RENEWABLE ENERGY POLICY IN ISRAEL
December 2015
Policy of CO2 emission Reduction
The Israeli Government has set a goal of 7.7 tones of Co2 emissions per capita
per year by the year 2030 in September 2015
To meet that goal 3 main objectives were set:
Reduction of electricity
consumption of 17%
compared to the business
as usual scenario by the
year 2030.
Reduction of private
vehicle mileage by 20%
compared to the business
as usual scenario by the
year 2030.
Produce 17% of the
electricity consumption in
the year 2030 by
renewable energy
technologies (and 13% by
the year 2025)
The implementation policy of renewable energy is part of a grand effort to reduce Co2
emissions
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
2
Barriers to
implementation
Advantages and disadvantages of renewable energy technologies
The economic value of reducing air pollution by producing a KWh by renewable energy compared
to producing it by convectional methods is appreciated at 7.7 agorot (2¢) in 2015 and is expected
to rise in the next coming years
Average cost of pollution in producing a KWh by conventional methods in
agorot by year
9
8.1
8.2
7.9
8
8.2
7.9
2017
2018
2019
2020
2021
2022
8.5
8
7.6
7.7
7.7
7.8
2013
2014
2015
2016
7.5
7
6.5
Average pollution cost of conventional electricity production in agorot per KWh
Source: Kendel committee, evaluating the economic benefits of renewable energy, 2013.
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
3
Barriers to
implementation
Advantages and disadvantages of renewable energy technologies
Renewable energy have a number of advantages for the Israeli market Beyond of pollution
reduction
Variation of
fuels
Renewable energy varies the fuels used in electricity production and therefore
provides energy security needed in every electricity market and especially in the
Israeli electricity market.
Decentralization
of production
The reliance on large power plants poses a strategic threat on the electricity market
which is reduced in a market that is based on small power plants. Renewable energy
power plants are usually small and therefore decentralize the electricity production
Enhancement of
competition
Renewable energy facilities enhance the competition with the Israel electricity
company which is a monopoly in the electricity production sector.
Employment
A majority of the renewable energy facilities are expected to be built in the south of
the country which is peripheral area. Therefore the implantation of the technology
will strengthen those areas and will produce quality employment in the peripheral
areas of the country.
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
4
Barriers to
implementation
Advantages and disadvantages of renewable energy technologies
Alongside with the advantages of renewable energy there are a few disadvantages as well:
High
production
costs
As of today, the electricity production by renewable sources is more expensive than
conventional production.
Volatile
production
Some of the renewable energy technologies are characterized by large differences in electricity
production capacity at different times of day or different times of the year.
This volatility has a number of negative impacts on the electricity market: a harm to the grids
stability, a need for many back-up power plants and over-investment in developing the grid.
Massive
consumption
of land
Land is an expensive resource in the Israeli context and renewable energies use land to a
greater extent than conventional technologies.
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
5
Barriers to
implementation
Government targets for renewable energy implementation
Electrical production targets of renewable energy increased from 5% in 2014 to 17% in 2030.
The scope targets production of electricity from renewable energies under
various Government decisions
17%
13%
Objectives set
forth in
Government
decision No. 3484
10%
Objectives set
forth in
Government
decision No.
542
5%
2014
2020
2025
2030
Target of production of electricity by renewable energies from total production
Despite Government targets, the production of electricity from renewable energy in 2015 is only 2%
of total electricity production in Israel.
* Data source: International review for environmental day 2015, Green energy companies Association in Israel.
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
7
Barriers to
implementation
Government targets for renewable energy implementation
The Government allocated quotas for production of electricity from renewable energies at 2,280
installed MW by 2020.
The distribution of the quotas of renewable energies set by Government
decisions by technology type (for all types of production technologies)
)‫טכנולוגיות הייצור‬
‫כלל‬50‫טכנולוגיה (עבור‬
Pioneer‫סוגי‬
facilities,
Large photovoltaic,
370
Wind, 740
Medium
photovoltaic, 530
Bio-gas, 100
Small photovoltaic,
260
Solar thermal, 180
Bio-mass / Waste
/ Bio-gas, 50
Approximately 58%
of quotas are for
solar energies,
indicating the
significant
applicability of this
technology in Israel.
Data source: Report monitoring the implementation of Government decisions (processed) – Ministry of Environmental Protection, 2014 & Government decision No. 2117.
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
8
Barriers to
implementation
License status versus assigned quotas
So far, approximately 633 MW of installed capacity licenses and 1,556
MW installed conditional licenses were distributed.
691
Most of the quotas stipulated
in Government decisions
were already distributed
conditional or permanent
licenses.
