DOMINICAN REPUBLIC—Recent Events in the Dominican Power Sector Open the Door for the Development of Power Generation Projects, Particularly in Renewable Energy

SUMMARY

Recent announcements of key projects in the Dominican power sector and actions taken by the government signal that this sector is finally taking meaningful steps aimed at resolving the structural problems that affect it, including the lack of an adequate diversification of its power generation matrix. Such projects and actions open the door for the development of new power generation projects,... (see full summary)

 
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  • Recent announcements of key projects in the Dominican power sector and actions taken by the government signal that this sector is finally taking meaningful steps aimed at resolving the structural problems that affect it, including the lack of an adequate diversification of its power generation matrix. Such projects and actions open the door for the development of new power generation projects, particularly renewable energy projects that can take advantage of the various financial and other incentives available for such projects since 2007.

    Current Composition of the Dominican Power Generation Matrix

    Thirteen years after implementing a general reform of its power sector, the Dominican Republic remains mired in a crisis affecting this sector, which has been worsened by the sustained increase in the price of oil, which is the base fuel for its power generation matrix. Investments in power generation resulting from reform allowed the construction of new coal, natural gas and crude oil-fired (using FO #6 in lieu of traditional diesel—FO #2) power generation projects and refurbishment of some of the existing units in the system, allowing them to operate at their full capacity and improving their efficiency. As a result of such investments, there has been an increase in the supply of energy, a reduction in production costs and greater diversification of the country’s power generation matrix. Thus, in accordance with the statistics of the Coordinating Body (Organismo Coordinador) of the National Interconnected Electric System (SENI), power generation has shifted from an industry based primarily on liquid petroleum, weighted at almost 90 percent of the country’s power generation matrix, to a greater diversification of said matrix, today composed of approximately 40 percent liquid petroleum, 14 percent coal, 31 percent natural gas, 14 percent hydroelectric and 1 percent wind.

    Required Changes to the Power Generation Matrix to Address the Problems Affecting the Country’s Electricity Sector

    Notwithstanding the foregoing, the actual composition of the country’s power generation matrix remains inadequate and significantly contributes to current deficiencies in the electricity sector, including production costs and state subsidies, which, according to statements by government officials, amounted to US$1.4 billion in 2013. To address these problems and particularly to promote the adequate supply of power generation, several studies on the subject have concluded that the country requires that as a priority new facilities, particularly coal and natural gas-fired facilities, be added to its power generation matrix to meet the base level of demand and to displace the matrix’s dependency on oil. It is estimated that in 2016 the system will require approximately 600 MW of new capacity to maintain the current levels of supply (84 percent of the demand) or 1,500 MW to supply the total demand projected by the SENI by that date.

    Significant Projects Recently Announced and Their Expected Impact on the Composition of the Power Generation Matrix and Development of Renewable Energy Projects

    The Dominican government has embarked on the construction of two coal-fired power generation units with an estimated 380 MW capacity each and related port infrastructure. According to government announcements, this project is expected to cost approximately US$2.041 billion. Both units are expected to commence operation during the first half of 2018. Similarly, last February a private consortium announced the construction of an LNG terminal in San Pedro de Macoris. It is estimated that this terminal will enable the long-awaited conversion of the CESPM...

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