DOMINICAN REPUBLIC—Moratorium on Provisional Concessions for Certain Renewables

By Cristián L. Vallejo, Partner, Corporate and Finance

Spanish

Despite the high interest in the country’s energy sector by local and international developers of renewable projects and the government’s commitments and ongoing efforts to diversify the country’s energy matrix, particularly by increasing the available capacity from renewable energy sources, the National Energy Commission (CNE) has yet to lift the moratorium on the processing, and therefore granting, of new “provisional concessions” (government’s preliminary authorization issued for project development purposes) for projects from sources referred to by Dominican law as “non-manageable” renewable energy sources, which include wind and solar photovoltaic projects. The moratorium was initially imposed by the CNE on November 18, 2015, and then reassessed and renewed by the CNE on October 24, 2016.

Dominican law, in particular, the Regulation to Law No. 57-07 of Renewable Energy Incentives and Special Regimes (Regulation) divides renewable energy sources into “non-manageable” and “manageable” sources. According to the Regulation, “non-manageable” renewable energy sources are those of an uncertain nature and, as such, cannot be determined with precision for power generation management purposes. Wind, photovoltaic, run-of-river (special regime) and solar thermoelectric without accumulation sources are expressly listed as “non-manageable” renewable energy sources in the Regulation. “Manageable” renewable energy sources, according to the Regulation, are those that can be managed without losing the corresponding energy resource and, if availability of same is below technical production capacity, energy production can be supplemented by other non-renewable sources (hybridization). Biomass combustion, biomass gasification, biodigestion, hydraulic with reservoir, run-of-river (ordinary regime) and solar thermoelectric with accumulation sources are expressly listed as “manageable” renewable energy sources in the Regulation.

Whether a renewable energy source not expressly included in the foregoing lists should be deemed as a “manageable” or “non-manageable” source must be assessed and determined by the CNE, according to the Regulation.

The moratorium is limited to “non-manageable” renewable energy sources and means, in practice, that:

• Unless the corresponding project is for self-consumption, the CNE is not processing new applications for “provisional concession” for wind, solar photovoltaic, run-of-river (special regime) and solar thermoelectric without accumulation projects, which means, among other things, that developers of such renewable projects cannot start the required process to obtain governmental approval for their projects (concession). Such process is comprised of the following main steps: (i) first step, granting of the project’s “provisional concession” by the CNE; (ii) second step (after the first step is completed), granting of the project’s “definitive concession” by the CNE; and (iii) third and final step (after the first and second steps are completed), signing of the project’s “concession agreement” by the government and the project’s developer.
• The CNE is processing new applications for “provisional concession” for (i) wind, photovoltaic, run-of-river (special regime) and solar thermoelectric without accumulation projects, if they are for self-consumption; and (ii) biomass combustion, biomass gasification, biodigestion, hydraulic with reservoir, run-of-river (ordinary regime) and solar thermoelectric with accumulation projects.

Pursuant to the agreements reached by the CNE’s board, the moratorium was imposed for, among others, the following reasons:

• The number of concessions for renewable projects already awarded.
• To avoid the collapse of the National Interconnected Power System (SENI), as it has occurred in other countries, particularly Spain, where, according to the CNE, an excessive number of concessions for renewable energy projects were awarded.
• The country’s need to determine the maximum capacity for renewable projects required by and acceptable for the country’s National Interconnected Power System (SENI).

To determine such maximum capacity for renewable projects, among other purposes, the CNE, the Superintendency of Electricity and the system’s coordinator (Organismo Coordinador) commissioned a study, sponsored by the United States Agency for International Development (USAID). Although the study was concluded, the CNE deemed it “unsatisfactory” and, together with the Superintendency of Electricity and the Inter-American Development Bank (IDB), commissioned a new study, which appears to be pending.

Finally, it is important to point out that the moratorium does not have an expiration date. Therefore, it will remain in place until the CNE decides to lift it, taking into account, among other factors, (i) the results of the above-referenced pending study, (ii) the outcome of the institutional and regulatory reorganization of the country’s energy sector being conducted by the Ministry of Energy and Mines, and (iii) the results of several studies commissioned by such Ministry, including studies to determine the capacity of the country’s renewable resources and the study of hourly measurements of wind and solar resources to validate and/or correct currently available information.