The Dominican Republic's Bright Future

Today Worldwatch launched the last of its three Sustainable Energy Roadmaps. You can read the official press release here. You can download the full report here. This blog post also appears at Worldwatch's blog.

The final installment of the Caribbean Roadmap series.

Just over one year ago, the Worldwatch Institute launched its first Sustainable Energy Roadmap for the Dominican Republic, the third and final such report in a multi-year project sponsored by the German Ministry for the Environment, Nature Conservation, Building and Nuclear Safety. The report showcases practical reforms that the Dominican Republic can implement to harness renewable energy sources, reduce greenhouse gas emissions, and significantly draw down its reliance on imported fossil fuels. Given the country’s abundant natural resources, promising regulatory framework, and robust economy, Worldwatch projected that the Dominican Republic could achieve a target of 85 percent of its electricity coming from renewable sources by 2030.

When Worldwatch presented and launched the Roadmap at the new Ministry of Energy and Mines in July 2015, the Dominican Republic was taking big steps to change its energy profile. President Danilo Medina had just made good on a campaign promise to create the new energy ministry, consolidating the various energy-related offices and initiatives spread across the government. Further, the government made strong commitments to developing its Intended Nationally Determined Contribution (INDC) ahead of the Conference of the Parties in Paris (COP 21) to reduce long-term carbon emissions by almost 50 percent. These are exactly the type of strong policy signals that the Worldwatch Roadmap advocated because of their ability to pave the way for would-be renewable energy developers and carbon emission initiatives.

In some respects, the Dominican Republic has chosen to embrace the Roadmap’s long-term renewable energy projections. The Los Cocos wind farm, owned and operated by EGE Haina, has expanded from its initial 25 megawatts (MW) to 77 MW, and in early 2016 the country launched the new 49 MW Larimar wind farm. After years of technical and financial difficulty, the long-awaited 30 MW Monte Plata solar farm finally came online in March with plans to expand to nearly twice the current capacity. The country’s net metering law, one of the most effective regulatory mechanisms in the region for promoting small- to mid-scale rooftop solar PV in the Caribbean, has added over 400 MW since being enacted in 2012.

[The Los Cocos wind far in Barahona, Dominican Republic.

By contrast, some aspects of the electricity landscape remain little changed. Fossil fuel imports are still around 85 percent, large hydropower production is still around 13 percent, and renewables still comprise only around 2 percent of the electricity mix. In addition, the country’s Law 57-07, meant to stimulate renewable energy investment, remains the subject of much debate, and continuing – and improving - its fiscal incentives seems in doubt.

So what is needed now? Electricity pricing could become more competitive due to the expiration of long-term contracts between generators and the government (more on that in a bit). It should! However, the Dominican Republic still relies on a pricing formula that fails to adequately connect the price of electricity to the price of the fuel source used to generate it. This mechanism can be beneficial when fossil fuel prices soar, but in markets where fossil fuels such as natural gas are at historic lows (or, in the case of renewables, where there is no costly fossil fuel), the full benefits of more affordable electricity are not fully realized by the consumer. Further, the state-owned electricity company, CDEEE, remains outside the Ministry of Energy and Mines, which, as the Roadmap correctly points out, makes coordination difficult and can lead to conflicting agendas.

[Rooftop solar is making a big difference to residential and commercial customers.

In some ways, it appears that the Dominican Republic is actually taking a step backward, ignoring key findings and recommendations of the Roadmap. Construction continues on two 300 MW coal-fired power plants, which have been center stage for some time due to alleged mismanagement, non-transparency, and the devastating environmental and health impacts that they could bring to Dominican citizens. And because they have an approximate life span of 30 year, the continued presence of these plants crowds out new renewable generation. Further, it remains unclear if the electricity produced by the coal plants will actually lead to lower electricity costs for Dominican consumers.

Further complicating the electricity landscape is the recent expiration of long-term electricity supply contracts between generators and the government. Those contracts established a set amount of electricity that a generator would supply to government-owned distribution companies at a fixed price. Any shortfall that the generator needed to procure could be done on a spot market. The fuel type used to satisfy the contract did not matter, only the end commodity. This was beneficial to generators investing in large-scale renewable energy because they procured their commodity without a costly fuel input, thereby increasing profit margins, and renewable energy has been given “priority dispatch” status ahead of electricity generated from fossil fuels.

The current reality, marked with uncertainty, could stifle further renewable energy development as the government seeks to ensure that baseload demand is met. That typically means relying on “dispatchable” sources such as natural gas, because the intermittency of renewables remains too high a risk.

This is one key area where the Roadmap should continue to play a vital role in guiding the country’s energy transition. The report shows what the Dominican electricity matrix could look like achieving very high percentages of renewable energy penetration if matched with other technological options. Natural gas forms a much better partner for renewable energy than coal or oil, as the former can quickly be adjusted to compensate for the variability of the latter. Storage of renewable electricity during peak hours might soon become an affordable solution. Already, geographic and technological diversity of renewable installations to limit both lows and highs are helping.

The Dominican government only has to look to its Latin American neighbors to see the effectiveness of opening a pre-determined level of capacity in a competitive bidding process wherein developers compete to deliver that electricity at the most affordable price. The remaining capacity can be reserved for a complementary source such as hydro, bioelectricity, geothermal or natural gas to ensure that baseload is adequately met.

The Roadmap offers not only the technical and socio-economic analysis of alternate energy pathways, but concrete finance and policy suggestions that can be of crucial help to the country in continuing its necessary transition away from heavy fossil fuel reliance. Country’s leaders still have to boldly commit to such a path. So far, actions have been a mixed bag.

Earlier this year I participated in the annual Semana Dominicana here in Washington, DC. The week-long event, sponsored by the American Chamber of Commerce in the Dominican Republic (AMCHAMDR), highlights the opportunities for greater economic cooperation between the two countries. I was specifically asked what I believe the future of renewable energy will be in the Dominican Republic. I told the group I think it could be a missed development opportunity second to none as the country struggles to truly commit to a renewable energy strategy.

The Dominican Republic’s size, location, and resources lend it to being a major installer of zero-emissions electricity generation, a distribution point for renewable energy technology in the Caribbean, and a leader in the transition away from fossil fuel reliance. However, for as much as it appears the Dominican Republic is following the suggestions listed in the Roadmap report, it appears that the country is slightly veering off-course. It’s time to make corrections to reach the outcomes that the Dominican people – and its leadership – have said they want.