Palestine Economic Policy Research Institute
Background Paper
Roundtable (7):
Encouraging Solar Electricity Production
in the OPT: Is It Just a Slogan?
2015
Background
Palestine suffers a significant shortage of natural resources, particularly the traditional sources of energy,
oil and gas. This has posed significant challenges to the energy sector. First, it has made Palestine heavily
dependent on energy imports. The country imports from Israel more than 86 percent of its electric power
needs and 95 percent of the fuel needed to generate electricity. Second, the price of these imports is high,
resulting in high costs for both Palestinian power generating companies and consumers. The annual
electricity bill, for example, has reached USD 500 million, and when Israel raised prices in 2013 by 33
percent (form 2010 prices), electricity imports jumped to USD 650 million. The annual import of oil and
its derivatives is around USD 800 million. Both oil and electricity imports deplete more than 12 percent
of the Palestinian GDP.
Worse, Israel controls the quantities of fuel imports, sets their prices, determines the time when they are
allowed into Palestine and denies their entry (as is the case in the Gaza Strip in particular) at its sole
discretion, let alone the commercial monopoly imposed by Israeli companies on Palestinian energy
imports. Part of the dilemma is the loss the sector incurs as a result of financial leakage arising from
Israel’s control of the energy sources and the absence of financial audit of reports and bills issued by the
Israeli companies, in addition to arbitrary fees for non-existent services, such as renewable energy and
carbon tax.
Now after more than two decades of the Oslo Agreement, Israel still requires the Israeli Civil
Administration approval for setting up stations and substations to generate power or to upgrade the
existing grid. These are issues that cannot be resolved while negotiations are stalled because of Israeli
intransigence.
There is ample justification to consider alternatives for the current mechanism of energy provision to
Palestine. The real challenge for policy makers and the private sector is developing a strategy for the
foreseeable future, with new investments in the field, moving towards more reliance on renewable sources
of energy. Such a move should enhance economic security on both the consumption and production
levels.
Renewable energy
Renewable energy is defined as energy that comes from resources which are constantly replenished.
Unlike fossil fuels (such as petroleum, coal, natural gas) and nuclear power, renewable resources never
run out.
Renewable energy is also called clean energy because it can be generated without harmful emissions for
the environment or public health. It does not produce carbon dioxide or other harmful gases. Countries
around the world have started to look for alternative energy sources to reduce the amount of gas that is
released during the combustion of fossil fuels, causing global warming and ozone depletion, with
significant harm to the environment, people, animals and plants.
Renewable energy comes particularly from the wind, sun, water, tides, waves, geothermal heat and
biomass energy. This paper focuses on solar power which can replace conventional fuels in some
important areas: generating power for off-grid areas, supplying remote communication stations with
electricity, pumping water to irrigate crops, as well as powering households, industrial facilities and
streets. In some cases, it can be used to run cars. Solar power is safe, economically feasible, flexible when
more power is needed, and it requires little maintenance.
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Renewable energy around the world
The production of clean energy around the globe has recently increased substantially. Most developed
countries depend on hydroelectric power from dams and waterfalls and wind power to generate
electricity. In the last ten years, some industrial and developing countries have started to use solar panels
to produce electricity on a large scale.
Many countries set a goal of meeting 20 percent of energy demand through the use of renewable sources
by 2020. The efforts of regulating renewable energy production have developed into drawing up
international treaties. In 1992, UN member states drew up the Kyoto Protocol which has committed State
Parties to reduce greenhouse gas emissions. To do so, there was a need to explore renewable energy
sources as alternatives that can reduce environmental damage and climate change. In 2007, a group of
European countries committed themselves to meeting 20 percent of their energy demand through the use
of renewable sources by 2020. Later, the target was raised to 30 percent. Soon, all countries, including
Palestine, will somehow be required to reduce the emission of harmful gases. As a matter of fact, the
sooner the countries start using renewable energy technology, the higher the economic benefits. This is
another reason for Palestinians to increase investments in this sector.
Globally, investment in renewable energy has risen significantly. In a report released in March 2013 by
the United Nations Environment Program and Bloomberg New Energy Finance, the world has invested
nearly USD 270 billion in renewable energy in 2014, an increase of 17 percent over 2013. More than 90
percent of this investment went to solar and wind power generation, one third reported in China and
Japan. Renewable sources (wind, water, etc.) raised its share of world electricity generation from 5
percent in 2007 to 8.5 percent in 2013 and up to 9.1 percent in 2014. The report also found that electricity
from solar energy reduced power production costs by 59 percent in recent years compared with traditional
methods. These investments have grown significantly in the countries that provided support and
incentives to private investors, while investments in countries that cut support saw a decline. In Italy, for
example, investments fell by 70 percent in 2014 from 2013 due to reduced support and poor investment
incentives. Currently, solar power accounts for only 2 percent of global demand for electricity though the
sun delivers to the earth four times the global demand for electricity.
