Esencia Group company, Havana Energy, has teamed up with Zerus to develop a pilot 30MW biomass power plant at Ciro Redondo Sugar Mill about 400km from Havana, Cuba.
The two firms also plan to develop four more power plants in the second stage.
The pilot plant is expected to generate return on investment within five years of construction.
Cuban vice-minister of Sugar Nelson Labrada said that using sugarcane bagasse for power generation avoids the problems of shortage, and in Cuba it is possible to serve up to 40% of its current energy needs through the sugar mills and bagasse-based power.
At present, 7% of the country's energy needs are supplied by renewable energy sources, and the Cuban Government is keen to increase this percentage using natural resources to reduce dependency on fossil fuels.