Dominican Republic Energy Efficiency and Rooftop Solar Project

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In the two decades, the DR experienced sustained economic growth and notable poverty reduction records, though continued reforms are required to sustain that growth. The DR is also highly vulnerable to climate change, with exposure to multiple natural hazards. The country is exposed to high risk of flooding, landslide, cyclone, and wildfire; and medium risk of water scarcity and extreme heat – all of which are expected to increase in frequency and intensity due to climate change – in addition to medium exposure to earthquakes. This carries significant risk to human, financial, and physical asset losses, including in energy generation, transmission, and distribution infrastructure. The Government of the Dominican Republic (GoDR) has committed to reducing GHG emissions by 27 percent by 2030 in its 2020 National Determined Contributions (NDC). The National Development Strategy (NDS) 2030 outlined specific actions that the GoDR would undertake to mitigate the impacts of climate change on the Dominican society and economy. In the energy sector, the Government has identified scaling up of RE and promotion of EE as key activities in the decarbonization of the economy, while emphasizing the need to strengthen the coordination between the different levels of government, broader stakeholder buy-in, and public awareness. In line with this, the National Energy Plan (NEP) 2022-2036 foresees the expansion of the electricity supply in an environmentally and financially sustainable manner as well as the promotion of rational use of energy and acts like a guide to climate-informed investments in the sector. The electricity sector in the DR has been a catalyst for the country’s strong and sustained economic growth. Nevertheless, the sector faces several interlinked challenges. First, the sector is highly carbon-intensive, especially in power generation. Second, the sector has experienced sustained and growing high losses in the distribution segment, impacting the companies’ financial standing. Third, the lack of cost recovery from tariffs, combined with the abovementioned high system costs and losses, has resulted in the lack of financial sustainability in the sector. Finally, the DR also has the second highest per capita carbon dioxide (CO2) emission in the region, reflecting opportunities for energy efficiency (EE) particularly in the building and industry segments. To address these fundamental challenges, the Government signed in February 2021 the Electricity Pact (Pacto Electrico), which was developed as a comprehensive reform program with a clear roadmap to address the systemic weaknesses and binding constraints in the sector by the end of 2026. The implementation of the Pact is well underway with the issuance of several key policy and regulatory measures to improve the investment climate and functioning of the sector. These policies are expected to be complemented by investments designed to support the Government in achieving specific targets for the sector, namely more RE deployment, lower losses, greater energy savings. The proposed operation aims to support the Government’s goal in achieving energy and therefore fiscal savings, reducing the carbon intensity of energy uses in public buildings and improving resilience against service disruptions in grid power, especially those due to impacts of climate-induced and disaster events. The Project will include the following key components:Component 1: Energy Efficiency and Rooftop Solar (US$145 million). This Component will finance investments in EE measures and rooftop solar PV systems in selected public buildings, accompanied by detailed energy audits, improvements in building control systems (i.e. smart controls, sensors), and safe disposal of used equipment and materials. In selected buildings, the Project might consider alternative cost-effective passive cooling options, such as cool roofs (reflective paint) that reflect sunlight and absorb less heat and other strategies to provide natural shade to help reduce the cooling load. The installation of rooftop solar PV systems may be accompanied by battery storage for eligible critical public buildings to improve climate resilience.Component 2: Project Management, Technical Assistance and Capacity Building (US$5 million). This Component will finance: (i) project management, (ii) implementation of energy management systems, (iii) measurement and verification (M&V) of results on energy savings and comfort level of EE renovations, (iv) and (v) capacity building and knowledge sharing for key public and private stakeholders and service providers in EE renovations and rooftop solar installations to stimulate EE and solar rooftop market development. As to be further discussed with MEM and per funding availability, the Project may consider support to the further development of the regulatory framework and standards market to support EE and rooftop solar investment scale-ups.