In developing countries, problems and obstacles still exist as infrastructure for storing power and feeding
it into the grid is not available. Also, technical problems and difficulties in managing and ensuring funds
for investments still impede real progress in the sector. In Arab countries, investments in green energy
and its share in power consumption are still in the embryonic stage compared with other countries. The
table below shows shares of renewable energy in total power production in selected countries, with
Palestine reporting a negligible share compared to neighboring countries.
Table 1: Shares of renewable energy in total power production
in selected countries
Country
Share
Palestine
.02%0
Jordan
2%
Egypt
3%
Israel
5%
Source: Jordan Strategy Forum; Palestinian Energy Authority; Energy Research
Center at An-najah University.
Renewable energy in Israel
Israel has made much progress in moving to a renewable energy future, with the country being at the
cutting edge of solar energy technology. Israel is the first per capita producer of power from the sun, and
currently 5 percent of renewable energy is used, with the sun accounting for about 2 percent of the energy
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consumed in Israel1. The country has signed the Kyoto Protocol in 1998 and ratified it in 2004. One of the
obligations of the signatories of the Protocol is to reduce the amount of greenhouse gas emissions. In
order to meet this obligation, Israel started a large scale campaign to encourage individuals and
companies to generate electricity from solar energy. Part of the effort was done by Israel Electric
Corporation which announced in June 2008 that it would buy electric power generated from the sun from
households and small businesses at prices up to four times the electricity prices in the market. This feedin-tariff is limited to 50 MW in seven years (whichever comes first) with limits set on production capacity
up to 15 KW for individuals and 50 KW for companies2.
To promote investment in renewable energy, the Israeli government decided in mid- 2011 to allocate NIS
5 billion to support the production of electricity from solar energy, setting the goal of reaching 10 percent
dependence on renewable energy by 20203.
Israel’s interest in the production of alternative energy and reducing emissions has spilled over into the
occupied Palestinian territory. Because Israel still considers the occupied Palestinian Territories as part of
its dominion and because the Palestinian Authority is not a signatory to the Kyoto Protocol, any reduction
in the emission of greenhouse gases in the Palestinian Territory is counted to Israel’s advantage.
The occupying power carries out its plans through the “Civil Administration” in Bet El, announcing the
applicability of offers available in Israel to Palestinians (individuals and companies) that are connected to
the Israeli grid. According to the Palestinian Energy Authority, around 40 Palestinian businesses have
subscribed to take advantage of this offer.
The energy sector in the Palestinian Territory
Energy generation and consumption in Palestine depend on two sources:
First, oil and natural gas derivatives: These are fully imported from Israel at an annual cost of about USD
900 million. This source accounts for about 51 percent of total energy consumption in Palestine.
Second, imported electricity: The imports are mainly from Israel (around 87 percent of the total), in
addition to 4 percent from Egypt and Jordan. The remaining 7.4 percent is supplied by Palestine Electric
Company– Gaza Power Plant which runs on industrial diesel often imported from Israel. The bill of
electricity imports from neighboring countries is USD 400-500 million a year4.
Electricity imports from Israel are not governed by an agreement between the PA and Israel, but through
bilateral contracts between local government councils and individual electricity distribution companies,
on the one hand, and Israel Electric Corporation, on the other. Communities in Palestine receive
electricity from five distribution companies: Northern Electricity Distribution Company, Jerusalem
District Electricity Company, Hebron Electric Power Company, Southern Electricity Company and Gaza
Electricity Distribution Corporation. The power is transmitted through 230 sub-stations installed in the
Palestinian territory.
The current state of the Palestinian energy sector
According to PCBS 2013 Household Energy Survey data, there are some significant indicators, both
positive and negative:
1
2
3
4
http://en.wikipedia.org/wiki/Solar_power_in_Israel
The incentive is set at NIS 1.61-2.01 per KWh. The price of electricity in Israel is around 50 agorot per KWh. See:
http://en.wikipedia.org/wiki/Solar_power_in_Israel
http://www.sustainablebusiness.com/index.cfm/go/news.display/id/19775
http://www.jpost.com/Opinion/Editorials/Article.aspx?id=229951
Sectoral Strategy (2011-2013), the Palestinian Energy Authority, 2011.
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Househollds and services consume around 75 percent of the total power supply, while economic and
productive facilities consume only 25 percent.
Electric power consumption grows annually at a rate of 6 percent, and thus it is expected to reach
8400 GW/h in 2020.
Thirty-two percent of the Palestinian households use electricity to heat water.
