Beyond occasional project announcements, the international community hears little about solar in Israel. Beneath the surface lies a picture of changing targets, complex support schemes and bureaucracy – but some hope for solar’s future
It does not take a genius to figure out that Israel is an energy island. The country, geographically in the Middle East but politically in Europe, shares no grid with its neighbours. Until recently all power generation came from coal-fired power plants burning imported fuel at great expense. Then in 2007 huge reserves of natural gas were discovered off the Mediterranean coast of Israel, yet to be tapped but thought to be enough to meet the country's energy demand for "many, many, years" according to one source, enough even for Israel to become a "major exporter" of gas.
In the period since that discovery, however, a solar energy industry came and almost completely died off again in Israel, only recently re-emerging and showing signs of life with the advent of a newly rethought net metering scheme.
Silvia Macri, Middle East and renewables analyst at research firm IHS, estimates that at the end of 2013, around 500MW had been installed in Israel. This figure is roughly backed up by Honi Kabalo, the head of renewable energy for regulatory body the Public Utility Authority and the highest authority besides the government on energy policy for Israel. Kabalo told Solar Business Focus in an email that the figure is currently at around that level. However, official statistics are not made readily available, perhaps due to the fluid nature of changing quotas and support schemes.
Solar power has passed through two distinct phases in Israel since discussions to kick-start the industry began in earnest in 2009: the first phase was marked with an unusually complex feed-in tariff (FiT) system and tenders issued in 2010 and 2011 for small, medium and large projects, the second phase when the FiT was cut and in its place a grid parity programme and net metering scheme began fostering greater numbers of rooftop plants, particularly commercial. If it wasn't already confusing enough, although FiT approval is no longer issued, some of the 400MW of projects awarded the FiT in 2010 and 2011 are still being built due to lengthy delays.
Nonetheless, Macri at IHS says companies have persevered in Israel, in spite of bureaucratic complexities, referring to the involvement in the market of international companies including America’s SunPower and EDF Energies Nouvelle.
“The complicated system in place has not discouraged solar PV players thus far. Both international and local companies have pursued their interest in the country and assumed that project development would be one of the key challenges,” Macri says.
Chinese tier one manufacturer Yingli Green recently supplied 27.5MW of modules to a project in Israel, which was designated a National Infrastructure Project by the Israeli government. Manuel Seiffe, Yingli Green’s new market development director, says the company joined the Israeli PV market in 2012 after partnering with local company Ledico, telling Solar Business Focus that Yingli Green “sees great potential for PV in Israel”.
Seiffe says Yingli Green expects to win one more utility-scale contract in southern Israel this year, in addition to “a number of small and medium-scale commercial and industrial projects.” Seiffe agrees that while opportunities exist in large-scale projects in the short to medium term, due to the new net metering programme, the large majority of new projects in Israel will be rooftop plants of up to 600kW in size.
The Israeli government's targets for renewable energy are also somewhat ambiguous. A target of 10% by 2020, including just over 1GW of PV, was hastily readjusted to an interim target of 5% by 2014, which has been adjusted again to a more achievable 4.6% by 2015.
Perhaps taking its cue from the US White House's recently installed PV array, the Knesset, the main Israeli parliament building, will be fitted with a 400kW system after a tender process under the net metering scheme was announced at the end of March.
Yet the Israeli government has not always been so solar-friendly in the last few years, according to David Rosenblatt, one of the co-founders of Arava Power. He speaks of frustration at delays caused by bureaucracy, government ministries at odds with one another and inconsistent support schemes and policies.
Arava inaugurated the nation's first solar 'field', the 5MW Ketura Sun project in the summer of 2011. The company will also inaugurate six new medium-sized PV plants this April and is preparing to launch a large-scale solar project later this year. Along with his Arava co-founders Ed Hoff and Josef Abramowitz, an outspoken advocate for solar in Israel, Rosenblatt has extensive experience working in Israel’s ground mounted solar sector.
Speaking to Solar Business Focus by telephone from New York, Rosenblatt explains the initial drivers for Israel's solar industry and how Arava came to be involved.
"In 2007 Israel only had one dominant source of energy, coal-fired power plants, and in a small country a lot of pollution can be created quickly. The other thing is that in 2007, Israel had roughly 11GW of [generation] capacity. A westernised country is supposed to have approximately 120% of peak demand, as a rule of thumb. Israel had probably around 97% of peak need and they didn’t know what to do about it. We said 'well, they have a lot of sun'.
