Israel Energy Portal

The other week was the 5th annual Eilat-Eilot Renewable Energy Conference, which was attended by thousands of people in the industry, including ministers, government regulators, state officials, media, academics, and entrepreneurs. While there was certainly some excitement surrounding a number of new technologies being showcased, most of the anticipation centered on the release of additional quotas, as the country gears up to meet its interim renewable energy (RE) goals.

Indeed, there is an increasing amount of attention being given to how far away Israel still stands from its stated RE goals of 5% by 2015 and 10% by 2020. Currently, the country derives less than 1% of its total energy needs from renewables and will need about  1.3 GW of additional RE to reach its 2015 target. At present, solar provides the largest portion of Israel’s RE capacity, generating approximately 250 MW of clean energy for the local market. As there are already some 1000 MW of approved solar projects in the pipeline, solar energy has the best chance of providing the country with the additional volume needed to hit its interim goal. The government seems to agree, and, on Dec. 2., approved an additional 300 MW of solar quotas.

It needs to be noted, however, that the additional 300 MW quota was actually reallocated from an existing quota for wind energy. However, Israel’s wind industry, which had an 800 MW quota initially set by the government almost four years ago, has not seen a single new commercial installation in the past two decades. While the potential for wind energy in Israel was debated at Eilat-Eilot, with regulators claiming just a few 100 MW of potential existed and industry representatives suggesting totals closer to a gigawatt, this most recent reduction of quotas is likely the proverbial nail in the coffin for the local wind industry. Moreover, several conversations with wind energy executives revealed a much more layered opposition to the development of a domestic wind industry:

• Israel apparently sits on a major migration path for birds, and environmentalists fear wind turbines may interfere with their migratory patterns.
• The Israeli military fears that wind turbines may interfere with surveillance and radar across the country.
• Some local entrepreneurs argue that the country’s national electricity provider, the Israel Electric Corporation (IEC), has vested interests in obstructing the establishment of independent power producers that could serve as competition. That includes the further development of the alternative energy industry – especially wind, which, on a per unit basis, has significant power generation potential.

Yet while the local wind industry is now effectively moribund, the announcement of the new quotas certainly augurs well for the domestic solar sector – Israel now stands to be a $1bn market for solar over the next two years (~$1 per watt x 1.3 GW).

In addition to the quotas, another big announcement for the solar industry was made at the conference, as Prof. Eugene Kandel, Chairman of the National Economic Council, presented his committee’s findings on the appropriate pricing point for renewable energy.

Over the past year, after the government made several impromptu adjustments to the FiT and was met with a strong backlash (and rightfully so) from the solar industry, Prof. Kandel was tasked with determining the true price of solar energy to help inform national policy in this area. The Kandel committee adopted an intriguing and unique approach, deciding to measure the net benefits – rather than focusing on the drawbacks – of solar energy. It is a unique approach because the committee sought to quantify solar energy’s benefits, including aspects like reduced emissions, enhanced energy security, and stimulated regional development – three blatantly clear advantages of solar, yet elements that are often deemed too economically difficult and politically sensitive to incorporate into such a study. That being said, the Kandel committee undertook a total examination of four main areas:

• Fuel and capital savings
• Reduction of emissions
• Energy security and price stability
• Regional development influence

To bring balance and credibility to the study, the committee was comprised of an inter-ministerial team, ensuring that all relevant branches of the government got their fair say, and included a simulation by the Israel Electric Corporation (IEC) assessing the implications of additional renewable energy fed into the national grid. The study projected greenhouse gas prices by examining carbon market forecasts and estimated the value of energy security through “revealed preferences” of hedging and fuel diversification. Taken together, this methodology brought to light the huge benefits that could be derived in the areas of fuel savings, capital investment, and emissions.

In his presentation, Kandel also made sure to stipulate that the level of benefits will depend on the degree of penetration; that dispatchability, i.e. the ability to store and control accumulated solar energy, would be crucial in determining net benefits; and that production facilities built near consumption centers will provide increased benefits by reducing overall losses.

Based on its analysis, the Kandel committee argues that the appropriate price per watt of solar energy in the Israel market is NIS 47.6 ($0.12) when built in remote locations, NIS 51.1 ($0.13) when built near consumption sites (i.e. cities), and NIS 65.3 ($0.17) when the facility also has a storage capacity. Anything above these prices, according to the committee’s analysis, should be deemed a subsidy. While the impact of the committee’s recommendations have yet to be seen, one can already be sure that this report will heavily influence the Public Utility Authority (PUA) when it is determining RE policy and future FiT rates.

Overall, it seems that solar was the big winner at this year’s Eilat-Eilot Conference. With an encroaching deadline, new quotas, a favorable Kandel committee report, and a net-metering scheme slated to be introduced in the coming months, it seems that the next two years will present a number of big opportunities for the expansion of the local solar industry and help bring Israel closer to its RE goals. Other countries looking to move their RE industries forward should also look to the Israel market to see how these new policies will play out, and effort to learn from both the successes and challenges that will undoubtedly arise.