Renewable Energy Incentives In The Dominican Republic

DOMINICAN REPUBLIC OFFERS LUCRATIVE INCENTIVES FOR RENEWABLE ENERGY INVESTMENTS Carlos Rymer Renewable Energy Director, Romana Sostenible

I

March 10, 2008

nvestors in the expanding renewable

entrepreneurs, researchers, investors, and

energy sector now have a new location

other industry leaders to promote the

to add to their list of renewable energy

growth of this newly born domestic

hotspots. The Dominican Republic has

industry. This, of course, comes on the

become the place to do renewable energy

heels of record oil prices and the increasing

business in the Caribbean and one of the

reality of climate change, which threatens

key hotspots for all of Latin America. Last

to significantly damage the country’s

May, the country passed a landmark

agriculture and tourism sectors.

renewable energy law that has already attracted over $2 billion worth of new investments in solar manufacturing, wind, hydro, and solar thermal power, waste to electricity, ethanol, and biodiesel.

The

Dominican

Republic’s

energy

consumption is growing steadily (see EIA graph below). Demand is currently around 14,000 GW-hrs per year for electricity, 1 billion

gallons

of

liquid

fuels

for

To highlight the country’s great appeal for

transportation, and 350 million gallons of

renewable

natural

energy,

the

government

gas

for

cooking.

Energy

celebrated the First International Energy

consumption is expected to grow by 4%

Week last January to bring together

annually in the next two decades given the

stabilization of energy prices. Renewable energy is expected to replace current fossil fuel generation and meet the expected growth in energy demand. Renewable energy is set to boom in the Dominican Republic. Already, there have been

major

investments

biodiesel,

electricity

bagasse,

wind

manufacturing,

solar

in

ethanol,

generation

from

energy,

solar

thermal

power

plants, and even waste-to-electricity plants. These investments have been facilitated by the Law on Renewable Energy Incentives and Special Regimes (57-07), which, in addition to providing institutional support for investments in new projects, provides the following benefits: •

Exemption from all taxes on imported equipment,

sales

(including

equipment), and total income; •

A reduction of the tax on interest payments to 5% for all foreign finances;

•

A tax credit of up to 75% of income tax on all autoproducers, including commercial and industrial;

•

Low-interest financing for up to 75% of the total cost of community or cooperative renewable energy projects;

•

A feed-in tariff based on the marginal cost of distribution and the positive externalities of the specific renewable energy technologies; and

•

A requirement that at least 10% of the electricity demand is met by renewable sources by 2010 and that at least 25% of electricity demand is met by renewable sources by 2025.

At a time when oil prices are reaching new records and climate change is already affecting society, it is important to achieve further breakthroughs in already proven renewable energy technologies, deploy these technologies on a massive scale, and build capacity in people to blend into a new clean energy economy. In the Dominican Republic, with over 10,000MW of wind potential, an immense solar potential, and the availability of large tracts of attractive lands, there exists the potential to achieve all of these and to create a model of what can be done to address the economy, climate change, and energy security. The Dominican Republic is strongly committed to seeing its energy needs being met by renewable energy. Currently, the government subsidy of over $500 million per year to oil losses is unsustainable, and only a renewable energy economy will fix this. The government has already shown its commitment to make investments in the country pay off through the landmark renewable energy law and its commitment to continue subsidizing the energy sector until it becomes stable and sustainable. In the Dominican Republic, renewable energy businesses have the opportunity to meet the energy needs of more than 10 million people in the next two decades.