Around 26 percent of electricity purchase is lost somewhere between the source and the
residential/commercial destination. The loss results from either technical issues, namely the large
number of substations (230) and poor grid, or non-technical issues, basically related to electricity
theft and poor collection of dues.
The annual per capita consumption of electricity (after deducting transmission loss) is about 830
kilowatt-hour, which is well below the rates in neighboring countries: 2093 in Jordan and 1549 in
Egypt5.
Electricity prices are high because of high transmission loss, high costs of domestic electricity
production, high cost of power imported from Israel, and inefficient distribution companies.
The use of renewable energy sources to generate electricity is negligible.
The Palestinian power sector management
The Palestinian power sector is managed by several organizational bodies, each within its range of
competence and in accordance with the laws in force.
The Palestinian Energy Authority is the official body that drafts vs. enacts laws and regulations
applicable to entities working in the energy sector. In 2012, it developed the national energy strategy
and designed the measures to ensure energy conservation. It also drafted the renewable energy bill
and net-metering bill, pending approval by legislature.
The Authority seeks to ensure energy security, diversify sources of power generation, develop the
necessary standards, produce a Palestinian atlas for the sun and the wind to be used by renewable
energy producers and researchers, and tender large projects; all to achieve the strategic goal of
producing 20 percent of Palestinian electricity consumption by 2020 through alternative energy
sources.
The Palestinian Electricity Regulatory Commission was established according to Presidential
Decree No. 13 of 2009. Article 5 of the decree states that the PERC possesses a separate legal
personality and enjoys financial and administrative independence, which it needs to carry out its
duties and powers, namely setting and monitoring electricity tariff; giving the necessary permits for
the transmission, distribution and generation of power; promoting competition and preventing
monopoly; raising the public awareness; and safeguarding the rights of all parties (consumers,
producers and distributors).
The private sector (distribution companies and local distributors, such as rural and urban
councils as well as transmission and production companies): Each of these agencies operates
according to its own regulations, but under the broader regulations of the PEA. Unfortunately, some
municipalities and village councils know nothing about the renewable energy schemes, and even
some of them say they did not receive newsletters or instructions from official parties on renewable
energy.
The Energy Authority promotes the production of electricity from alternative energy through:
1. Tendering for medium and large scale production of renewable energy: The Energy Authority is
planning to put 10 competitive projects up for tenders from the private sector to generate energy,
particularly for government and semi-government agencies, with an allocation of USD 200 million.
5
http://data.albankaldawli.org/indicator/EG.USE.ELEC.KH.PC
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2. Regulating net metering, grid connectivity and billing through cooperating with small investors and
distribution companies. The method depends on a direct relationship between the consumer and the
companies in order to deliver the needs of the individual consumers, be they households, businesses
or industries. However, because there is no law to regulate the relationship between the consumers
and the suppliers, distribution companies usually apply their own policies. For example, they collect
12 agorot per kwh for storing surplus energy, which is arguably unfair for the consumer.
3. Launching the Palestinian Solar Energy Initiative by the Palestinian Cabinet: The PSEI aims at
providing 1,000 homes' roofs with solar cells, with the government contributing 50 percent of costs.
In practice, however, as the government stopped its support of the project, only 200 homes benefited
from the initiative. In addition to the government’s failure to meet its commitment, it is believed that
the initiative was launched too early without an accompanying campaign to make investors aware of
the economic benefits of renewable energy. Part of the failure is attributed to the poor coordination
with stakeholders, weak cooperation from distribution companies and lack of a regulatory framework
as a necessary condition for success.
Development in renewable energy use in Palestine
There are of course promising opportunities for using photovoltaic panels to generate electric power. The
Palestinian Authority is aware that solar energy is particularly important for two reasons: geography and
climate. Sunrays are abundant in Palestine, as the country enjoys 300 sunny days a year. Geographically,
Palestine lies on latitude 30o north, where the annual incident solar irradiance is 3000 KWh per sq. m.
Studies show that the annual rate of solar energy is 5.46 KWh per square meter per day, which is a high
percentage compared with other countries6– suggesting an enabling climate for renewable energy.
Believing that the climate and geography are effective enablers, both the public and private sectors have
started to explore opportunities to utilize green energy technologies. Some research and development
institutes, governmental agencies and universities (such as Palestinian Energy and Environmental
Research Center, Energy Research Center at An-najah University and the Palestinian Solar and
Sustainable Energy Society) have made some efforts and small pilot projects to use solar energy to
generate electricity. Part of the effort was made by international non-governmental organizations, which
financed a number of projects: powering Wadi An-nar and providing power to outpatient medical
facilities, clinics, schools, some Bedouin communities and small villages far from electricity grids, such
Atof in northern West Bank, Mneizel south of Hebron and Jobbat Al-deeb in Bethlehem. In the past few
years, more than 40 private companies were set up to install and maintain networks and electricitygenerating solar cells.
