The Dominican Corporation of State Electricity Companies (CDEEE) has applied new conditions to renewable energy contracts, as the country tries to ramp up activity in the clean energy sector.
The new conditions are designed to ensure the timely start and conclusion of construction work on projects, and to prevent use of the contracts as “business instruments”, i.e. as tax vehicles or for the purposes of trading assets, the state power holding company said in a press statement.
Specifically, it means that they cannot be sold on or transferred before the works on the project are complete, the CDEEE said.
The new conditions will serve to eliminate the “old practice of seeking an energy purchase contract to use as a trading instrument and obtaining economic benefits without making the agreed investment,” the CDEEE said. As such, they will protect the interests of the state and consumers in the Caribbean nation, the company added.
The CDEEE said that construction from now on must be completed within a period of 18 months of the start date of the contract. Works must begin within six months of the beginning of the contract, and developers will be penalised if they do not fulfil these conditions, the CDEEE added.
In addition, failure to comply with the agreed deadline for entry into commercial operation will result in a monthly charge of US$50,000 during the first six months after the date the project should have started, the firm said. After the first six months, that charge will rise to US$100,000 on a monthly basis.
The new conditions have already been applied to eight new renewable energy projects that were awarded contracts by the CDEEE last month. The wind and solar power projects, which have a total generation capacity of 361 MW, will require around US$780 million in investment.
The Dominican Republic currently has 195 MW in installed capacity, which will rise to a total of 556 MW by the end of 2018 once the eight new projects come online, the CDEEE said.
The country is trying to kick-start development of its renewable energy sector as a way of cutting back on costly imported fuel, on which it spends around US$5 billion per year – around 7% of GDP.
According to the government’s current energy targets, the country would expand its share of renewables to 25% of the total energy mix by 2025.
Last year, the International Renewable Energy Agency (IRENA) said that the Dominican Republic could increase the share of renewables in its energy mix from 9% to 27% by 2030. In the power sector, the share of renewables could rise from 12% to 44% by the same year, if the country harnessed the potential of wind and solar power – under the agency’s REmap scenario, these could contribute up to 25% of total electricity generation.