In relation to the previously published topic "The truth about incentives to renewable energies", I have received several questions, including the following:
Is any action planned to improve the current situation, facilitate investments and attract investors?
So that we can understand the answer to the previous question, I will show some basic aspects of the incentives to renewable energies and then I will give the answer to the question.
B. Normative aspects, incentives, renewable sources.
In 2007 the Dominican Republic issued Law No. 57-07, about Incentives for the Development of Renewable Sources of Energy, which contains incentives for the installation and operation of projects based on renewable sources of energy and its Article 3 specifies the following objectives.
c. Stimulate private investment projects, developed from renewable sources of energy;
- In this document, we will analyze the latest actions of the Dominican state with a view to stimulating private investment, at the end the reader will have a more complete idea of our reality and reach their own conclusions.
F. Promote community social investment in renewable energy projects;
- The results of this objective of the Law are practically null, the same Law ordered the creation of a regulation that allows the development of community projects, "Cooperatives of Renewable Energies", however, this regulation has not been issued and its absence constitutes a barrier to the development of community social projects.
Article 21 specifies the following:
Article 21.- All the authorities of the electric subsector shall ensure that 25% of the service needs for the year 2025, are supplied from renewable energy sources. ...
- As we can see, this law clearly demarcates its objectives in terms of promoting investments and clean energy production goals.
Note. Although there are other important regulations that create the bases for the development of renewable energies, at this moment we are only going to refer to Law No. 57-07.
C. Latest actions of the Dominican Republic related to renewable energies.
1. Issuance of the Regulation that establishes the procedure for processing applications for provisional concessions. (January 2019).
- This regulation, more than helping the development of new projects, complicates it, since it introduces in the provisional concession, requirements that only have sense to be demanded during the last definitive concession processes.
The objective of the provisional concessions is to allowance to a certain company the rights to carry out the studies required by the project, technical, environmental and economic studies.
At the conclusion of the studies, the promoters will be able to determine the feasibility of the project, and if it is feasible, the promoters will strengthen the company, look for the investors and present them during the final concession process, this is logical and is as it should be and it is contained in the Regulations of Law No. 57-07.
2. Concise report on the renewable energy development plan in the SENI. (December 2018).
- There are many things that have been said and can be said in relation to this report, possibly we will analyze them in another document, but at the end what we can see is that the report aims to limit for the period 2018-2020 the growth of renewable energies not manageable to only 250 MW in some proposed polygons and that the contracting of the projects will be the result of a bidding process.
The above sends signals of doubts and skepticism to investors and more when the same document expresses the following.
"It is necessary to find a mechanism for simultaneous management of the opening of concessions and renewable energy tenders."
3. Limitation of aggregate self-production capacity in trunk circuits.
The Distributed Generation Regulation, in its Article No. 17, establishes the following:
"a. The Aggregate Capacity of all Renewable Generation Systems connected in the same Trunk Network, including the proposed Generation System, shall not exceed fifteen percent (15%) of the annual Peak Demand of said Trunk Network. This Peak Demand will be determined at the output of the feeder in the substation and will correspond to the maximum demand registered in the feeder during the 12 months prior to the date in which the Evaluation Request is received. The percentage of Aggregate Capacity mentioned in this literal may be modified by prior agreement between the Clients and the Distributing Companies, as long as this agreement is technically supported. "
- While it is true that this provision has been in the Distributed Generation Regulation since it was issued, no less true is that this provision is currently being used by the Distributing Companies in an arbitrary manner and as a weapon to prevent the development of self-production projects that use net metering.
Note. There are other state actions that are unfavorable for the development of private investments in renewable energy projects; they will be addressed in other documents.
D. The discourse of the authorities in relation to Renewable Energies.
In relation to renewable energies, the discourse of the state is having two directions.
a. What they have done the latest news issued by the official bodies regarding renewable energies point to a large growth in installed capacity, and it is true, we have grown, but this truth is marred by the following reasons.
- It is evident that the Dominican state was forced to deliver the PPAs of the projects that had long obtained their definitive concession contract and in this way; the knot that impeded the development of renewable energy projects was unleashed.
- Lately we have grown because before we almost did not have any renewable energy, so that: any increase in capacity significantly influences the percentage of growth.
- Although it is true that we have grown, no less true is that: this growth is lower than we should have, to achieve that by 2025, 25% of energy demand is covered with renewable energy.
b. The issue of the penetration of non-manageable renewable energies. Although it is true that unmanageable renewable energies create disturbances in electrical systems and this is a reality all over the world, it is also true that renewable energies have many positive economic and environmental aspects and, for these reasons, these projects must be supported and encouraged, this is what Law 57-07 contemplates, then the state instead of shielding itself from penetration, which must create the conditions so that renewable energy can be installed in the national grid.
E. Conclusion of latest provisions / Promotion of Renewable Energies.
When we talk about promotion to Renewable Energies, we think of a set of informative actions, regulations, processes, etc., that result in creating facilities for the development of new projects, and definitely the latest provisions related to Renewable Energies, more that promoting and providing facilities are establishing limits and barriers.
At the end what we can see is that the Dominican state maintains a double focus towards the development of renewable energy projects, on the one hand, it says to encourage, and on the other hand it establishes barriers that hinder the development of smaller and large-scale projects.
F. What should the Dominican Republic do to ensure that, by the year 2025, 25% of the energy demand is covered by clean energy?
The Dominican Republic must make a concrete plan that covers all the capacity that will be necessary to install to meet the required goal, said plan must have the technologies, capabilities, installation start times and entry times into operation, under this premise, the developers will be responsible for preparing the projects and at their risk they should be competitive.
The state must once and for all, choose the mechanism under which it hires renewable energies, whether through PPA or through competitive bidding processes, both methods are good if they are applied in an appropriate way, which cannot be possible due to pre-investment risk issues: obtain a long and expensive concession, then go to tender.
Manager IEC, May 2019