Energy & Mining

Keep the Lights on

El Pacto Electrico

To address long-standing electricity grid issues, the Dominican Republic is working to pass an Electric Pact that would reform the energy sector.

For decades, citizens and businesses in the Dominican Republic have suffered from daily power cuts that send parts of the island nation into darkness, interrupting the trade and tourism sectors that are the lifeblood of the economy. Residents have long come to rely on localized backup generators to mitigate the constant black outs caused by an antiquated electrical grid, its expensive maintenance requirements, and state deficits in collecting payments for energy services.

In recent years, government officials have worked to address such problems by negotiating a national Electric Pact, know in Spanish as El Pacto Eléctrico. The proposed electric sector reforms aim to increase the nation’s competitiveness and improve Dominicans’ standard of living. Through the development of energy security via diversification efforts utilizing more natural gas, renewable energies, and biomass, the nation hopes to fulfill its economic potential as a key energy hub in the Caribbean region.
Yet attempts to implement the Electric Pact have stalled since reforms were first approved in 2017, and stakeholders continue to negotiate the agreement’s terms, delaying the signing process well into the year 2019. Despite support from the Dominican Industry Association (AIRD) and prominent business groups, the Electric Pact was postponed on February 20, 2019, due to disagreements from the Modern Revolutionary Party (PRM), one of the country’s main opposition parties.

The postponement came as a surprise as the Electric Pact, formally known as the National Reform of the Electric Sector, had been on President Danilo Medina’s desk for months, and a signing ceremony had been scheduled for 11 am that day. Now, state officials are pushing to finalize the pact, while at the same time installing new energy plants to address electrical issues, which continue to pose obstacles for the nation’s growing economy.

Opponents of the pact have said it excluded the newly built coal-fired Punta Catalina power plant, and the agreement did not address systemic issues to resolve wider electricity supply issues. While the USD2.1-billion Punta Catalina power plant came online in February 2019, adding 200MW to the grid, analysts have noted energy capacity is not the sole cause of rolling blackouts on the island.

Prior to the plant’s opening, total installed generation capacity was more than 3,000MW, well over the nation’s average daily peak demand of 1,900MW. Instead, blackouts appear to be linked to technical and non-technical losses averaging 30-35% of power supplies per day.

As negotiations on the Electric Pact are likely to continue into 2019, complementary state initiatives are making headway to fortify the electric grid and increase resiliency in power distribution mechanisms. In recent years, the Work Bank has directed USD120 million to support government efforts to improve the financial performance of three key power distribution companies, with the goal of increasing electricity access for more than 1 million Dominican residents, who were previously living beyond the electric grid.

One hurdle in energy reform is the fact that more than half of the clients of the three targeted companies pay a fixed amount on energy bills and do not have electricity meters, resulting in flawed payment collections which have left many power companies running on fiscal deficits. World Bank funding has since been used to rehabilitate more than 1,000km of distribution networks, install more than 138,000m of power lines, and reduce illegal energy connections across the country.
Renewable energy sources are also being implemented to ensure grid security. The Vice President of the Dominican Corporation of State Electricity Company, Rubén Jiménez Bichara, recently announced the nation’s green energy capacity would grow to 604MW by 2020. By offering generous tax incentives, Bichara hopes to encourage development in the private solar and wind energy sectors.

Several energy reforms have also been passed with aims to ease regulations on small-to-medium scale renewable power generation for private homes and businesses, while expediting the legal process required for such installments. Unlike conventional energy distribution, renewable energy net metering legislation was developed in 2011 to integrate private wind and solar installations. Current laws make residential units smaller than 25kW and commercial units under 1MW eligible to receive credits for excess power exported to the national grid.
So, as state and business leaders continue to negotiate the Electric Pact in Santo Domingo, notable advancements are being made to add energy capacity to the national grid and reduce distribution issues that many residents hope will soon become relics of the past.

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