Dominican Republic: a business friendly country to invest in renewable energy

September 30, 2022

Authors: Ney de la Rosa and Gustavo Pérez

Renewable energies garner vital importance, due to their reduced negative impact on the environment and natural resources.

Importance of a quality energy supply for the country
Among the main challenges that today’s society faces is the constant need to meet the growing demand for energy for the proper functioning of most human activities, due to its essential use at home, in transportation (land, sea and air), in the functioning of the productive apparatus, among others.

It is necessary to guarantee a constant and quality energy supply, which is an issue of vital importance for any nation, regardless of where it is located, or the particular vision it has in the political, social or economic fields.

This is because, without adequate energy supply, no country will be in a position to consolidate a robust, healthy and sustainable economic strategy over time.

Paradigm shift: an energy that contributes to the sustainability of the environment and natural resources
Reality imposes not only a need to meet the growing demand for energy resources, but also the diversification of its sources, in order to alleviate, and eventually significantly reduce, the negative impact that the use of fossil fuels has accumulated on the environment. Especially its already palpable effects on climate change and the sustainability of ecosystems.

This has led to the emergence of new paradigms, focused on the renewed vision of where society should go, how to guarantee future generations the advantages of modern life, which require a growing and sustainable supply of energy to sustain economic and social growth, without compromising the environment and the planet.

In this scenario, renewable energies garner vital importance, among which wind, solar, hydro, biomass, among others; stand out due to their reduced negative impact on the environment and natural resources.

Faced with this reality, the so-called “Third Generation Rights” emerged, including the right to a healthy environment, thereby increasing the charter of obligations of States, as they had to guarantee a new series of rights that were strange to the traditional vision that was previously held, such as environmental rights.

Legal framework to promote investments in renewable energy
In the Dominican Republic, the energy park has been based on fossil fuels, and to a lesser degree on hydroelectric energy. Therefore, to promote the diversification of sources of electricity generation -and especially the use of renewable energies-, a series of incentives were considered to promote investment in this last line.

This was absolutely necessary, since faced with the moral, social, environmental and even systemic sustainability aspects involved in the use of more environmentally friendly energy sources; we found ourselves: i) facing an energy infrastructure almost completely dominated by fossil fuels, and ii) a legal framework not attractive in the incentive of investment in friendly business schemes (“business friendly”) for the diversification of the energy matrix.

The first step was to create a legal framework that was appealing enough to attract investment from private actors at the local level and international capital, which in most cases have greater access to financing, as well as state-of-the-art technologies.

Private investment attracted by a package of exemptions and incentives and legal certainty
In this sense, in 2007 the Dominican legislator approved Law 57-07 on Incentives for the Development of Renewable Energy Sources and their Special Regimes, which since then has constituted the fundamental normative and regulatory framework for the diversification of the Dominican energy matrix, through the promotion, incentive and development of renewable energies.

Articles 9 to 14 of Law 57-07 list the general incentives for the production and use of renewable energy. These are varied, contemplating tax exemptions on different issues such as the importation of equipment and machinery, income tax, external financing, among others.

As can be seen, it is a fairly broad package of exemptions and incentives, which is attractive for private investment. All this, added to the climate of legal security and social peace that the Dominican Republic has, consolidates it as an ideal destination for investment in renewable energies.

Investment in renewable energy increases, while sources of oil derivatives decrease
Now, has this investment generated results for the Dominican Republic? According to the report of the Dominican Association of the Electric Industry (ADIE) presented in 2020, energy diversification in the Dominican Republic from 2000 to 2020 has been significant.

Initially, the distribution of energy sources was segregated as follows: 88% oil derivatives, 3% coal and 9% hydroelectric. For the year 2020, it was reflected as follows: natural gas 30%, coal 37.1%, oil derivatives 16.7%, water 7%, biomass 0.9%, wind 6.4% and sun 1.7%.

Three conclusions can be drawn from this:

– It´s undeniable that the Dominican energy park is truly diversified.

– The dependence on energy sources derived from oil, has experienced a significant decrease.

– The investment in renewable energy has been important, making this type of energy almost 10% of that generated in the country.

Committed to protecting the environment and preserving the ecological balance
As important as the advances indicated above, is their sustainability over time. To this effect, with the promulgation of the Constitution of 2010, the Dominican Republic advanced another step to tune in to this new pattern.

Since certain third-generation rights were constitutionalized in it, among which are the protection of the environment and the conservation of ecological balance, incorporating them as constitutionally protected fundamental rights.

Serving as a basis for the implementation of sustainable public policies in energy and environmental matters, in accordance with the provisions of numeral 3 of article 67 of the Constitution, in the sense that “the State will promote, in the public and private sector, the use of non-polluting alternative technologies”.

Dominican Republic: a safe destination to invest in “clean energy”
The implementation of the energy transition in the Dominican Republic to “clean energy” is a process that has yielded results in a relatively short period.

Different administrations have reiterated their support for the promotion and encouragement of private investment in this type of energy source, demonstrating stability and continuity that guarantee investment protection.

There is still plenty of room to grow, being the goal of all these efforts energy self-sufficiency. In achieving this goal, renewable energies will continue to play a very important role.