"As I refer to it they have Saudi Arabian sun [in Israel], in the sense that their sunlight is not only plentiful but also clean sunlight, it's not diffused by clouds; it's actually really productive sunlight. And the entire southern region of Israel is effectively pdesert with large plots of land."
Rosenblatt explains that the other advantage to Israel is that with a dispersed population extending to the southern parts of the country, grid connection is available spanning from the north to the south, even in some desert regions.
Despite these seemingly favourable conditions, Rosenblatt gives one example of the aforementioned delays, ironically linked to the issue of the abundant desert land.
"Quite frankly the bureaucracy is just too heavy in Israel,” he says. “You have multiple government ministries that have a say and sometimes those government ministries don't get along and they make decisions and don't agree. For example, one of the conditions to get your [solar] field done is that you have to pay the Israel Land Authority (ILA) a property tax for the value of the property. Land that literally that hasn't been touched in Israel's history, a bunch of sand."
According to Rosenblatt despite this, once it was determined something as valuable as a solar power plant would be built on the land, the ILA tax went up to those comparable for an apartment block in Tel Aviv.
"Meanwhile…on the one hand the FiT is reduced because the cost has come down but on the other the ILA has given you a very heavy tax because the property is now valuable. Effectively one hand cancels the other to make your projects less viable or in some cases, not viable at all," Rosenblatt says.
Honi Kabalo at PUA claims that Israel has been “phasing out” the FiT in line with European Commission recommendations over the past “1 to 1.5 years”.
An industry source who did not wish to be named responds to Kabalo's claim, stating that rather than phasing out the FiT, the Israeli authorities have simply "not done anything for two years".
FiTs, calculated for generation sources via a complex equation, were cut by 30% to 40%, rather than the smaller increments typically seen in countries where managed degression of FiT rates has taken place, implying there may be some grounds to dispute Kabalo and PUA's claim.
"The government should have taken accountability for the FiT it itself adopted after great delays, allowed current projects to proceed and revised the economics for future projects in a manner that did not punish the risk takers, who created jobs and increased economic investment in the country,” the source says. The result of this punishment, according to the source, was that many companies suffered.
"The players now are generally multi-national companies and investment houses that can afford to wait out the government's delayed decision making."
Net metering progress
On the other side of the coin, the recently introduced net metering programme appears to have done a fairly effective job of keeping rooftop solar alive in Israel. Alongside the support offered, doing away with the need for available plots of land and therefore permitting processes eliminates two of the biggest bureaucratic obstructions that ground-mount solar farms faced.
Lior Handelsman, VP of marketing and product strategy at PV optimisation firm Solaredge, which is headquartered in Israel, tells Solar Business Focus that the country's commercial rooftop PV sector is going well, mainly due to the new net metering policy.
"The Israeli net metering has unique benefits since it allows to have credit for period of two years, and even to transfer the credit to others. The net metering regulation gave the market the chance to recover, and the future is indeed positive. I hope this momentum will continue by adding new quotas of net metering in the future," says Handelsman.
Solaredge's major customers include factories, mills and traditional Kibbutzim (communes or co-operatives). The communal housing of a Kibbutz lends itself well to rooftop generation, with each settlement having only one electricity meter.
Handelsman explains the qualification process for net metering: "You need to have the solar system connected to the same meter as the consumption meter. So most of the net metering systems go either on the rooftops of factories or kibbutzim because most kibbutzim have one single meter."
Reflecting on attitudes toward energy issues in Israel, Handelsman is less critical than others yet says that from the top level, there is ambivalence towards national renewable energy ambitions.
"The big picture is that Israel is really focused on natural gas…With this in mind, nobody at the decision-making level in Israel feels renewable energy is critical…nobody is really advocating at a government level for solar energy. Because if you’ve got gas and it’s going to make cheap energy why do you need anything else?
"So the government is definitely not against renewable energy but it’s not also advocating it or promoting it in a very big way.”
On a positive note David Rosenblatt highlights a recent decision to adopt the recommendations of the Kendall Report on grid parity. This was commissioned to determine rates for renewable energy facilities in Israel. Rosenblatt says the move to adopt the report’s recommendations was “encouraging”, as it bases targets on technical specifications, although he says the issue of quotas remains confusing and obstructive.
Rosenblatt and his colleagues in the Israeli solar industry may take heart in the fact that Honi Kabalo informs Solar Business Focus that the PUA intends to put out more tenders for PV. Rosenblatt may even raise a wry chuckle at the vagueness of the scheduled timeframe, which Kabalo says will be "around the end of 2014".