Focus: Energy

To Fill the Gap

To Fill the Gap

Apr. 28, 2013

The private sector has its largest presence in the generation segment, with only around 20% of the sector in state hands. Transmission, on the other hand, is carried out solely by the state-owned Electricity Transmission Company (ETED), while the state owns two of the three distribution companies and 50% of the third. Investment is likely to be centered on generation and distribution in the coming years, with the Dominican Corporation of State-Owned Electricity Enterprises (CDEEE) proposing open tenders for coal- and gas-fired plants worth up to $3 billion. EGE Haina, one of the largest private generators in the country, is also investing to improve the efficiency of oil-fired plants, while considering gas-fired facilities and wind energy. The first phase of its Los Cocos wind energy project was inaugurated in 2011 at a cost of $100 million, and will likely result in savings of 200,000 barrels of oil annually.

Investment in the distribution segment will be focused on lowering losses, which have only dropped slightly from 46%-48% 10 years ago, to 38%-40% currently. In order to install the technology necessary to reduce loss, “distribution companies need significant amounts of funding and financing, about $800 million to $900 million in the next three or four years," according to Otto González, Executive Director of the San Felipe.

GENERATION

While the global green revolution shifts attention away from coal, the Dominican Republic's generation sector has come to see it as a way to reduce costs and avoid the price variations associated with oil. Gas is another viable option, and generation companies, such as EGE Haina and San Felipe are weighing up their options for the medium term. While EGE Haina has already taken concrete steps toward gas-fired generation plants, beginning construction on a dual-fuel plant that will burn either oil or gas, San Felipe signaled to TBY that it is “looking to convert to either natural gas or coal." San Felipe's González believes the development of a coal-fired generation matrix could prove challenging, however. “The financing of coal projects is not being supported by multilateral organizations due to the greenhouse effect on the atmosphere of this technology," he said, adding that “for developing countries that do not have certain energy resources, there is little choice but to develop a portion of thermal generation based on coal."

By the end of 2012, the country's renewable energy capacity had also expanded to 300 MW, a volume that represents around $900 million in investment. Renewable generation is based around solar, wind, and hydroelectricity. As EGE Haina moves into Phase II of its wind energy project, its Los Cocos farm's generation capacity is likely to jump from 25 MW to 77 MW, reducing further both the country's reliance on imported oil and reducing CO2 emissions, which could drop by up to 150,000 tons by the end of Phase II. The government is also keen to see solar energy generation reach its potential. Grupo de Empresas Dominicanas de Energia Renovable (GEDER), which works with the government under a power-purchase agreement, currently has 30 MW in capacity at its solar farm, a figure that will jump to 54.1 MW once the current phase is completed in mid-2013, making it the “largest solar project in the Latin American region," according to Luciano Guido, International Business Developer. ISOFOTON is another company helping to develop the country's solar potential, and is currently working on a $150-million, 50-MW solar farm. “However, we have the capacity to install about 300 MW of solar energy modules in the Dominican Republic, which would represent around 10% of the total energy this country currently requires," said Rafael Zapata, the company's Caribbean Area Director.

The Dominican Republic's desire to lower oil imports has also caught the attention of Globasol, which believes the country, in terms of biofuels, has “all the conditions to replicate the US model." Indeed, in addition to import activities, the company has also acquired 12,000 hectares in order to develop an agribusiness project to locally produce jatropha oil. Finally, hydroelectricity investment has focused mainly on the recovery of dams that had fallen into disrepair. “One of those units had gone eight years without operating, and these are the dams that will be rehabilitated," said Rubén Bichara, Executive Vice-President of CDEEE, concluding that, “at this rate, the dams will provide an important contribution to our recovery."

DISTRIBUTION

The negative evolution of electricity prices over the last decade has forced home the need for change in both the country's energy matrix and the way energy purchased from generators is managed by distributors. State-owned Edesur currently runs losses of around 39%, and is aiming to reduce this by 4% in the coming years. Making matters worse, the country's three distribution companies have been unable to make the necessary investments to significantly reduce loss due to the diminished profits it results in. “Our current levels of loss do not enable us to carry out the needed investments in the company and the sector," said Hipólito Núñez Martínez, General Administrator Manager of Edesur, adding that a solution could be found in the private sector. “We want to encourage the private sector to commercialize energy in those areas where we need to improve our administration—high levels of investment are needed." Investment is also being found through overseas institutions such as the EU and the World Bank. The country's three distribution companies have an investment budget of $150 million for 2013 and expect this figure to grow through co-financed projects.

High levels of debt in the sector are also holding back investment. The CDEEE's debt hovers between $400 million and $600 million, a sector-wide problem that is weighing it down. According to Luís Ernesto De León, General Administrator Manager of state distributor Ede este, “we need to work on the reduction of the industry's debt through a series of key investments and the implementation of adequate policies in the sector." Ernesto de León is also aware of the need for a shift in the country's energy matrix, adding, “the next four years are vital for the industry, because we need to catalyze a change in the generation matrix as well as reduce the industry's debt."

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