Israel’s Renewable Energy Sector at a Crossroads

Israel’s ministerial committee for renewable energy approved last week the transfer of 290 megawatts (MW) renewable energy quotas to the solar photovoltaic sector. Specifically, quotas for 70 MW of large wind power parks, 20 MW of small wind power installations (up to 50 kW each) and 200 MW of solar thermal power plants were transferred to the solar PV industry.

The committee, which is an inter-ministerial governmental body, argues this decision will help the country to achieve its national target for 10 percent electricity generation from renewable types of energy by 2020, and will lead to a savings of more than NIS 2 billion (US$564.2 million) over the next 20 years.

In addition to these quota shifts, local press reports Environmental Protection Minister Amir Peretz is also pushing to transfer 60 MW of its biogas quota to solar PV, aiming for NIS 27 million (US$7.6 million) in cost savings. 

Following the committee’s decision, Energy, Water and National Infrastructures Minister Silvan Shalom verified the Israeli Government’s commitment to the 2020 electricity target, however added the level of electricity tariffs should remain within limits that do not threaten the economy and the cost of life.

Wind Association Opposes Quota Shifts

Israel’s Wind Energy Association (IsraWEA) CEO Gadi Hareli explained that “this is the third time the Ministry of Energy is attempting to convert part of the 2020 quota from wind to solar. In the previous two rounds, the attempt was to divert 300 MW of the allocated 800 MW wind power to solar PV, while current attempt is to divert 90 MW of wind quotas.”

IsraWEA has fiercely opposed such quota diversions, especially now since “the regulations from the government that would allow the implementation of wind energy are just about to be concluded,” said Hareli. 

IsraWEA also objects the argument that wind power is more costly than solar PV. Obviously, Hareli explained, there are different support schemes (Israel for example applies net-metering provisions for small installations), so comparison is not clear cut. But as a general rule, the electricity tariff allocated to large wind power plants is lower than those of the utility solar PV plants, he added. Israel has set a target of 800 MW of large wind turbines for 2020 at a FIT of 0.53NIS (US$0.151), which is reduced to 0.49 NIS (US$0.14) from 2014. It has also allocated 30 MW of small wind (up to 50 kW) with a higher FIT. 

Comparing wind and solar PV FITs is also difficult for another reason: since 2009, solar PV installations in Israel were given a FIT related to four different sizes of installations: residential (up to 15 KW); commercial (up to 50 KW), Medium-Utility Scale (up to 12 MW) and Large-Utility Scale (above 12 MW). 

However, this changed altogether in September 2012 when the government decided to change the basis of tariff calculation for all new solar PV systems. Thus, instead of a fixed tariff, the support mechanism now provides a variable FIT which is calculated according to a formula based on interest rates, inflation, exchange rates, and Bloomberg New Energy Finance module and inverter Indices (the SSPI). 

“The tariff for each separate solar PV project will be determined by the formula shortly before the closure of financial terms” said Israel’s Public Utilities Authority (PUA). 

According to PUA data old FITs for the vast majority of solar PV systems varied between 0.45 to 0.66 NIS/KWh (0.13 to 0.19 €/KWh). Also, since most of the solar PV quotas (around 1,000 MW) have already been allocated according to the old tariffs, the new formula-based FIT will only apply to approximately 350 MW-400 MW of PV. 

Nevertheless, diverting renewable energy quotas must be approved by the government and “like last attempts, we believe this one will also be rejected by one of the ministers” said Hareli.  

PUA also adds that a past attempt to divert wind allocated energy quota to solar PV was strongly opposed by the ministry of finance.

Solar Power Gears Up

Apart from the quota shifts, solar power installations in Israel appear to be underway. An 11-MW solar farm came online at the end of 2013 in Kibbutz Samar. In the southern Arava Desert, 60 MW of new solar parks are expected to be connected to the grid by the end of March.

A separate decision by the inter-ministerial committee last week might lead to even more solar PV installations. In 2011, the Israeli Government had called for 30 MW of solar projects to be built in the Judea and Samaria areas of the West Bank region, Palestinian territories. To date though, the projects have failed to secure funding from the banks out of fear that future political developments may affect the projects’ operation. Thus, the inter-ministerial committee voted last week to allow the state to underwrite the debt owned by the developer to financial institutions.

Cumulative solar PV capacity in Israel stands at 400 MW, of which around 250 MW are consumer installations and 150 MW are medium-size systems. Solar PV installations are projected to continue increasing in 2014, adding the remaining 200 MW allocated under the old FITs. 

Wind power installations on the contrary are currently limited to a single 6-MW wind farm called Golan Heights, which is operating at 50 percent capacity. However, the situation might also change soon since the National Council for Planning and Building, a body that belongs to the Ministry of Interior, decided recently to promote the construction of large wind farms on thirty sites around the country.

Hareli told the renewable energy world magazine “the Israeli authorities would need to approve each site for the relevant specific details”. However, with the national framework for wind energy that primarily deals with building permits regulations under discussion at the Ministry of Interior, the approval process might speed up relatively soon.

Committment to Renewable Energy

Critics often express that natural gas is the greatest threat to Israel’s renewable power development. In the last decade, experts discovered vast offshore natural gas reserves, which have changed its energy profile. According to the International Energy Agency, in 2011 natural gas provided 33.1 percent of Israel’s electricity. By 2015, natural gas consumption in Israel is expected to reach 50 percent, according to the Ministry of Energy. 

However, Israeli officials have repeatedly said the country is also interested in exporting large parts of its gas reserves. The option of joint export operations with neighbouring Cyprus, which is also expected to be a big offshore gas producer in the region, remains on the table.

Israel still needs a rigid energy policy, which despite its natural gas sector boom, still leaves room for renewable energy development and promotes a diverse energy market portfolio. But not everyone agrees that Israel does its best to promote the renewable energy sector. “The government is still highly puzzled between renewables and other energy choices, needs higher commitment, understanding and determination of planning ahead, and sticking to the plans” said Hareli. 

Lead image: Israel flag via Shutterstock

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Ilias started writing for Renewable Energy World in February, 2014. He is also a correspondent for other publications, mainly reporting on electricity market developments and the role of renewable energy and energy storage. His geographic area of expertise include Europe and the Middle East and Northern Africa (MENA) region. Ilias is also working towards a PhD at the University of Greenwich (Business School), looking at the UK's Electricity Market Reform. He currently lives in London.

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