The Dominican Republic’s economy has demonstrated remarkable progress and resilience within Latin America for the past twenty years. Economic experts project its economy to grow by 4% in 2023. Renewable Energy in the Dominican Republic is on the rise.
This impressive growth is set to continue after the World Bank announced a massive US $400 million loan to support renewable energy in the Dominican Republic. The loan aims to enhance transparency, efficiency, and accessibility in the energy sector while facilitating the transition to cleaner and more affordable energy sources.
After receiving more than US$3 billion in foreign direct investment over the last two years, the Dominican Republic is a leading market for investors in Latin America.
Read on to learn more about the World Bank’s strategic investment in renewable energy in the Dominican Republic and uncover the potential outcomes for the local economy.
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Why is the World Bank Investing in Renewable Energy in the Dominican Republic?
On May 26, 2023, the World Bank approved a US$400 million loan to bolster the Dominican Republic Government’s efforts in expanding transparency, accountability, and efficiency within the energy sector.
“The Government of the DR has taken decisive actions to start addressing the country’s decades-long challenges of the electricity sector,” said Alexandria Valerio, World Bank Representative. “The World Bank will continue to support these efforts to achieve a more reliable electricity service, which is fundamental for the country’s economic growth, poverty reduction, and people’s wellbeing.”
The Electricity Reform for Sustainable Growth Development Policy Loan (DPL) represents the second phase, reinforcing ongoing support for vital policy and institutional reforms in renewable energy in the Dominican Republic.
The country heavily depends on imported fossil fuels to generate power, resulting in significant greenhouse gas emissions (GHG). This reliance severely impacts disadvantaged households, leading to unreliable access to essential electricity services.
Additionally, the DPL will strengthen ongoing efforts to enhance the sector’s financial sustainability and alleviate its fiscal burden, resulting in significant cost savings.
Dominican Republic Green Bonds Highly Sought After
In December 2022, the first Dominican Republic green bond was issued to investors. Foreign investor interest surpassed expectations, with demand exceeding the US$20 million offer by more than 15-fold.
The issuance of the green bond aimed to generate funds for EGE Haina, a Dominican energy company, to facilitate the expansion of its Larimar I wind farm in the country’s southwestern Barahona Province.
Larimar I is a wind-based electricity generation facility that opened in 2016. With 15 wind turbines, it can produce 200,000 MWh of clean energy each year. Developed with a substantial investment of US$118 million, Larimar I effectively mitigates the emission of 140,000 tons of CO2 annually and eliminates the need to import 335,000 barrels of oil.
Overview of Renewable Energy in the Dominican Republic
The government is committed to the expansion of renewable energy in the Dominican Republic. This includes the adoption of electromobility, and implementation of energy storage technologies, all while actively working to decrease greenhouse gas emissions.
Currently, the Dominican Republic has 17 major renewable energy facilities in various stages of construction. Six of these plants are expected to commence operations before the next quarter, while an additional eight are projected to become operational by the end of this year.
This significant progress ensures that the country remains on track to achieve its target of fulfilling 25% of the national energy demand through renewable sources by 2025.
Business Opportunities for Renewable Energy in the Dominican Republic
The Dominican Government enacted the Renewable Energy Incentives Law (57-07) in 2007 to promote local energy generation from renewable sources and support the production of valuable renewable energy products.
Originally the law did include a 10-year tax exemption on profits until 2020. However, in 2012, the law was modified to reduce tax incentives for small-scale renewable energy producers and eliminate the 10-year tax exemption on profits from selling renewable energy-generated electricity.
The current administration intends to restore the fiscal credit for renewable energy investments to 75%, as stipulated in the original law. Additionally, the government plans to launch a tender to incorporate more renewable energy into the national energy system, enhancing the availability of clean energy in the country.
Thanks to its abundant natural resources, such as solar, wind, and hydroelectric power, the Dominican Republic is an ideal location for renewable energy projects. By investing in renewable energy, companies can tap into these resources, generate clean and affordable energy, and positively impact the local communities by creating job opportunities and stimulating economic development.
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