563
509
425
431
502
266
133
2,230
180
160
180
160
6
Medium
Large
photovoltaic photovoltaic
Wind
Solar thermal
39
39
Small
NET counter
photovoltaic
Permanent licenses (MW)
31
23
10
7
Bio-gas
Bio-mass
Hydro
electric
Conditional licenses (MW)
2,144
Total permanent
conditional (MW)
Total quotas by
Government
decisions (MW)
Data source: License data – PUA, production license not required for NET counter and photovoltaic facilities, therefore the estimation in the chart if of the active facilities.
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
9
Barriers to
implementation
Government targets for renewable energy implementation
Despite the established renewable energy production targets for the year 2030, quotas
for the different technologies for the years 2020-2030 were not set yet. This decision
should take into account a number of constraints:
• Production cost
• The degree of reliability and the volatility of electricity production for each type of
technology (dispatch ability)
• Available energy source – wind regime, sun, materials for burning (used for bio-gas &
bio-mass)
• Network costs - The cost of connecting facilities to the power grid and development of
transmission and distribution systems
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
10
Barriers to
implementation
Means of promoting renewable energies in Israel
Renewable energy in Israel are promoted in three main ways:
Tools for promoting renewable energies in Israel
Investment
in R&D
R&D Support
by the Chief
Scientist
Emission reduction
policy
Tariff Regulation
Tax Benefits
R&D Support
by the
ministry of
national
infrastructure
Recognition of
accelerated
depreciation
(for solar
facilities by
2013)
Advantages and disadvantagesrenewable energy
Income tax
exemption for
small facilities
(for PV until
2012)
Reverse
auction
Government targets for renewable
energy implementation
Net metering
Tools for Implementing
Renewable Energies
Feed-in tariff
determined
by normative
cost
11
Barriers to
implementation
Tools for Implementing Renewable Energies, Israel
Tariff Regulation for Renewable Energies in Israel
Regulation
Type
Principle of the
method
Feed-in tariff
set by
normative cost
Net metering
Reverse
auction
Emission reduction
policy
Examples of
Implementation
Advantages
Disadvantages
Tariff set by normative
production costs for
the power produced.
Certainty of cash flow
for the entrepreneur
which allows obtaining
finance.
• No competition between
technologies
• The tariff changes due to
frequent changes in costs.
The most
common tariff
regulation
Credit the vendor by
tariff for power
uploaded to the
network by the facility
Interface between
conventional production
cost and renewable
energy production cost
Allows entrance only of
mature technologies.
Net metering
regulation
The tariff set for the
power is set by tender
The method allows
detection of the “actual”
price of production and
minimize costs.
• Low applicability of
projects
• High transaction costs
• Ashalim tender.
• PUA Hearing,
meeting No.
476 of.
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
12
Barriers to
implementation
Tools for Implementing Renewable Energies, Israel
Production costs of renewable energies are on a constant decrease and so is the feed-in
tariff set for these facilities.
Feed-in tariff for renewable energies by technology and year (1/100 of Israeli
shekel per KWh)
Home PV
Business PV
PV distribution
PV conduction
Wind
IEC production costs
“Timna” Auction
Despite the decrease in production costs of photo-voltaic facilities, the production cost of renewable
energies remains higher than production cost of IEC.
Data source: Report of the status of electricity sector – 2015, PUA
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
13
Barriers to
implementation
Barriers to implementation of renewable energies and ways to
remove them
In order to meet Government targets for renewable energy implementation several key
barriers must be removed:
Barriers
Explanation
Ways to remove barrier
Regulatory
instability
Frequent changes in quotas and feed-in rate of
renewable energies. This is the most
fundamental barrier.
Approve rates in the early stages of the
project to increase regulatory certainty.
Tax & Levy
Some of the levies cast on the entrepreneurs are
not recognized in the normative feed-in tariff set
for the entrepreneurs.
Mapping the costs imposed on the
entrepreneur and dismiss/acknowledge it
in the feed-in tariff
Lack of
coordination
between regulators
Renewable energy entrepreneurs need to work
with many regulators (PUA, ministry of energy,
local authority and co.), and sometimes there is
low coordination between them.
Create a regulatory mechanism for
cooperation among the various regulators.
consolidating the PUA with the ministry of
infrastructure might help in this matter.
Emission reduction
policy
Advantages and disadvantagesrenewable energy
Government targets for renewable
energy implementation
Tools for Implementing
Renewable Energies
14
Barriers to
implementation
Summary
To summarize:
• Israel set ambitious goals for promoting renewable energies, in light of the many benefits of these energies.
• The most applicable renewable energy in Israel is solar energy and especially photovoltaic energy.
• The main tool for promoting renewable energies so far has been the feed-in tariff.
• The feed-in tariff is on a constant decrease in light of declining production costs.
• Despite various efforts to promote these energies, so far their penetration rate to the market is lower than the target.
• The main barriers in the promotion of renewable energies are the constant change of regulation and the lack of
coordination among the various regulatory bodies.
• In order to meet the Government's targets the certainty for investors must be increased and the cooperation between
various regulators promoted.
15
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