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Market News

 April 27, 2007
Dominican Republic: Renewable Energy

 This report provides an overview of the opportunities for firms in the renewable energy sector in the Dominican Republic as well as its legal framework.

The Dominican Republic experiences frequent electrical blackouts that can last from a couple of hours to more than twelve hours a day. Supply shortfalls in the sector can be attributed mainly to electricity distribution companies' inability to collect sufficient funds from consumers, theft, and delays in government payments. Rising world petroleum prices and system inefficiencies have magnified the problems.

Energy sector problems threaten economic competitiveness and create widespread public dissatisfaction. The government's response has included a push to increase generating capacity. The Dominican Republic's installed generation capacity is over 3,000 MW and the average daily peak demand is around only 1,900 MW. Technical and non-technical losses average 45 to 50 percent.

Considering all of these facts, it is easy to conclude that this is the right time for renewable energy solutions in the Dominican Republic. In this report, key laws that affect or will affect renewable energy projects are highlighted, as well as several considerations for each of the methods for renewable energy production and its potential in the Dominican market.

Legal Framework

There are several laws that comprise the legal framework for the renewable energy projects in the Dominican Republic. These include the following:

  • Reform of Public Enterprises Law 141-97.
    This provided the legal framework for the partial privatization of the electricity generation and distribution units.

  • General Electricity Law 125-01.
    This provides preferential treatment for companies that generate electricity from renewable energy, if prices and conditions are identical to conventional generation. Companies that generate electricity with renewable energy are exempted from taxes for five years.

  • Presidential Decree 139-03.
    Provides import tax exemptions for solar panels and wind turbines.

  • Presidential Decree that supports the diversification of sugar mills into energy producing IPP industries.

  • Incentive Law to promote industrial development in the border with Haiti regions, which includes incentives for wind, solar and all biofuels.

Laws not yet approved, in process:

  • The Renewable Energy Law. This bill was approved by the Chamber of Deputies and is now awaiting approval in the Dominican Senate and then its ratification from the Executive Branch.

    It includes the following incentives:

    • Tax exemptions for imports of renewable energy components
    • Reduced transmission fees for renewable energy electricity (preferential dispatch and fee)
    • Fixed feed-in price for renewable energy electricity
    • Income tax exemptions (of up to 5 years) and fiscal incentives for self-suppliers
    • Grants of up to 50 percent of financial costs (to be decided on a case-by-case basis, max. 5MW)

  • There is also a Renewable Energy Fund or National Interest Fund. The Hydrocarbon Law 112-00 provides funding for the promotion of renewable energy and energy saving programs. It started as a two percent hydrocarbon tax income in 2002, and it increased to five percent in 2005. This fund and its programs are managed by the Ministry of Industry and Commerce of the Dominican Republic.

Wind Power

Wind potential assessment: 1,500 km2 with good-to-excellent wind resource potential (>7m/s at 30 m) approximately 10,000 MW of wind potential.

Installed Capacity: None. Planned projects total 470 MW.

Solar Energy

Solar potential assessment: High solar radiation of approximately 5 kWh/m2/day.

Solar Water Heating:

  • Huge untapped potential
  • Inexpensive thermosyphon technology applicable
  • Concurrent source: expensive electricity

There are approximately 350,000 rural households without access to modern energy services; a considerable amount of these households could be served by solar home systems.

One of the programs being executed by the Renewable Energy Fund of the Ministry of Industry and Commerce is the Water Heater Exchange Program. The program plans to exchange approximately 190,000 electrical water heaters for solar water heaters. The users will have a financial plan through the State-owned bank, Banco de Reservas.

Hydropower

Installed Capacity: 20 hydropower plants, capacity ranging 3-100 MW, for a total of 534 MW. Hydro constitutes16 percent of total installed generation capacity, and 10 percent of produced electricity comes from the hydro units.

Potential: Approximately another 500 additional MW. There are several small/micro projects in operation or under preparation, and there is a huge untapped potential for rural electrification

Biomass

Potential: Large untapped potential, lands previously used for sugar cane production.

Biomass yield: 15 to 60 million tons per year depending on technology used

Biofuel: Diversifying the sugar cane industry (a dozen sugar mills) for Ethanol production (300 to 1,500 millions of gallons per year) and Biogas as main products. There are several ethanol plants in the Dominican Republic that are in operation to produce rum.

Excerpts from "Dominican Republic Renewable Energy Overview", US Commercial Service, April 2007.