Dominican Republic: Energy Resources

Extend network

Distribution networks cover 88% of the population, with about 8% of the connections thought to be illegal.

Energy procedure

The National Energy Commission is the policy agency. One of its main responsibilities is the development of the National Energy Plan.

The World Bank is currently implementing an Electricity Distribution Rehabilitation Project that has targeted the goals of (a) increasing the cash recovery index of the three electricity distribution companies in selected areas; and (b) improving the quality of electricity service.

Energy debates

A new law, Law 186-07, making provision for punishment for electricity theft was promulgated in July 2007.

An Energy Efficiency Law is under process.

National Development Strategy Bill for the Dominican Republic 2010-1030

Electricity subsidies are estimated to exceed US$ 1 billion in 2008, corresponding to a strikingly large 3% of Dominican Republic GDP.

Energy sources

Total installed electricity capacity (2010): 5,518 MW Fossil fuels (coal, fuel oil and natural gas): 86% Hydro-power: 14%.

The Dominican Republic is the dominant producer of hydro-electricity in the Caribbean.

Regulatory roles

The Superintendent of Electricity (SIE) functions include:

   Price regulation,
   enforcement of quality and safety regulation,
   market surveillance,
   consumer protection, and
   conflict resolution between energy agents.

Competition

A wholesale market exists for transactions between generators, distributors and large end-users.

Distributors and large end-users can buy electricity from generators under long-term contracts.

There is a spot market where generators, distributors and large end-users can buy/sell short term energy deficit/surplus.

Energy efficiency

Energy Efficiency Strategy for the Dominican Republic (CNE 2004)

Capacity concerns

There is a heavy dependence on fossil fuels, all of which have to be imported and there is a lack of investment in generation.

An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system.

Rolling blackouts and electricity shortages have become a way of life for people in the Dominican Republic.  Although the country has more than sufficient generation capacity to meet local demand, the government’s decision to cap electricity prices, tolerate theft by end users and give free electricity has resulted in insufficient funds to state-owned electric distribution companies to cover their operating costs and pay private sector generators for contracted capacity.

Congress passed a law in 2007 that criminalizes the act of stealing electricity, but it has not yet been fully implemented. The electricity sector is highly politicized.

Government agencies

The Decree no. 146-2000 placed the Program on non-conventional energy under the auspices of the Industry and Commerce Secretariat for the purpose of promoting research and development projects concerning the exploitation of renewable energy sources.

Energy regulation role

Regulatory tasks are carried out by the Superintendent of Electricity. Government energy planning and policies are carried out by the National Energy Commission.

Ownership

Electricity market Unbundling and privatization began in 1999 with the sale of 50% of the electricity generation infrastructure. The government retained control over transmission and hydropower plants and today owns two of the three distribution companies that have been re-nationalized in 2003. The formerly state owned Corporación Dominicana de Electricidad – CDE (Dominican Electricity Company) and also a dozen (mainly American) independent power providers are active in the Dominican electricity market. These private companies now provide 86% of the installed generating capacity.

Under the General Electricity Act of 2001, independent state-owned power transmission companies Empresa de Transmisión Eléctrica Dominicana – ETED and Empresa de Generación Hidro-eléctrica Dominicana – EGEHID were established and made responsible for the transmission network and for the operation of hydroelectric power plants.

The tasks of rural and urban-marginal electrification, the coordination of electricity companies, and the administration of contracts with independent power producers were assigned to a new company - Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE), which also serves as a holding company for ETED and EGEHID.

The power distribution networks were privatised in 1999. Unión Fenosa (Spain) took over the northern and southern grids (EDENORTE/EDESUR), with each holding 50%, and AES (USA) bought into the eastern grid (EDEESTE). Due to the poor financial and operational situation of the distribution networks, the Dominican Government reacquired, via CDEEE, Unión Fenosa’s stakes in Edenorte and Edesur in September 2003.

Degree of independence

The Board of the Superintendence of Electricity is composed of 3 members appointed by the President and ratified by the Congress.

