Dominican Republic: Toward the Construction of a More Reliable and More Environmentally Sustainable Electricity Sector

Friday, July 24, 2015

The Dominican Republic covers a little over two thirds of the eastern part of Hispaniola, the island it shares with Haiti. Its economy is the ninth largest in Latin America and second in Central America and the Caribbean (CIA, 2010). Although the country is known as a sugar producer,, the services industry is currently the predominant area of economic activity.

The lines of action that will shape the future of the Dominican Republic’s energy sector are set down in its National Development Strategy (END), which was enacted as law on January 25, 2012. Specifically, the strategic vision for the energy sector is defined in the objectives and lines of action under the third plank of the END, the achievement time frame for which is 18 years.

One of the underlying objectives of that plank— aimed at consolidating an efficient, competitive, and broadly inclusive new economic model— is to lay the foundations for national development on a reliable, efficient, environmentally sustainable energy system with two important specific objectives: (1) ensure a reliable electricity supply; and (2) guarantee the fuel supply, while seeking greater diversification, competitive prices, and environmental sustainability.

In that regard, the aims will be to:

  1. Advance diversification in electricity generation, with an emphasis on renewable, low environmental-impact sources , such as solar and wind energy;
  2. Strengthen legal certainty, institutions, and the regulatory framework in the electricity sector;
  3. Plan and move forward with the development of electricity generation, transmission, and distribution infrastructure that operates in line with to statutory quality-of-service and reliability standards.
  4. Promote energy savings and efficiency in the use of the electricity system.
  5. Promote a culture of energy-efficiency in the general public and business.
  6. Implement an integrated oil and gas exploration strategy over the short, medium, and long terms that is “coherent and sustained, enables the feasibility of exploitation—including the use of oil rigs—to be determined, and ensures environmental sustainability.”
  7. Review the regulatory framework and consolidate institutions in the fuel subsector. This line of action should be complemented by designing policies for, organizing, promoting and stimulating local output and sustainable biofuel use, particularly in the transport sector, in order to lessen dependence on imports, curb greenhouse gas emissions, and protect the environment.

In addition, in light of the expected increase in energy consumption across all sectors over the coming years, the Dominican Government should focus its efforts on planning and promoting the “development of a modern and efficient fuel refining, storage, transportation, and distribution infrastructure that is environmentally sustainable, geographically balanced, and competitive, and operates with the highest safety and quality standards.”

The country is clearly looking to reduce its dependence on fossil fuels by building a new energy system capable of sustaining it is economic and social development goals while doing its part to reduce emissions of local pollutants and greenhouse gases, particularly since, as an island, it is vulnerable to the effects of climate change.

In this context, the greatest challenge is the performance of the electricity subsector. Broadly speaking, the electricity supply is unreliable, deficient, and costly, the most visible manifestations of which are frequent power outages, technical and non-technical losses, financial and environmental unsustainability, and a heavy dependence on government transfers that come with a hefty fiscal toll. Therefore, based on the above strategic guidelines, the challenge is to implement a systemic solution to which all sectors and actors are committed.

END 2030 requires the signing of an Electricity Pact that addresses the core lines of action. This has elicited broad consensus across all sectors and, it is hoped, will ensure a solution to the structural crisis in the electricity subsector. Following the strategy outlined above, a few months ago the Dominican Government launched the preparations for the Pact by unveiling a general basic outline that includes the following components or plans:

  1. Efficient and Renewable Thermal Generation Expansion Plan that is less dependent on petroleum products.
  2. Transmission and Distribution Network Expansion Plan following a rigorous demand-side study for that period.
  3. Loss management and recovery plan
  4. Comprehensive renewable energy source development plan
  5. Introduction of sweeping reforms to the complex organizational structure of the subsector, preferably inclined toward vertical integration under a guarantee of capital democratization.
  6. An electricity-generation system carbon emissions reduction plan

The active participation of the Ministry of Energy and Mines (MEM) in shaping the contents of the Electricity Pact will be permanently guided by its vision for energy security. This includes, among other elements, developing innovative initiatives within the context of several already-defined planks of the strategy: First, hydrocarbons, with an emphasis on modernizing and/or overhauling the regulatory and policy framework, while at the same time carrying out prospecting, exploration, and exploitation projects to tap the country’s hydrocarbons potential.

Second, minimize the country’s dependence on imported hydrocarbons, thereby transforming the Dominican economy to have a sustainable electricity production mix that prioritizes renewable energy resources, with the integration of new, competitive, and environmentally-friendly energy technologies. Finally, and regarding the energy arena in general, the MEM has proposed implementing a new model for exploiting renewable natural resources, based on the principles of equity, social inclusion, security, and environmental sustainability. In this regard, the ministry will prioritize small and medium-sized projects in metal and non-metal mining.

The MEM’s contribution to meeting the commitments contained in the END, the Electric Pact, and the dynamic series of presidential energy-related goals, will be decisive for national development. The creation of this ministry is undoubtedly the most significant institutional reform in recent years.