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Dominican Republic

Dominican Republic

IADB loans point to wind industry growth

DOMINICAN REPUBLIC: Loans approved by a major international development bank to support two planned wind farms in the Dominican Republic are signs that the sector is finally taking off in the country.

The Caribbean nation introduced laws in 2007 designed to encourage renewable-energy generation, but it is only now that projects are receiving the funding they need to get off the ground.

In July, the Inter-American Development Bank (IADB) announced two loans with a combined value of $78.3 million for two wind projects with a combined capacity of 80MW. The first loan, for $50.7 million, will support the $127-million Parques Eolicos del Caribe, a wind farm being developed by a consortium that includes Spanish turbine maker Gamesa, Dominican real estate firm Grupo Delta Intur, and businessmen Aquiles Mateo and Miguel Angel Muniz. The project will comprise 25 Gamesa G90 turbines and be located close to the northern coast of the Dominican Republic, which shares the island of Hispanola with Haiti.

The second IADB loan is for $27.6 million and has been allocated to a $68.9 million wind project developed by Grupo Eolico Dominicano, which is owned by Inveravante, a Spanish group that invests in energy, real estate and hotels. It will be located east of the capital Santo Domingo and deploy Vestas V90 1.8MW turbines.

20-year PPAs

Both projects are backed by 20-year power-purchase agreements (PPAs) in US dollars that are linked to US inflation. The projects first received permits from the Dominican government in June 2006 and both have permission to sell carbon credits via the clean development mechanism defined under the UN Kyoto Protocol.

"The renewables law was passed in 2007, but supporting legislation wasn't passed then," said Ana Maria Vidaurre, IADB team leader. Details of incentives, including extra payments for companies that build towers, were published in June 2008 and a series of tax and import-tariff exemptions were published by state electricity body, the National Energy Commission, in February 2010.

As certainty has grown over market rules and incentives, greater interest from private-sector investments has emerged, in turn prompting the IADB to lend, Vidaurre said. "There was a lot of uncertainty, but now private developers believe the sector is ready for them."

State power provider Dominican State Power Companies Corporation can now offer renewable-energy developers higher payments as part of PPAs, provided the projects in question are already judged to be financially viable. However, higher payments - currently $137.44/MWh - are largely unnecessary given the high price of electricity in the Dominican Republic, explained Vidaurre. "PPA prices were below the normal prices paid from June to October last year because most generation is based on fossil fuels," she added.

The Dominican Republic produces around 3.3GW of electricity annually of which approximately 60% is generated from fuel oil and almost 17% from natural gas. The remainder is generated by hydropower. The country has a target to generate 25% of national energy supply by 2020 from renewable sources, around 838MW or three percentage points more than at present.

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