Energy debates

N/A

Energy framework

Approved in 2007, the Renewable Energies Incentive Law 57-07 grants incentives and tax exemptions on alternative energy imports and facilities for research and application of renewable energy technologies.   Law 57-07 eliminates former law 2071, opening the country for the development of alternate energy sources. The new law’s incentives, include the following: - 100% exemption over import duties for equipment, machinery and accessories required for renewable energy production. - Income tax exemption. A 10-year exemption from all taxation on profits up to, but not beyond, the year 2020. - Fixing of the electricity price from renewables that enters the national grid to the price of the market for the distributors. - Tax incentive for Self-Producers. Up to a 75% credit on capital cost for businesses’ shift entirely to renewable energy systems or increase their energy consumption share in these. This tax credit will be deferred to the self-producer’s income tax for the next 3 years. - Community Projects Incentives. Every and all institution of social interest (community organizations, producers associations, registered mutual groups) willing to develop renewable energy sources at a small scale (up to 500 KW) and destined to a community use, may access financial assistance funds at the lowest market rate for developing these projects, for up to 75% cost of the works and its installation.

Authorities overseeing every electric subsector are committed to ensuring that 25% of service needs by 2025 shall be supplied from renewable energy sources. By 2015, at least 10% of the energy purchased by the distributors and trading companies shall originate from renewable sources of energy.

Reliance

Under the San Jose Accord, the Dominican Republic receives crude oil and refined petroleum products from Mexico and Venezuela (75% of oil imports) at favourable prices.

Liquefied natural gas (LNG) is imported from Trinidad and Tobago for electricity generation.

Role of the government

The National Energy Commission (Comisión Nacional de la Energía, CNE) is in charge of developing programs, projects and legislation for the energy sector, including electricity, hydrocarbons and non-renewable energy.

Regulatory framework

The fiscal incentives provided by Law 57-07 aim to make investing in renewable energy projects in the country a profitable venture.  The Dominican Republic is one of the first countries in Central America and the Caribbean to define a legal corpus on renewable energy that has helped the National Energy Commission (CNE) to process more quickly and efficiently the setting up of investing operations.  This is claimed to have helped significantly in motivating foreign investors to come into the country.

The feed-in tariff scheduled in the Law 57-07 could clearly be favourable to RET as utility producers could receive a premium equal to the estimated externalities of fossil fuels for the renewable energy they produce.

CNE recommends a minimum price for each type of renewable energy handed over to SENI. Such price shall cover the guarantee for a minimum value to pay for the renewable energies that shall maintain the adequate incentives to investments.

Additionally, CNE is authorized to recommend the maximum price corresponding to each type of renewable energy. These reference values (minimum and maximum) shall be revised annually. This law also schedules the fixation of a quota of RES by the CNE.

Regulatory barriers

N/A

Energy regulator

The Superintendence of Electricity (SIE) created in 1998. http://www.sie.gov.do/  

Renewable energy

Hydropower In 2008 the Dominican Republic had an installed hydroelectric capacity of 470 MW, accounting for 14% of electricity generating capacity. It is expected that, by 2012, an additional 762 MW will have been added. The 50 MW hydroelectric Pinalito has started generating energy in 2009 while it is expected that the 99 MW Palomino hydroelectric, in the southwest, shall start operations in 2011. Construction is under way, or contracts have been signed, for 356 MW of new hydro plants.  In addition, several hundred MW of new hydro projects are in different stages of development. 

Solar energy A high potential sector. In February 2009, the Dominican Republic signed an agreement with US firm Sunovia Energy Technologies for the installation of the country’s first solar energy plant of 20 MW. There are also estimates of 2,899 MW of solar PV projects, but these would not be economically worthwhile based on current estimates.

Wind energy About 350 MW of wind projects have already been approved.

Biomass energy The $350 million Fenix Project from RJS Group is set to produce 100 million gallons of ethanol per year, using sweet sorghum as feedstock, and generate 55/60 MW of electricity.

In January 2009, the Dominican State-owned power companies (CDEEE) and the US based company Koar Energy Resources signed an agreement to generate energy from vegetable waste.