Dominica Geothermal Risk Mitigation II Project

active

Prospective

Project Context: Dominica, a small island nation, faces acute vulnerability to natural disasters and global market fluctuations, with its economy heavily reliant on sectors like tourism. The devastating impact of Hurricane Maria in 2017 underscored the urgent need for climate resilience, prompting the government to pursue the goal of becoming the world’s first climate-resilient country. Central to this ambition is the transformation of Dominica’s energy sector—currently dependent on imported fossil fuels (79% diesel generators)—toward a diversified, greener, and more resilient power system.Dominica’s electricity system is aged and exposed to climatic risks, resulting in high costs and unreliable supply. The government’s National Resilient Development Strategy (NRDS) and Nationally Determined Contribution (NDC) set ambitious targets: a 45% reduction in greenhouse gas (GHG) emissions below 2014 levels and 100% renewable energy generation by 2030. The country’s indigenous geothermal resources, with potential for up to 100 MW, offer a transformative opportunity to achieve these goals, providing reliable, cost-effective, and climate-resilient electricity.Project Description: The project is structured into three main components, with expanded scope and innovative financing mechanisms to maximize impact and sustainability.Component 1: Transmission Network Expansion and Resilience Development• Network Expansion: Construction of new transmission lines (69 kV overhead, 33 kV underground) and substations to connect the Geothermal Power Plant (GPP) to the main load center in Fond Cole, as well as other key substations (New Trafalgar, Padu, Laudat). The infrastructure is designed to withstand extreme weather events, including Category 5 hurricanes, with features such as parallel routes, undergrounding, and rapid restoration capabilities.• Resilience Development: Procurement of emergency spare parts and equipment to enable efficient response to future disasters. Technical assistance will be provided to DOMLEC (Dominica Electricity Services Limited) for climate diagnostics, risk assessments, emergency preparedness planning, and safety regulations for the upgraded transmission and distribution (T&D) system.• Financing: This component is co-financed by an IDA loan, a GEF-8 STAR grant, and government counterpart funds.Component 2: Technical Assistance, Project Implementation Support, and Knowledge Sharing• Capacity Building: Comprehensive training and on-the-job learning for DOMLEC to operate and manage the new 33 kV and 69 kV networks, enhancing technical and operational capacity.• Gender and Social Inclusion: Targeted programs to reduce the gender gap in technical energy sector jobs, including outreach, scholarships, apprenticeships, and employment opportunities for women in electrical and mechanical engineering. The project will also improve gender-sensitivity in HR policies and address gender-based violence (GBV) and sexual harassment.• Regulatory Framework and Grid Modernization: Support for developing a modern regulatory framework and upgrading the electricity grid, ensuring long-term sustainability and sector reform.• Project Implementation Support: Technical, engineering, and project management expertise for the Dominica Geothermal Development Company (DGDC).• Knowledge Sharing: Regional workshops and dissemination of lessons learned to facilitate geothermal energy deployment in other Caribbean countries.• Financing: Supported by the IDA loan, CCEFCF grant, and GEF-8 STAR grant.Component 3: Guarantee Mechanism for the Geothermal Power Plant (GPP)• Payment Guarantee: Introduction of a GEF Non-Grant Instrument (NGI) to provide payment security for DOMLEC’s purchase of electricity from the GPP over a 20-year period. This innovative mechanism replaces the traditional Letter of Credit, leveraging commercial financing and private sector investment.• Impact: The guarantee mechanism is a condition of the Power Purchase Agreement (PPA) between DOMLEC and the GPP’s special purpose vehicle (GPCD, led by Ormat Technologies), ensuring financial viability and attracting private investment.• Leveraging: This component mobilizes significant commercial financing for the GPP, with 27% private equity and 73% debt from regional development banks.Implementation Arrangements• The project will be implemented in parallel with the Dominica Geothermal Risk Mitigation Project (DGRMP - P162149), which brings 10 MW of geothermal capacity online.• DGDC will oversee project implementation until commissioning, after which DOMLEC will assume responsibility for operation and maintenance of the new transmission assets.• The project’s phased approach allows for future expansion, including extending the 69 kV line to additional substations.Expected Outcomes• Substantial increase in renewable electricity share and reliability of supply.• Significant reduction in electricity generation costs and consumer tariffs.• Major decrease in GHG emissions and fossil fuel dependence.• Enhanced climate resilience of Dominica’s energy infrastructure.• Improved gender equity and social inclusion in the energy sector.• Regional knowledge transfer to accelerate geothermal adoption in the Caribbean.

FY17 - Energy and Extractives

World Bank Group

Project

Power Transmission, Natural Gas, Geothermal, Hotel, Power Generation (CCGT), Government, Commercial