With Chavez gone, what will become of his PetroCaribe program? Photo credit: Valter Campanato, Agencia Brasil
Among the questions arising after the death of Venezuelan leader Hugo Chavez is what will become of the PetroCaribe program he started in 2005 and upon which many Caribbean economies have become dependent. Since it began, PetroCaribe has become a much-needed lifeline to countries in the region that are overly reliant on fossil fuel imports to supply their energy and transportation sectors. However, it has also increased the unsustainable debt levels of these countries. What comes next is uncertain as Venezuela prepares to elect Chavez’ successor as president of Venezuela next month.
Chavez started PetroCaribe with the aim of helping neighboring countries bear the burden of oil dependence at a time when oil prices began to rise sharply. Touted on its Web site as a “shield against misery,” the program allows participating Caribbean countries to purchase Venezuelan oil under preferential conditions. At the outset, 50 percent of the payment was due within 90 days with the remainder being financed over an extended period, sometimes up to as long as 25 years. The interest charged on the balance was at 2 percent but fell to 1 percent once oil surpassed US$40 per barrel.
The DR’s National Energy Commission leads by example using Net Metering to reduce monthly bills. This solution also provides surplus renewable energy to the grid, reducing the country’s total amount of fossil fuel-based energy.
Since October 2012, the energy sector in the Dominican Republic has been in the spotlight as a result of President Danilo Medina’s efforts to deal with the country’s larger fiscal crisis. Over the years, decisions made within the sector have led to an unsustainable level of debt, poorly maintained infrastructure, and a reliance on fossil fuels that, in 2010, cost the government US$2.6 billion.
With all of this attention, the opportunity exists to overhaul the floundering electricity sector and bring it in line with the country’s vision of a sustainable future. The Dominican Republic has a stated goal of obtaining 25 percent of its energy from renewable sources by 2025. And at the recent United Nations climate talks in Doha, Qatar, Mr. Omar Ramirez, Executive Vice-President of the Dominican National Council for Climate Change and the Clean Development Mechanism (CNCCMDL), said the country will reduce its carbon emissions 25 percent from 2012 levels by 2030.
These are ambitious targets for a country that relies on fossil fuels for more than 90 percent of its primary energy. But they can be achieved if decision makers seize this moment and embrace new thinking. It will not be enough to just add more generating capacity to the mix. Real reform will come when subsidies not longer hide the true cost of fossil fuel use, when renewable energy promotion is prioritized, and when energy sector agencies are structured in a way that provides transparency and accountability and is in line with stated long-term energy goals.
The Dominican Republic faces many challenges. Some are easier to solve than others.
Danilo Medina was sworn in as the new president of the Dominican Republic in August 2012. Two months into his presidency, he is choosing to address some significant financial challenges that have plagued the Caribbean nation for years. Among them is the state of the country’s electricity system. This vital sector faces a staggering US$700 million shortfall, soaring levels of technical losses and electricity theft, as well as recurring outages. Meanwhile, paying customers suffer painfully high electricity prices.
In recent weeks, President Medina (or “Danilo” as he is referred to locally) made headlines when he announced a sweeping tax reform to help address the government’s budget woes. The electricity sector will be spared from new taxes, but Danilo is calling for an overhaul of its structure, including a controversial call to renegotiate the contract between the government (responsible for transmission and distribution) and generators ahead of the contract’s expiration. Industry professionals, on the other hand, think that addressing the persistent issues of losses and poor bill collection, and substantial investment in generating capacity, would go farther to right the ship.
In truth, a combination of these factors contributes to the debt that the Dominican Corporation of State Electricity Companies (CDEEE) now faces. After a recent visit to the island nation, representatives with the International Monetary Fund (IMF) concluded that the country’s electricity sector should focus on investing in the electricity grid to reduce technical losses and address the high levels of electricity theft nationwide, both of which result in more than 40 percent system loss. Equally important is the fact that distributors currently collect less than 60 percent of what customers owe them.
Climate scientists were surprised to discover that U.S. carbon dioxide (CO2) emissions recently decreased to levels not seen since 1992. While renewable energy has no doubt contributed to this recent trend, it is clear that the “shale gas revolution” and the recent U.S. transition away from coal and toward natural gas generation has had a very large impact on this encouraging trend.
The LNG terminal in Santo Domingo, Dominican Republic. (Source: Chicago Bridge & Iron)
One region where interest in natural gas has grown recently is the Caribbean. Trinidad and Tobago is already a global supplier of liquefied natural gas (LNG), the Dominican Republic and Puerto Rico are LNG importers, and nations like Haiti and Jamaica are considering building LNG import terminals of their own. LNG—the liquid form of natural gas that has one-six hundredth the volume per unit of energy of naturally occurring natural gas—is the form in which gas is typically shipped overseas. LNG imports are gaining traction in the Caribbean region, where tanker ships offload the fuel to be re-gasified and used to fuel natural gas power plants.
As seen in the United States, natural gas can play a significant role in mitigating greenhouse gas emissions and climate change. Moreover, at least in the United States, a shale gas boom has led to very low natural gas prices, making it cost competitive with almost any other source of power generation. However, it is unclear whether such benefits would translate to small island nations. The question that begs analysis is whether or not natural gas—in the form of imported LNG—is appropriate for small countries like those in the Caribbean region.
