Dominican Republic San Pedro de Macoris
With a huge gold mine set to increase the load on an already overstressed grid, the mine owners and a Dominican generation company found a way to power mine operations and address capacity shortfalls by joining forces on the same project.
Like many countries in the developing world, the Dominican Republic regularly struggles to meet the energy needs of its population. Much of the story is familiar: regular blackouts, high costs from inefficient infrastructure, rampant electricity theft, widespread self-generation, and a dysfunctional utility sector handicapped by a poorly designed regulatory regime. The nation also faces challenges common to island nations: a dependence on expensive imported fossil fuels and an inability to purchase power from neighboring countries when necessary. (The Dominican Republic shares the island of Hispaniola with Haiti, but that country’s barely functioning electricity sector is in far worse shape.)
Once entirely state-owned, the Dominican electricity business underwent a process of privatization and deregulation in the late 1990s and early 2000s, but that ambitious program has fallen well short of its goals. The Dominican Electricity Corp. (CDE), was broken up into a group of generation and transmission companies, and the sector was opened to independent producers. Though the program saw some initial success, with generation capacity increasing 43% and the capacity shortfall cut in half in just a few years, rising oil prices during the 2000s soon undercut the gains.
Part of the problem has been a convoluted system of tariffs and rate-setting that has created a perverse situation under which the country sees some of the highest electricity rates in Latin America, yet the generation companies can lose huge amounts of money due to an inability to index rates to the cost of fuel. (An inability to effectively combat electricity theft and nonpayment has also exacerbated the situation.) The government has been forced to make up the difference, with electricity subsidies constituting a significant portion of the national budget.
Worse, the privatization process failed to create a strong national oversight body, meaning the government’s ability to effect meaningful reform has been handicapped. CDE’s successor, the state-owned Dominican State Electrical Company Corp. (CDEEE), which owns the grid (much of it was renationalized in 2003) and oversees power purchase agreements with independent producers, is supposed to work with the Secretary of Electricity and the National Energy Commission (CNE), but in practice there are no mechanisms for enforcement of policy recommendations.
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