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Renewable Energy Recap: Israel

Developers, manufacturers, investors and other renewable energy industry stakeholders need to know where the next big market is going to be so that they can adjust their business decisions accordingly.

Since 2003, global consultancy Ernst & Young has released its Country Attractiveness Indices, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.

Here is the firm’s assessment of Israel.

General

Israel currently obtains around 43% of its energy needs from coal and 37% from gas. Renewable energy sources represents only 0.1% of total capacity.

Israel has been looking to diversify away from coal and oil for some time. Its efforts were given a boost by the recent discovery of substantial offshore reserves of natural gas. Furthermore, the Government has set a goal of generating 5% of the country's electricity needs from renewable energy by 2014, increasing to 10% by 2020. The Government believes this target will result in US$5b (€4b) of investment in the sector and deliver 2.76GW of renewable electricity capacity by 2020.

Policy

The electricity sector in Israel is regulated by Electricity Law 5756-1996. Its main mandate is to ensure the reliability, availability, quality and efficiency of electricity distribution in the country. It also promotes the conditions for competition and cost minimization.

The Israel Public Utility Authority (PUA) approved a FIT policy in June 2008 coveringg small domestic and commercial plants for both solar and wind. The tariff levels were circa €0.30/kWh for wind turbines up to 50 kW (with a 30-MW aggregate cap), and circa €0.31/kWh for solar installations above 50 kW and below 5 MW (with a 300-MW aggregate cap).

Tariffs have subsequently been decreased from their original levels for both solar and wind; however, the size of plants and caps which are acceptable for the subsidies has been increased, such that solar plants above 12 MW will now receive the subsidies. The rates as of 2011 are circa €0.20/kWh for solar (which will be applied retroactively to 200 MW of approved projects), while wind receives circa €0.08/kWh. The new aggregate caps are 460 MW for large solar fields, 100 MW for rooftop PV arrays and 800 MW for wind farms. In October 2011, the mid-sized solar FIT was again cut, by a further 25%, for projects not reaching financial close within 90 days of the announcement.

There are further supporting mechanisms for renewable energy which include tax cuts, tax exemptions, facilitation of land availability and investment grants. For example, there are lower corporate tax rates for companies with foreign investment, where the greater the level of foreign investment, the lower the tax rate (as low as 10% for foreign investments of over 90%).

The Renewable Energy Association of Israel (REAI) was also established in 2009 to promote the implementation of renewable energy. Its main activities are lobbying and promoting implementation of renewable energy by the various authorities and ministries of Israel.

Internationally, Israel is engaged in joint research efforts under a number of bilateral agreements, including the BIRD Energy program for joint US-Israeli renewable energy development. 

Grid

Israel Electric Corporation (IEC) is the supplier of virtually all electrical power in Israel. IEC builds, maintains and operates themajority of power stations, substations and the transmission and distribution networks. The State of Israel owns around 99.85% of the company.

At present, the grid can only absorb between 5%-20% of its energy from renewable sources due its inability to tolerate fluctuations. In the near term, this doesn’t appear to present an issue; however, investment will be required should Israel substantially increase its level of renewable energy generation in line with its targets. Israel also lacks interconnections with neighboring countries (with the exception of Gaza and the West Bank), which in the future could prevent large-scale exports of electricity within the region and further afield to the EU.

Solar

In 2009, Israel was the top-performing country in the world with respect to the relative growth of its solar PV market, experiencing a near 20 fold increase over the previous year and an additional 21.5 MW of installed capacity.

Cumulative installed capacity now stands at 61 MW, of which around 88% represents grid-connected systems. This rapid growth is in part due to the country’s excellent natural solar resources, with some regions boasting 350 days of direct sunlight each year.

Solar CSP is also expected to experience significant growth in the near future, with over 300 MW of plants currently inplanning. For example, a 240-MW thermal plant is due to be constructed at Ashalim in the western Negev desert, at a cost of US$750 million (€552 million), becoming operational in 2014.

Wind

Israel also boasts relatively good natural resources for onshore wind, with an estimated 2.5 GW of potential. Current installed capacity stands at only 6 MW, though the Government has set atarget of 800 MW by 2020. This figure coincides with the totalquota of wind projects available for FIT subsidies.

In September 2010, Israel’s Prime Minister gave “national infrastructure project” status to a US$400 million (€294 million) wind farm on Israel’s Golan Heights, clearing it for fast-track approval by regulators. The new farm will comprise 70 turbines totaling 155 MW, and is expected to be completed by mid 2012.

Other

Israel has made less progress in the way of other technologies besides solar and wind. There are minimal amounts of other technologies such as small-scale hydro, biomass and geothermal, though small-scale pilot plants are being undertaken. There are no indications that the FIT subsidies are due to be extended to these technologies in the short term.

For more information on renewable energy development in Israel, contact the report’s author Itay Zetelny.

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