and to increase the energy efficiency (Arrastia-Avila et al. 2009).

Actors responsible for implementation
To some extend social workers and volunteers implemented the exchange of energy-inefficient products like light bulbs.

Evaluation
Seifried (2013) provides a rough evaluation of the policy, including energy savings, costs, and benefits. For results, please see the policy impact section (tab).

• Dynamic market transformation and/or innovation: The policy (almost) completely achieved a one-time transformation of the refrigerator stock as well as that for cooking stoves and TVs. However, it also missed the opportunity to further transform the remaining market for new appliances dynamically or provide incentives for innovation. For example, due the distribution of energy-efficient refrigerators to 100% of Cuban households, almost no domestic demand for refrigerators remains for the life span of refrigerators (15 years).
• Avoiding lost opportunities: The government’s decision not to distribute BAT but cheaper and less efficient refrigerators, is problematic because opportunities to save even more energy through BAT are now lost. However, in developing country contexts, financial restrictions have to be taken into account.
• Minimising rebound effects: By establishing a new tariff structure with systemically increasing tariffs, the government disincentivises rebound effects.
• Minimising free-rider effects: For refrigerators and light bulbs free rider effects are theoretically possible, as the policy does not rule out that households that would have invested in new equipment, are excluded by the policy. However, in developing countries it is unlikely, that households lacking income would have invested in purchasing new appliances/equipment.

Design for sustainability aspects
The refrigerator replacement programme was coupled with a recycling programme. Many thousands of old refrigerators are taken to junkyards, where technicians recycle the products. According to the government, the refrigerators weigh an average of 122 pound, including 93 pounds of retrievable steel, 18 of plastic, 3 of aluminium and 2 of copper. The steel goes to plants like Antillana de Acero in Havana, where it is transformed into construction material. The copper goes to the Empresa Conrado Benítez to produce telephone and electric cables. The aluminium is used to make kitchen utensils and parts for other appliances (NY times 2007).

Co-benefits
In particular, the exchange of kerosene- or liquefied gas-based cooking stoves with electricity-powered ones increased the indoor air quality and reduced the risk of fire for some households (Seifried 2013, p. 9).
China, which is the primary for the policy, has several appliance manufacturers located in Cuba. Whether the increased demand for their products has contributed to the labour market, is unknown.
Moreover, since 2006, 13,000 social workers have visited Cubans, replacing light bulbs, teaching people how to use their new products and spreading information. However, whether this has created any positive labour market effects, is open to speculation, too, as no robust information exists.

The following barriers have been experienced during the implementation of the policy
Due to information restrictions set out by the government, there is hardly any information available regarding barriers to implementation. Seifried (2013, p. 23) refers to discontent within some parts of the population because of increasing electricity consumption due to the exchange of electric cooking stoves by kerosene- or liquefied petroleum gas-fuelled cooking stoves. As new refrigerators are estimated to save roughly 450 kWh per year compared to old refrigerators, net electricity savings should outweigh new costs.
There is no information about people’s discontent regarding new loan-obligations.
Moreover, the content of the agreement between Cuba und China is unknown.

The following measures have been undertaken to overcome the barriers
Cuba has combined the mass roll-out of energy efficient appliances with education campaigns and provision of information through mass media. Print media, radio, and television inform its audience on energy issues.

Concrete figures in energy savings/year
The United Nations made a quantitative assessment of achievements due to the “Energy revolution” (United Nations 2010). According to these calculations, the “Energy Revolution” yielded an overall saving of 2.365 million tons of oil equivalent from 2006 to 2008.

• Light bulbs: 354,123 MWh/yr
• Fans: 62,640 MWh/yr
• Refrigerators: 1,147,500 MWh/yr
• Total: 1,564,263 MWh/yr

• Light bulbs: 2 951 025MWh
• Fans: 438 480 MWh
• Refrigerators: 17,212,500 MWh
• Total: 20,602,005

If effectiveness is measured against the target to provide 100% of all Cuban households with energy-efficient appliances/building equipment, the programme can be considered to be highly effective. The following figures show the share of exchanged appliances (which are energy efficient) to the total appliance stock (Seifried 2013, p. 8):

• Light bulbs: 100%
• Fans: 100%
• Refrigerator: 96%
• Television: 22%

Seifried (2013, p. 11) roughly calculates for the exchange of fans and refrigerators costs of EUR 10.4 million and EUR 383 million, respectively.
While costs for the exchange of fans as well as light bulbs were financed by the public purse, costs for new refrigerators had to be covered by individual households. Costs for refrigerators were around EUR 180 per refrigerator. Low-income households are offered low-interest loans (Seifried 2013, p. 8).

• Light bulbs: EUR 590 million
• Fans: EUR 88 million
• Refrigerators: EUR 3,443 million

Based on the given data, Seifried (2013, p. 11) expects a benefit-cost-ratio of 10,5 (or EUR 393 million: EUR 4,120 million) for the exchange programmes for fans and refrigerators (investments costs for lights bulbs were not determined).