Dominican Republic: Energy efficiency in the commercial and industrial sector
Mobilising Investment for NDC Implementation (MI), supported by the German Government’s International Climate Initiative (IKI), was launched by CDKN, SouthSouthNorth and LEDS-GP in 2017. The project focuses on seven developing countries who are all highly vulnerable to climate change, namely Bangladesh, Ethiopia, Kenya, Peru, Dominican Republic, Philippines and Vietnam, to accelerate public and private investment in priority Nationally Determined Contribution (NDC) sectors and markets.
The IKI MI country implementation work has been undertaken by NREL who support several initiatives for deploying renewable energy, energy efficiency, sustainable transportation, and advanced grid management technologies and systems in developing Latin American and Caribbean countries and regions.
The Dominican Republic’s climate-focused NDC is a 25% reduction in emissions from the 2013 national baseline emissions, by 2030 (conditional on external finance). The country seeks to meet this NDC by increasing energy efficiency, increasing the participation of non-conventional renewable energies, and by aligning with the Ministry of Energy and Mines’ (MEM) goal of a 13.2% energy consumption reduction by 2030, as stated in a draft bill on energy efficiency.
The partners will join forces to coordinate capacity building and green finance standards development to further the advancement of new banking and bonding facilities in the country.
Scoping investment barriers
Energy efficiency solutions are an obvious cost saver for commercial and industrial users in the Dominican Republic. Like many small islands, the country has relatively high electricity tariffs. While high tariff prices may seem like an obvious factor that would incentivize investments in renewable energy and energy efficiency, there has been very limited uptake.
The IKI MI Team undertook scoping meetings from late 2017 to early 2018 to convene with key stakeholders, understand the main market challenges as well as past successes, and identify ongoing activities and opportunities for partnership.
- Government partners: Ministry of Energy and Mines, Superintendent of Electricity, National Energy Commission, Climate Change Commission
- Development partners: GIZ, IADB and the German and US embassies
- Private sector actors including a utility, local clean energy businesses and business associations
The scoping assessment identified several key barriers:
- Many of the distribution companies are insolvent and do not have the financial capacity to invest renewables or incentivize clean energy
- There are strong perceptions of risk associated with renewable energy
- Limited skill sets regarding renewable energy amongst local engineers, business owners, government officials and financiers
- Limited awareness or interest among the business community to invest in clean energy, especially when weighing other opportunities (e.g., a hotel owner may find it more attractive to update the pool rather than install a more efficient air conditioner)
Key outcomes of the study included agreeing with GIZ to develop a joint work plan, complementing their efforts in the Dominican Republic to advance clean energy deployment, especially renewable energy, and that is also being funded by German IKI. The Government of the Dominican Republic has long identified that the net metering compensation scheme requires some adjustments in order to accommodate and incentivise solar energy development. Scoping resulted in agreement that the IKI MI country team would work with GIZ, the DR government, and others to produce techno-economic analysis of compensation mechanisms for solar distributed energy in the Dominican Republic.
There was also initial agreement with the local association of industrials, Association of Industries of the Dominican Republic (AIRD) to further explore collaborating to develop an energy efficiency training program for its member companies.
In the first phase of the project, NREL conducted a variety of capacity building efforts with key government and development partners.
- A 2-day workshop was hosted together GIZ’s Dominican Republic office at the National Renewable Energy Laboratory (NREL) in Golden, Colorado in April 2019. The workshop brought together government and power sector representatives. Training topics included review of tools for renewable energy deployment; policies to support distributed generation and community solar; and approaches to grid integration studies for renewable energy.
- In addition, NREL held a resiliency planning training in February 2018 with the Ministry of Energy and Mines in Santo Domingo, given recent and expected future hurricanes.
In the second phase of the project, NREL began to focus its efforts towards the private sector.
- In May 2019, NREL jointly convened a meeting of local and regional financial institutions together with the GIZ Dominican Republic office. Representatives included those from the Association of Commercial Banks, Banco BHD León, Banco Popular, and the European Investment Bank to discuss opportunities for joint work around green financing mechanisms and to plan for a follow-on workshop in 2020.
- This included developing partnerships with local industry groups, specifically AIRD and conducting sample energy audits of government buildings looking to add energy efficiency features. Results from these audits inform business cases on investment opportunities and encourage replication.
- In July 2019, NREL conducted an Energy Efficiency Workshop with AIRD and industry representatives. This workshop presented various energy audit tools, and best practices and methodologies to be used to develop a business case for the purpose of securing the required approval and funding. The workshop emphasized various practices to identify opportunities as well as the process of converting these opportunities into bankable projects. The feedback that was received from this workshop was very positive with companies better equipped to seek out energy efficiency measures in their respective industries.
In the third (and current) phase of the project, NREL is focusing on working with energy buyers, financial institutions, and government partners on the following activities:
- Fostering a few select pilot-projects to demonstrate to financing institutions the viability, reliability, and profitability of such projects.
Project activities to enable investment flows
- Policy adjustments to enable more effective compensation mechanisms for solar distributed energy. The government of the Dominican Republic has long viewed their current net metering compensation scheme to need some adjustments in order to make it a long-term sustainable policy to support increasing solar development. Togethers with GIZ, an analysis was undertaken of net metering and other incentives. Results could influence some of the financing mechanisms for the installation of distributed generation solar PV system in the residential, commercial and small industrial subsectors and address the solvency of the government long-term incentive.
- A new green finance task force that seeks to mobilize new resources to facilitate clean energy investments. The Dominican Republic government, international and local finance institutions, and bilateral partners that have agreed on the viability of green investment opportunities in the Dominican Republic. The partners will join forces to coordinate capacity building and green finance standards development to further the advancement of new banking and bonding facilities in the country.
- Engaging the Private Sector: A partnership among the NREL and AIRD frames agreement to work with member companies and build capacity to invest in energy efficiency. NREL also gathered data from industry group member-companies to assess EE business case and provided additional clean energy feasibility assessments for private sector companies to encourage their investments in solar and energy efficiency improvements.
Future Opportunities and Challenges in the Dominican Republic
NREL has identified the following potential opportunities:
- Identify and aggregate project pipelines by conducting selected energy audits and work with regional and local banks to match-make financing products
- Develop coalitions of businesses willing to commit to clean energy investments and facilitate dialogues with government to identify opportunities for joint efforts
- Train government partners on best practices for creating the legal and regulatory environment that can support private sector investments in clean energy
- Provide deep-dive, objective clean energy policy technical assistance in partnership with the GIZ Dominican Republic IKI-supported program
- Work with public sector financial institutions to design EE finance facilities
Replication and Learning
- Support regional learning in the LAC through partnerships
- Develop energy efficiency investment guidebooks and conduct trainings to support replication among industry
- Facilitate knowledge sharing among green financing programs active in Latin America and the Caribbean to enable replication in the Dominican Republic