Part 3: Analyzing the Dominican Republic’s Public Financial Incentives to Promote Renewable Energies

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 on the Dominican Republic’s comprehensive legal framework regulating renewable energy technologies. 

Worldwide, growth in renewable energy has consistently been a policy-driven process. The design of supportive policies, as well as their effective implementation, has been critical in countries that were successful in developing a favorable investment climate for renewables.

Development of renewable energies in the Dominican Republic is incentivized by a comprehensive set of regulations

In the Dominican Republic, a whole corpus of domestic laws recognizing the necessity to transition the energy sector to cleaner fuels has been instituted during the past decade, culminating in 2007 with the publication of Law 57-07 and its appending regulation, which sets a solid legal foundation to incentivize renewable energy technologies development, including cost reductions policies such as tax exemptions, loans, capital subsidies, and a Feed-in-Tariff (FiT).

Yet some major barriers remain, hindering sustained growth in the renewable energy sector. The first is the length and unpredictability of administrative procedures to obtain a concession and benefit from the tax credits and tax exemptions laid out in Law 57-07. Business stakeholders have noted, however, that the process has improved considerably in recent years. A second major barrier is uncertainty regarding implementation and regulation of the FiT laid out in Law 57-07, particularly for solar development. Other barriers include a lack of capital availability, the absence of long-term, concessional commercial loans, the difficulty in accessing international financing for renewable energy and energy efficiency, and a lack of knowledge and awareness of financing opportunities and conditions of international climate finance institutions.

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Part 2: Clear Policy Signals To Develop Renewable Energies

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.

Far from the media spotlight, the Dominican Republic is paving its way to a cleaner energy sector. Over the past ten years, the government has published a large set of policies and laws to incentivize renewable energy production. Lifting clean-energy development to a constitutional objective, Article 67 of the Constitution of 2010 reads, “The State shall promote in the public and the private sector the use of clean alternative technologies to preserve the environment.”

Law 57-07 to incentivize the production of energy from renewable sources

A whole corpus of domestic laws recognizing the necessity to transition the energy sector to cleaner fuels has been instituted during the past decade, culminating in 2007 with the publication of Law 57-07 on Renewable Sources of Energy Incentives and its Special Regimes and its appending regulation, which sets a target of 25 percent of renewable energies in the country’s final electricity consumption by 2025.  The law also aims at “opening the door” to sustained commercial financing for the renewable sector through financial incentives such as tax exemptions, a feed-in-tariff (FiT), and a national fund for renewable energies, discussed in more detail in this blog series.

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Geographic Information System (GIS) mapping is playing a vital role inWorldwatch’s Low-Carbon Energy Roadmap project in the Dominican Republic. 3TIER – a company that performs renewable energy risk analysis and develops high-resolution mapping – has assisted Worldwatch by providing GIS data and maps for solar and wind resources in the Dominican Republic.

Generally speaking, GIS is a tool that can be used to integrate geographically referenced data. This computer-based system facilitates the collection, storage, manipulation, analysis, and display of information in a geographically organized manner. It is often employed to help visualize patterns, trends, and relationships amongst data and to compare the suitability of many locations for a specific project.

GIS mapping begins with a simple geographic map of a real-world location. Then, any number of datasets can be added to this baseline map, taking the form of additional map layers. Often, GIS maps are interactive. Users can change the amount of information they see in a map as well as zoom in and out.

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The Dominican Republic ismaking strides in promoting renewable energy as a way to reduce its heavy dependence on imported fossil fuels. As part of our work collaborating with government and private stakeholders to develop low-carbon energy roadmaps for the Dominican Republic and other Caribbean countries, the Worldwatch Institute is conducting socioeconomic impact assessments for planned and potential renewable energy projects, focusing on solar and wind for the current stage of the analysis. The Dominican Republic has several solar photovoltaic (PV) and wind power projects lined up, and the renewable resource potential to significantly expand on these investments. Examining the job creation potential of these renewable energy projects is an important first step toward understanding the full scope of benefits that renewable energy can provide, especially with high levels of unemployment in the Dominican Republic – 14.2 percent in 2010.

A worker installs solar PV rooftop panels.

Despite a rapidly growing economy (7.8 percent GDP growth in 2010), about half of the Dominican population lives below the poverty line. One reason that economic growth has failed to translate fully into widespread socioeconomic benefits is the Dominican Republic’s dependence on fossil fuel imports. The Dominican economy is highly susceptible to oil price shocks, with oil imports accounting for 5 percent of gross domestic product (GDP) in 2010, down from 9 percent during the global price spike in 2008. Domestic renewable generation can reduce economic vulnerability due to reliance on fossil fuel imports, but can it create enough jobs to tackle the country’s unemployment and improve the standard of living?

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This week the Dominican Republic began official operation of a new transmission line running between its two largest cities, Santo Domingo and Santiago. This comes on the heels of the Inter-American Develop Bank’s recent approval of two loans totaling US $78.3 million for two new wind farms in the country.  These new developments complement last month’s announcement from the Comisión Nacional de Energía (CNE) introducing a new net metering regulation. All three advancements are great steps towards addressing issues of electricity stabilization and increasing consumer participation in the move towards widespread use of renewable energy.

A towering improvement for the Dominican Republic's electricity infrastructure.

