Renewable energy in the Dominican Republic: an opportunity for investors

The Dominican Republic is at a pivotal moment in its energy transition, driven by a strong commitment to sustainable development and decarbonization. Aligned with the Sustainable Development Goals (SDGs) and international agreements such as the Paris Agreement, the country has made significant progress in promoting renewable energy in recent years. These achievements result from a combination of factors, including government commitment, a favorable legal framework, a growing economy, and collaboration with international organizations.

These efforts have fostered a favorable ecosystem for the development of strategic clean energy projects, the attraction of foreign investments, job creation, and the strengthening of the country’s position as a regional leader in energy sustainability.

Regulatory framework: evolution and key growth factors for renewable energy

The regulatory framework has played a crucial role in the development of renewable energy in the Dominican Republic. Law No. 57-07, enacted in 2007, has been a cornerstone, offering tax incentives and regulatory mechanisms that have driven the integration of renewable sources into the electricity system, strengthening the country’s competitiveness in the region.

As the energy landscape evolved, the regulatory framework has also been updated to meet new demands. In 2021, the Executive Branch enacted Decree No. 608-21, which partially amended the implementing regulations of Law 57-07. This decree mandated that distribution companies prioritize acquiring energy generated from renewable sources, reinforcing the demand for clean energy. It also introduced a remuneration scheme where reference prices are reviewed annually by the National Energy Commission (CNE) and the Superintendence of Electricity (SIE), serving as the maximum cap for distributors.

In 2023, Decree No. 65-23 was enacted, repealing and replacing the previous regulation, and implementing a competitive bidding system for contracting new projects. This measure aims to bolster investor confidence and optimize electricity market prices.

Complementing these changes, the CNE has issued several resolutions focused on technological and operational improvements in the electricity system. Resolution CNE-AD-0003-2023 mandates the integration of battery storage systems for projects using variable renewable sources, such as solar and wind, to balance electricity supply with demand. Resolution CNE-AD-0004-2023 outlines the technical and administrative requirements for properly implementing these systems, ensuring greater efficiency and reliability in the grid.

Finally, Resolution CNE-AD-0005-2024 establishes that large-scale projects (20 MW or more) must incorporate batteries with at least 50% of installed capacity and a minimum duration of four hours, a crucial measure to manage the intermittency of sources like solar power.

Incentives for renewable energy in the Dominican Republic

An attractive system of tax incentives has also driven the growth of renewable energy. Law 57-07 provides several measures that reduce the initial costs of projects, positioning the country as a competitive destination in the region. These incentives include:

• Exemption from import taxes and VAT: Equipment and machinery needed for clean energy production are 100% exempt from tariffs and other taxes. They are also exempt from the Value Added Tax (ITBIS) and all final sale taxes.
• Reduction of withholding tax on foreign loans: The withholding rate applicable to foreign financing has been reduced to 5%.
• Tax credit for self-producers: Users implementing renewable energy systems for self-consumption can benefit from a one-time 40% tax credit on equipment investment costs, applicable over three years.
• Emission reduction certificates: Projects can also generate tradable bonds or certificates in international markets, offering additional economic benefits.

Although some of the incentives originally established in Law 57-07 have been modified over the years, the regulatory framework remains one of the most favorable in the region, maintaining the energy sector’s dynamism.

Progress and strategies in the energy transition

The Dominican government has set ambitious goals to accelerate the transition to renewable energy, aiming for renewables to represent 25% of electricity generation by 2025 and 30% by 2030. This commitment results from effective collaboration between the public and private sectors, which has facilitated sustainable initiatives and attracted increasing foreign investment.

These efforts have led to significant advancements. In 2023, the country attracted over $1.07 billion in foreign direct investment, strengthening the development of strategic projects. A notable example is the Monte Plata Solar Park, which generates over 60 MW, followed by the Los Guzmancitos Wind Farm, with a capacity of 48 MW. Regulatory stability and market opportunities have positioned the Dominican Republic as an attractive destination for clean energy investors.

This progress has been recognized internationally. In November 2022, Bloomberg’s Climatescope bulletin ranked the country as the fifth most attractive investment destination for renewable energy in Latin America. This recognition is due, in addition to the aforementioned factors, to the implementation of innovative economic strategies. Among these, the country has developed a reference pricing regime that allows certain projects to sell energy in the spot market without requiring prior contracts.

Additionally, short-, medium-, and long-term contracts have been established with unregulated private sector users, as well as agreements with electricity distribution companies. In 2023, the Dominican government signed 38 direct contracts with renewable energy developers, a strategic step that continues to reinforce investor confidence. At the same time, the use of green bond certificates is being explored to finance sustainable projects, further driving economic development in the sector.

Within this sustained progress, the government has designed a long-term roadmap with the National Energy Plan (PEN) 2025-2038, currently under public consultation. This plan aims to ensure that sustainability, competitiveness, and energy resilience objectives align with national needs. Its priorities include diversifying the energy mix with clean sources, integrating storage systems, and strategically planning land use. This planning aligns with the country’s climate commitments and the Sustainable Development Goals (SDGs).

Thanks to these strategies, renewable energy accounted for approximately 23.32% of the country’s total installed capacity by the end of 2024. This represents an increase of over 137% compared to 2020, solidifying the Dominican Republic’s leadership in energy sustainability in the Caribbean region.

Investment conditions and opportunities in renewable energy

The Dominican Republic offers exceptional natural conditions for the development of renewable projects:

• Solar radiation: Average solar radiation exceeds 5 kWh/m² per day, ranking the country among the best Caribbean regions for photovoltaic energy.
• Consistent wind patterns: In southern areas like Enriquillo and Baní, wind speeds are ideal for large-scale wind power projects.
• Water resources: The country’s topography and hydrological resources also offer opportunities for small-scale hydropower projects.

Financially, collaboration with multilateral organizations such as the Inter-American Development Bank (IDB) and the World Bank has facilitated access to green funds. Additionally, the government promotes public-private partnerships (PPP) to encourage private sector participation.

Challenges and prospects

Despite progress, the renewable energy sector in the Dominican Republic still faces significant legal, structural, and financial challenges that must be addressed to improve development. Updating Law 57-07 is necessary to reflect technological advances, such as energy storage systems, as well as to simplify the complex concession and permitting processes, which involve multiple government agencies. Periodic updates to the National Energy Plan are also essential to coordinate investments and adapt generation capacity to growing demand.

Regarding infrastructure, it is urgent to expand the country’s electricity transmission capacity to integrate new clean energy sources and improve distribution infrastructure, which currently lacks essential equipment. Additionally, improving access to financing—especially for public companies—and strengthening long-term contracts and bidding processes are crucial to attracting sustainable investment. Despite these challenges, stakeholders in the sector remain committed to consolidating the country’s leadership in energy sustainability in the Caribbean.

Conclusion

Renewable energy in the Dominican Republic represents a unique opportunity for investors interested in sustainable and highly profitable projects. With an attractive legal framework, abundant natural resources, and a growing economy, the country is positioned as a regional leader in clean energy. The combination of tax incentives, government support, and innovative financing ensures a favorable environment for the success of renewable projects in the near future. Under these conditions, the Dominican Republic stands as a strategic partner for those looking to invest in a sustainable energy future.