Worldwatch presents the Wind & Solar Roadmap to energy and government officials in the Dominican Republic. (From Left: Hon. Pelegrin Castillo, National District Representative; Manuel Pena, National Energy Commission; Maria Eugenia Salaverria, Energy and Climate Partnership of Central America; Mr. Enrique Ramirez, National Energy Commission President; Alexander Ochs; Mark Konold; Mr. Omar Ramirez, Executive President of the National Council for Climate Change and the Clean Development Mechanism
Yesterday the Climate & Energy Program of the Worldwatch Institute officially launched its first Sustainable Energy Roadmap in Santo Domingo, Dominican Republic. The Roadmap, which was completed with financial support from the Energy & Environment Partnership in Central America (EEP) and with guidance from the National Energy Commission of the Dominican Republic (CNE), focuses on strategies the government of the Dominican Republic can use to begin moving toward a more sustainable energy future.
The Worldwatch research team worked with 3TIER, a renewable resource mapping company, to develop detailed solar resource assessments for the country’s two major cities, Santo Domingo and Santiago, as well as wind resource assessments in six provinces. The report also explores the potential for distributed and centralized renewable power generation in the country, job creation opportunities from renewables, and challenges facing the integration of renewable energy into the existing electricity grid. It then examines the Dominican Republic’s energy regulatory framework and the current status of the country’s financial sector for supporting renewable energy growth. Finally, the Roadmap contains strong and actionable recommendations the government can follow to begin ramping up the presence of renewable energy, drawing down its dependence on fossil fuel imports and creating an energy future that is socially, environmentally and financially more sustainable.
In November of 2011 a solar photovoltaic (PV) energy project began construction on the roof of the “National Energy Commission” (CNE) headquarters in Santo Domingo, Dominican Republic. CNE is the institution responsible for overseeing the energy sector in the Dominican Republic. The solar PV energy project was completed in January 2012 with a total installed capacity of 22 kilowatts (kW) and an estimated annual generation of 35,358 kWh, around 20 percent of the building’s annual electricity consumption. The solar PV energy system is connected to the utility grid Edesur under a net metering contract. CNE is using the solar panels to help mitigate its use of electricity from traditional fossil fuel sources, such as coal, fuel oil, and diesel. The project’s main goals are to lower the headquarters’ greenhouse gas emissions and to demonstrate for others the feasibility of installing solar PV energy systems on roofs.
The solar PV system at CNE's headquarters (Source: CNE).
This project was made possible by the Energy and Climate Partnership of the Americans (ECPA), which was created in 2009 in order to fund energy efficiency and sustainability initiatives. Secretary of State Hillary Rodham Clinton invited Caribbean governments to join the ECPA Caribbean Partnership, which is administered by the Organization of American States (OAS) and is supported financially by the Department of State. In addition, Secretary Clinton announced that members will receive grants to improve renewable energy development. In 2010, Caribbean governments submitted over 20 proposals to the OAS for renewable energy development projects. The OAS awarded technical assistance to six projects in six countries. One of the six projects was for the construction of a solar PV energy system at the CNE headquarters. In addition to receiving assistance from the OAS, CNE received assistance from the Caribbean Renewable Energy Development Programme (CREDP), which is administered by the “German Society for International Cooperation” (GIZ) and is supported financially by the Austrian Development Agency. The total cost of the project was around US$ 130,000 with ECPA contributing US$ 65,000, CREDP contributing US$ 35,000, and CNE contributing US$ 30,000.
Recently I was lucky enough to be invited to speak at this year’s Caribbean Renewable Energy Forum (CREF), held in Bridgetown, Barbados. The two-day conference was a uniquely productive session that brought together more than 300 participants from 37 countries, including 11 government ministers. The exceptional vigor that the conference brought to the discussion was facilitated by a format that prioritized open, free form discussion over prepared remarks. I spoke on the last panel of the conference which analyzed the progress, problems and prospects of renewable energy development in the Dominican Republic and Puerto Rico. I had the pleasure of being joined by technical specialists and representatives from both countries’ governments and the World Bank. I would especially like to highlight the contributions of our dear friend, Julián Despradel, whose work as the Coordinator of the Projects Division, in the Renewable Energies and Energy Efficiency Department of the Dominican Republic, I greatly admire.
Session of the United Nations climate negotiations October 2 in Panama City. Source: International Institute for Sustainable Development
Panama is only a short hop from the Caribbean islands now home to Worldwatch Institute’s Low-Carbon Energy Roadmaps project. But, it’s a big leap from the national renewable energy strategies being developed in the Caribbean to the tense efforts just wrapping up in Panama City to agree on global climate change reduction goals.
The Panama meetings from October 1-7 marked the final preparatory negotiation before the next United Nations climate change summit convenes in Durban, South Africa from November 28-December 10. With many issues on the negotiating table, countries made surprising progress on providing funding for climate change solutions, especially in developing countries. Countries also pushed big issues like a new global climate agreement and the next stage of the Kyoto Protocol onto an already overflowing agenda for Durban.
This series of blogs explores current mechanisms in place to finance renewable energies in the Dominican Republic. Be sure not to miss Part 1 on the Dominican Republic’s clean energy entrepreneurs, and Part 2 and Part 3 on the Dominican Republic’s efforts to incentivize clean energy production.