The new 345 kilovolt (KV) transmission line is the first of its kind in the country. The national grid, divided among three regional operators, is composed mostly of 69 KV transmission lines with 135 KV lines in some of the more populated and tourist-oriented areas of the country. The new transmission line is supported by two substations and spans the 130 km between Santo Domingo and Santiago. It is overseen by the country’s electricity transmission company, Empresa de Transmisión Eléctrica Dominicana (ETED), and came at a cost of just over USD $170 million. Officials hope that it will help alleviate unreliable electricity in the Cibao Valley region. It also helps prepare the country to handle new generation capacity soon to come online, including both wind and solar projects.

Some of that new capacity is expected to come from the two IADB-funded wind farms. In total they are expected to add 80.6 megawatts (MW) of electricity to the country’s overall capacity. The 50 MW Parques Eólicos del Caribe will be located in Guanillo, in the Monte Cristi province, and is expected to cost US $127 million. Meanwhile, Grupo Eólico Dominicano, will develop a wind farm in Baní, in the province of Peravia. The 30.6 MW project has an estimated cost of US $68.9 million.

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Banco BHD, the only bank in the Dominican Republic with a credit line for renewables projects

This series of  four blog pieces explores current mechanisms in place to finance renewable energies in the Dominican Republic.

Overlooking one of Dominican Republic’s beautiful black sand beaches in Palmar de Ocoa, Azua, a row of seashore villas dominates the bay. Throughout this picturesque landscape one would notice whistling wind turbines and glistening rooftop solar panels. Although the first utility-scale wind farm will be connected to the grid in August 2011 — a significant landmark in the Dominican Republic’s energy transition –  the Dominican market for wind and solar energies is still largely dominated by small, off-grid installations for private homes. Wealthy Dominicans and foreign real-estate investors take advantage of the abundant solar and wind resources to power their villas with a mix of wind and solar energies technologies. Such power supply however, is an exception in the Dominican Republic, where more than 90% of electricity generation comes from imported fossil fuels.

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The Turbines at Los Cocos and Quilvio Cabrera are Fully Assembled

Earlier this month, Worldwatch researchers visited the Los Cocos and Quilvio Cabrera wind farms, adjacent to each other on the border between Barahona and Pedernales provinces in the southwestern corner of the Dominican Republic. These installations, operated by power company EGE Haina, are expected to come online this August. They will represent the first utility-scale wind projects in the Dominican Republic. As with most ventures that are the first of their kind, Los Cocos and Quilvio Cabrera offer valuable lessons for future wind development in the Caribbean.

The Los Cocos wind farm consists of 14 Vestas V90 turbines, each with an installed capacity of 1.8 megawatts (MW). Quilvio Cabrera holds 5 Vestas V82 turbines, each with an installed capacity of 1.65 MW. All told, the two farms will have a combined installed capacity of 33.5 MW. Based on seven years of data collection on site, the capacity factor of the facilities is anticipated to be 33 percent, which means that they will produce an average of around 11 MW, or just under 100 Gigawatt-hours per year (not accounting for downtime due to maintenance).  The Los Cocos project alone is expected to avoid the emission of 125 thousand metric tons of carbon dioxide (CO₂) per year, equivalent to the annual greenhouse gas emissions from over 20,000 passenger vehicles in the U.S.

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Earlier this year The Worldwatch Institute went to Santo Domingo for the 2011 Caribbean Clean Energy Business Forum. Alexander Ochs, the Director of our Climate and Energy team, presented on our Low-Carbon Energy Roadmap methodology and upcoming work in the Dominican Republic, Haiti, and Jamaica.

Other presenters included Rene Jean-Jumeau, the Coordinator of the Energy Sector Management Unit at the Haitian Ministry of Public Works, Transport and Communications and one of our key partners in Haiti. He spoke about the Haitian energy system and the needs and opportunities for investment in renewable energy.

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By: Mark Konold and Cristina Adkins

This entry is an update on the Worldwatch Institute’s Caribbean Low-Carbon Energy Roadmap project.  

Dominican Republic Wind Zones

Worldwatch’s Climate & Energy team recently received a wind resource assessment for particular zones within the Dominican Republic. This final installment in a series of deliverables from 3TIER complements the solar analyses that 3TIER provided earlier in the project for the country’s two main cities, Santo Domingo and Santiago. With these resources, Worldwatch is now in the process of preparing a presentation of first findings for key in-country stakeholders that will be presented next month in Santo Domingo.

As was noted in a previous post, Worldwatch’s approach combines thorough policy analysis with 3TIER’s resource assessments to provide governments with options for fostering a low-carbon energy mix. These resource assessments are foundational for making planning decisions around generation and transmission in the Dominican Republic.

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LNG tankers could become a more common sight in the Caribbean.

By Saya Kitasei and Cristina Adkins

As oil prices continue to rise, consumers all over the world are feeling the squeeze. Although Americans may be hurting at the pump and reviving debates about energy security, the U.S. economy’s vulnerability to oil price volatility is small relative to the island nations of the Caribbean, which use oil to generate most of their electricity in addition to fueling their vehicles. In response to recent oil price shocks, some islands are discussing a shift from oil to natural gas to generate electricity (and even to fill up their cars). Since the end of 2008, natural gas prices have stayed very low while oil prices rose steeply, leading many policy-makers in the Caribbean to argue that natural gas is a good bet for their islands’ economic and energy security.

As ReVolt has reported, Worldwatch is currently working with three Caribbean countries, the Dominican Republic, Jamaica, and Haiti, to study the potential for development pathways based around domestic renewable energy and energy efficiency resources.  Should it remain significantly cheaper than oil, natural gas could provide an important additional piece to reducing these islands’ expenditures on energy imports, even though gas, too, would have to be imported, most likely in the form of liquefied natural gas (LNG).

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