Cuba is preparing to open its first solar park 100 percent-owned by foreign investors. Hive Energy of the United Kingdom aims to start construction mid-2018 on a 50MW project in the Mariel Special Economic Development Zone, one of the largest solar ventures on the island.
Hive Energy was awarded rights to the project in May 2016, and it signed an agreement in September 2017 for Cuba’s electric company Union Electrica to buy the power generated from the solar park for 25 years, said Bernardo Fernandez, the company’s director for Latin America and the Caribbean. Now, as Hive is seeking funds to build the project at a cost topping $67 million, Fernandez told Cuba Trade: “We have to be creative.”
Financing is a key challenge for energy projects in Cuba today, because the communist-led nation is not a member of international financial institutions like the World Bank. And while Cuba recently renegotiated its debt with countries in the Paris Club, it does not have a strong track record in payments over decades. What’s more, the U.S. embargo and potential fines from Washington boost the perception of risk, making some private non-U.S. banks skittish about Cuba business.
“And the Trump presidency has made matters more difficult for financing,” said Matthew Perks, CEO of New Energy Events, which organizes the annual Caribbean Renewable Energy Forum.
To finance its project, Hive is asking potential equipment suppliers in China to extend long repayment terms for their products, and it’s reaching out to development banks in the Netherlands and other European nations. Once the solar park is up and running, it would pay those funders with money received from Cuba’s electric company for the energy purchased, said Fernandez.
Hive Energy launched in 2010, tapping incentives for renewables in the United Kingdom. As those incentives waned, the company expanded overseas. It now has offices in Spain, Mexico, Argentina, Mauritius, and Turkey.
In Cuba, Hive’s project enjoys special benefits because of its location inside the Mariel zone, recently created to lure foreign investment. Ventures in Mariel pay lower taxes than elsewhere on the island. They also have access to a “one-stop shop” for government assistance in permits and other paperwork.
The one-stop office “fast-tracked our project and allowed us to eliminate roughly six months worth of permitting that we’d have had to do anywhere else on the island,” Fernandez told the Caribbean conference in Miami this October.
Yet even in Mariel, land is not owned by foreign ventures. Hive has a 25-year right of use.
Hive plans to build its Mariel solar project in three separate sites about seven kilometers (about four miles) apart. Until the Zone gets more factories that can use the energy, each site will feed power into the grid bound for a different province: Artemisa, Havana, and Pinar del Rio, said Fernandez.
Being the first 100-percent foreign-owned solar company authorized in Cuba presented some challenges, of course. While Cuban officials understood the project development process in general terms, they were unfamiliar with some specifics for renewables, such as the financing mechanisms, Fernandez said.
Cuban officials now are moving up the learning curve, he told the Caribbean conference. Thanks to that learning, Fernandez is optimistic that Cuba will produce 24 percent of its electricity from renewables — though it may take a bit longer than 2030 because of extra time needed to secure financing.
Hive’s funding plan is similar to that of Havana Energy of the United Kingdom, which acquired capital from China; Havana Energy’s first joint-venture plant with Cuba’s state sugar group obtained supplier credit from the Shanghai Electric Co. Now, Havana Energy is looking to develop wind and solar projects in Cuba too, said CEO Andrew MacDonald.
“There’s real tangible progress in Hive Energy signing the power-purchase agreement and Havana Energy securing finance for its first plant,” said New Energy Events’ Perks. “The big question remains: Will finance flow to more Cuban projects, given the current political situation?”