Last week I was asked to speak at the Caribbean Renewable Energy Forum (CREF), an annual event with an impressive roster of renewable technology experts, vendors, government officials, policy experts and a generally large and enthusiastic audience. Over the years, I have participated in dozens of similar conferences, all designed to increase the use of clean, renewable energy sources and energy efficiency measures, reduce the impact of climate change, and generate new business opportunities.
Yet, despite all of these meetings, I constantly receive the same question: “The Dominican Republic has so much sun and wind, and such high energy costs. Why isn’t there more renewable energy?”
I agree that it doesn’t seem to make a lot of sense. Tourism is the dominant industry in Dominican Republic and the cost of energy is one of the most important factors in the operation of a hotel. Current electricity costs in the country are high, sometimes 2-3 times as expensive as energy in the United States. According to different studies, electricity represents between 14-22% of the total operating cost of an average Dominican hotel.
Similarly, the age and design of the existing hotels in the region make them excellent candidates for improvements in energy efficiency, enabling significant savings in hotel operating costs. According to different energy audits conducted throughout the Caribbean, there are opportunities to increase hotel energy efficiency by as much as 40%, in many cases with a return on investment in as little as 2-3 years.
In 2007, the Dominican Republic even created a renewable energy law meant to encourage investment in renewable energy projects through tax incentives. Though it was eventually revised and reduced, the law still allows a deduction of 40% of taxes over a three period, greatly improving the return on clean energy projects. This has created seemingly positive conditions for banks, investors and companies to finance renewable energy projects, meaning there should be no shortage of capital or financing for projects.
The Dominican Republic also has favorable environmental conditions for renewable energy projects. Punta Cana, where the majority of the hotel rooms of the country are located, is blessed with abundant sun and wind, the very conditions that attract several million international tourists each year to visit. The tourism industry produces vast quantities of garbage and organic waste, which could be converted to renewable energy.
With so many obvious advantages, with abundant examples of successfully executed renewable energy projects throughout the world, and a clear opportunity to create a positive environmental and economic impact, why then does the Dominican Republic receives so little of its energy from renewable energy (an estimated 9%) compared to traditional fossil fuels?
To be fair, there are examples of renewable energy projects in the country. “Los Cocos” in the southern Dominican Republic is the first large wind farm in the country. The CEPM District Energy project provides thermal energy to several thousand hotel rooms in three hotels in Bavaro. Grupo Puntacana operates a biomass facility that produces steam for use in its industrial laundry facility from waste organic material. A growing number of solar panels have been installed in commercial buildings and private residences throughout the country.
However, while encouraging, these projects are isolated investments in renewables, primarily by the private sector, that is unfortunately the exception rather than the rule. The reality is that local environmental conditions and existing energy prices are not the only factors that determine whether a country has a high percentage of renewable energy. The fact that it is sunny and windy in the Dominican Republic is almost irrelevant.
In early 2014, the Dominican Republic initiated the construction of two coal plants totaling over 750 megawatts, committing the country to rely on one of the dirtiest and most contaminating existing forms of energy on the market. Instead of betting on cleaner, locally available energy sources and decreasing its dependency on imported fuels, the country will continue to be dependent on imported, fossil fuels for many years to come.
This points to the underlying problem of widespread adoption of renewables in the Dominican: the lack of a coherent energy strategy that prioritizes renewables as part of a national competitiveness strategy. Such a strategy would name clear national targets and back them with transparent policies and regulations and financial instruments that support achieving those targets.
At the Creating Climate Wealth Summit in the British Virgin Islands, an event hosted by the Carbon War at the island of Sir Richard Branson in 2014, the Prime Minister of Aruba presented their national energy strategy. Aruba, similar to the Dominican Republic, is highly dependent on tourism, suffers from high and variable energy prices and has favorable conditions for renewables. Unlike the Dominican Republic, Aruba has created a national energy strategy that seeks to achieve 100% renewable energy by the year 2020. The plan was created with input from the public and private sectors and includes specific policies and incentives that position renewable energy as part of a national plan for competiveness. The plan contemplates public projects while encouraging private investment. It streamlines the approval process for new projects, helps vet vendors and service providers, and simplifies the incentives process to eliminate the need for expensive consultants. Although it has faced recent setbacks in this plan, Aruba already receives 20% of its energy needs from wind, with more in construction, and has committed itself to renewable energy to power its tourism industry in the future. The Dominican Republic, by contrast, hopes to get the same amount of renewable energy Aruba has now by 2020.
This type of aggressive, forward-thinking policy is what is missing in many of the islands of the Caribbean. The Dominican Republic in particular is plagued by a complex web of energy regulations, often contradictory, that slow the approval process for new projects, increase the risk and uncertainty for investors and have caused renewable fatigue for many businesses that are constantly besieged by vendors proposing new projects with little hope of approval.
At Grupo Puntacana, my colleagues and I invest considerable time receiving, reviewing and in most cases, declining new project proposals, in large part, due to the relative uncertainty of the investment compared to other types of opportunities. Despite our widespread recognition as an environmentally responsible company, we have admittedly few renewable energy projects.
It doesn’t have to be this way. The Dominican Republic has all of the conditions to become a leader in implementing renewable energy and improving efficiency as a means to power its tourism industry and increase its competitiveness across the globe. All it would take is a serious strategic commitment to renewable energy by the public sector that allows the private sector to benefit from its obvious advantages. Until then, we will continue to be plagued by questions about the lack of clean of energy in the country.