Demand analysis of emerging PV markets: The Dominican Republic of Central and South America
May 5, 2020 PV InfoLink
The Dominican Republic, a country with an estimated population of 10 million, is the largest economy in the Caribbean and Central America region. Its main economic staples are tourism and export of manufactured goods. It has enjoyed robust economic growth and leads the pack in the growth of the Central American economy. The country’s annual GDP growth rate was 6.98% in 2018, up 2.32% from 2017. However, the economic growth may slow in 2020 amid the U.S.-China trad war and the COVID-19 pandemic. Moody’s, an international credit rating agency, has assigned the Dominican Republic a Ba3 rating, which represents stable economic outlook.
Geographically, the Dominican Republic lies to the east of the Caribbean island of Hispaniola and borders Haiti. The rivers, which are mostly shallow and carry rapid currents, are fit for irrigation and hydropower generation, but not for transportation.
The Dominican Republic is characterized by a tropical marine climate. The annual temperature range is generally small, averaging at 22–28 °C all year round. Its rain season spans from May to November and the Atlantic hurricane season from June to November. Its annual rainfall ranges from 1,500 to 2,500 mm. It receives a daily solar radiation of 4.6 kWh/m2.
Renewable energy developments in the Dominican Republic
The Dominican Republic has committed itself to sourcing 25% of electricity from renewables by 2025. But this figure could reach 32%, estimates the public agency National Energy Commission (CNE). Developing renewable energy sources for self-consumption has become the centerpiece of the nation’s energy policy as there is no extraction of crude oil or natural gas and it depends heavily on energy imports.
The largest renewable source in the Dominican Republic is hydropower, representing nearly 50% of the country’s renewable energy mix. Wind and solar account for a combined 50% of the share. The volume of new capacity additions from hydropower have become stagnant, whereas wind and solar capacity additions are growing continuously. This will reshape the energy landscape in the Dominican Republic.
Renewables Development in the Dominican Republic
While the government of the Dominican Republic pledges to achieve its 2025 target of generating 25% of electricity from renewables, it has not set any target for solar installations. Its PV capacity is driven by distributed generation PV under the net-metering scheme.
The country used to depend on foreign independent power producers (IPPs) for building PV projects. However, in recent years it has been crafting solar PV policies. In July 2018, the Ministry of Mines and Energy announced that the government will adopt auction mechanism to spur the development of renewables.
To design a comprehensive auction system for renewables, the Dominican Republic government started by adopting a policy last February that involves approving short-term renewables projects, encouraging IPPs to invest in utility-scale PV under power purchase agreements. The outcomes of this policy will be evaluated and served as a foundation for the auction system. The policy has been approved by the CNE.
Many developers have made their entry into the Dominican Republic market since the policy was launched. In May 2019, the government approved twelve wind and PV projects, with a combined capacity of around 874 MW. Of which, 90%, or 774 MW of the capacity is solar and 10%, or 100 MW, is wind. The Association for the Promotion of Renewable Energies (Asofer) is urging the CNE to pick up the pace in terms of the process of formulating auction rules and guidelines.
The Dominican Republic relies heavily on foreign developers for building renewables projects because the domestic supply chain is underdeveloped.
Dominican Republic-China trade: module import and export
China shipped around 191 MW of modules to the Dominican Republic in 2019, up 90 MW from the previous year. Although the module shipment is modest at best, it will grow markedly when the Dominican government puts up large-scale PV projects for auction.
With the government’s auction scheme being underway, the Dominican Republic expects to hit 32% of electricity generating from renewables by 2025, overachieving the original target of 25%.
The renewable energy matrix in the Dominican Republic is dominated by hydropower, followed by wind power and PV. Together, the three sources represent more than 90% of the nation’s installed renewable capacity. While IPPs are continuing to invest in wind power and PV projects, the hydropower growth and development have become stagnant. The structure of the country’s installed capacity will therefore undergo some change.
Although the Dominican Republic government has not set a target for solar capacity, it encourages the development of distributed generation through net-metering scheme. PV demand from large-scale PV systems is relatively low, as they rely on foreign IPPs for project development. However, the government approved twelve PV and wind power projects last year, with solar capacity totaling at 774 MW. If these projects are successfully awarded through bidding process, the Dominican Republic PV demand will grow considerably.
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