Renewable Energy Law
Renewable Energy Law 57-07 Dominican Republic active.
While there is a lot of debate about a national renewable energy standard and more than half of the states have some kind of RPS, where does the rest of the world stand on renewable energy targets? As a Hispanic, I’m very interested in what Latin America and the Caribbean do about global warming, not just because we need to show leadership to northerners, but also because this is our future. Most countries in Latin America depend on oil imports, and most of them are also already being and will be impacted by global warming. So, not surprisingly, we are seriously trying to be on top of this.
Everybody knows about what Brazil is doing with ethanol, but what about other countries in Latin America? And what does the future hold for renewable energy in this region. I’m from the Caribbean, specifically the Dominican Republic, and I’m very involved in what’s happening in that country and elsewhere around the region. Since 2005, I’ve been visiting the country quite often, helping found an organization that promotes sustainable development and now looking into renewable energy ventures in that country. So, what is the Dominican Republic doing about global warming? In short, its emissions are going up, but it has a renewable energy standard that says 25% renewables by 2025. Let’s take a closer look at the details.
Last April 2007, the President of that country, Dr. Leonel Fernandez, signed a renewable energy law passed by the Congress. After 6 years of meetings and drafts and building support, it finally passed. Within a year of the idea that the law was going to definitely pass under Fernandez’ administration, a Spanish company invested E$100 million in solar cell production, wind companies announced over 400MW of planned installations, the Brazilian company Infinity Bio-Energy announced an investment of $200 million in a large ethanol plant (since the country has a lot of sugarcane), and lots of small solar and wind energy subsidiaries have been set up in the country. With over 25,000MW of wind potential in less than 3% of the land (over 60,000MW in 9% of the land) and an infinite supply of sunlight (sunny Caribbean), the potential is there for the country to meet all its energy needs from renewables.
Before specifying what the law does, it’s important to mention the fact that the government is committing to paying for what the incentives described below on top of all the problems the country has. Among them are an unemployment rate of 15%, a per capita GDP of just over $8,000 (though growing at 10%), some 25% of the population in poverty, a relatively high crime rate, congestion in large cities, high energy costs and power blackouts, many urban areas without potable water or paved roads, and an education system that is not near the best it can be. Of course, high energy costs justify taking this action because it will create large energy savings in the future, but the investments required to incentivize renewable energies are coming out of the pockets of citizens of the Dominican Republic.
So, what does this law do exactly? First of all, it removes all taxes from all equipment, sales, and income for at least 10 years. Clearly not the case in the United States or elsewhere. Second, it pays up to 75% of the cost of installing solar or wind in homes or community co-ops. Again, higher than the incentives in the United States or elsewhere. And third, but most important, it places a feed-in tariff! That’s right, utility producers receive a premium equal to the estimated externalities of fossil fuels for the renewable energy they produce. Essentially, they’re putting the incentives that make solar work in Germany. But, of course, this country is sunnier, so the potential for higher installations is clearly there.
On the fuels side, they have lots of incentives for ethanol and bio-diesel production, including the 100% tax exemptions. Brazil and Chile are therefore very interested in producing ethanol in the country. The law mandates that all gasoline sold in the country are blended with a 10% mix, with higher blends to come. While there may be transformations coming to the mobility sector of that country that will make ethanol unnecessary (and thus solely for tax-free exports to the U.S.; yes, CAFTA works for this), this is pretty impressive. There are several experimental plots that will be producing bio-diesel from Jatropha and other plants. And the President joined investors last week at the Clinton Global Initiative to announce plans for bio-diesel production in Haiti (to promote growth, create jobs, etc.).
Now, isn’t this enough to justify the U.S. hopping on board? “No,” the administration will say, “it doesn’t matter what others do, as long as India and China are not in…” But, then again, India is on track to cutting emissions 25% by 2020 anyways and China just announced investments of up to $280 billion over the next several years, and has a renewable energy standard of 15% by 2025. Well, if we go past the tipping point, the city where I grew up will be under water, and so will most of the major cities in the Dominican Republic and many other countries all over Latin America. Anyways, this is all really impressive, but don’t think we’re stopping there…
President Fernández recently signed into law the incentive for renewable energy bill. This new law provides tax and duties incentives on alternative energy imports and facilities for research and application of renewable energy technologies. Law 57-07 eliminates former law 2071, opening the Dominican Republic for the development of alternate energy sources. The new law’s incentives, in effect under the regulation of the National Energy Commission, include the following:
(a) 100% exemption over import duties for equipment, machinery and accessories required for renewable energy production.
(b) 100% exemption over sales tax (ITBIS), for all previously mentioned equipments.
(c) 100% 10-year exemption over income tax, for companies or individuals benefited by this law until year 2020.
(d) Reduction to a fixed 5% on the tax over foreign financed interest payments, modifying Art. 306 of the Dominican Tax Code for the beneficiaries of this new law.
(e) Up to a 75% credit on capital cost of equipment required by owners or renters of family homes and commercial or industrial establishments who shift entirely to renewable energy systems or increase their energy consumption share in these. This tax credit will be deferred to the consumer’s income tax for the next 3 years, discounted at a proportion of 33.33% per year.
This new bill also calls for the creation of a CO2 emission’s bond market under the platform of the Kyoto Protocol, regulated by the Ministry of Natural Resource’s Mechanism of Clean Development.
(Article “Renewable Ernergy Law 57-07 Dominican Republic” by Fabio J. Guzman Ariza from Attorneys at Law at www.drlawyer.com).
Note: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.