At the official level, the Palestinian Energy Authority has adopted a national strategy for the energy sector
(2011-2013) which aims to increase domestic production of electric power to cover 20 percent of
consumption by 2020. The remaining 80 percent is to be covered by the Eight Country Interconnection
Project.
On the implementation level, the PA signed a preliminary agreement with the Japanese government to
implement a project that generates electricity through solar cells with a capacity of 300-500 KW to supply
power to the agro-industrial area in Jericho. Currently, the Energy Authority is seeking to raise funds for a
solar-powered electric generating station in Jericho with a capacity of 100 MW in several stages, with the
first stage producing10-20 MW. However, these projects, which are still in the planning stage, face
serious challenges and real constraints by the occupation authorities.
6
Energy Research Center, An-najah National University. http://www.najah.edu/ar/page/3214
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The positions of stakeholders
For reliability of results and for in-depth examination of the opportunities and challenges discussed so far,
and in exploration of the different views of stakeholders (producers, distributors and lawmakers) the
author conducted direct interviews with representatives from:
The Palestinian Energy Authority and the Palestinian Electricity Regulatory Commission
Energy Authority objectives, policies and strategies
A Palestinian national plan for power conservation was developed with the aim of reducing energy
consumption.
In 2012, a national plan for renewable energy was developed.
Implementing a number of renewable energy projects for public institutions.
Competitive bidding for the production of 10 megawatts of power to cover 5 percent of domestic
consumption is being currently considered.
Drafting the renewable energy bill and net metering bill, pending approval by legislature.
Compelling transmission and distribution companies to connect users to the grid and buy excess
electricity that is fed back into the grid.
Following through on the implementation of the Palestinian Solar Energy Initiative.
While acknowledging all the achievements of the Palestinian Energy Authority, we still have some
observations to share with the reader. The Palestinian Solar Energy Initiative is shutting down; the laws
have not been enacted and the researchers have not managed to get a draft; the bidding is still in the
intention stage; and distribution companies still operate on a profit and loss basis and on their own terms
rather than in accordance with the standards of the Energy Authority.
According to the Palestinian Electricity Regulatory Commission, laws are still being drafted nearing
completion and that it will start operating effectively when these laws are approved by legislature. The
fact is that the Commission was never able to take action because there are no laws to regulate the
renewable energy sector. Once the law is enacted, the distribution companies and producers will be
required to shape up and set prices. We should make it clear that the new law has no conflict with the
Electricity Company Law, which is a basic law in this area.
The private sector (Renewable Energy Industries Union and some companies unaffiliated with the
Union)
The position of the private sector came from the President of the Union:
Renewable energy in Palestine is only three years old, but it is vital and strategic. It has some
economic and environmental significance, and it helps achieve energy independence. However,
renewable energy has yet to be made a priority by the Palestinian decision-makers. The PA is no
longer interested in this sector and the government budget has no allocations for developing the
sector. That is why investment is still weak.
The renewable energy national strategy has some major flaws and the resources necessary for
implementation are lacking..
There is no clear regulatory framework; policies are vague; and funding for the primary cost is not
specified: Will the banks help in funding the projects? Is there a central agency to buy the power
produced locally or from Israel?
There are no investment incentives. When the Investment Promotion Law was enacted, the renewable
energy sector was completely disregarded.
Many distributors know nothing about renewable energy and its benefits.
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The infrastructure does not help establish a favorable investment climate, as distribution companies
bear the costs of connecting to the grid. The belief that the producers are competing with distribution
companies is erroneous. Honestly speaking, it is the PA that should be responsible for building the
infrastructure and developing the grid so that the solar-generated power can be fed into it. For
example, if there are 50 homes to be connected to the network, who will bear the cost of supplying
and installing the new transformer? In fact, distribution companies should not be responsible for that.
The absence of laws is a license for distribution companies to be the legislator and the operator.
Currently, companies work randomly without regulation.
In short, expansion in green energy requires a regulatory environment and implementing rules;
compelling distribution companies to connecting to the grid subject to fair conditions; providing
investment incentives; and developing an effective control system. These translate into more
investment through granting soft loans, and thus creating an enabling environment where the state is
interested and the private sector makes profits.
According to some companies unaffiliated with the Union, the sale and purchase prices are the main
problems. Distribution companies do not offer incentives that promote investment. Another problem
is the reliability of the grid, with doubts about its ability to take in large projects in particular. This
problem must be tackled by the Energy Authority. A third problem is niche: most companies working
in renewable energy do other businesses due to weak demand for solar cells. To overcome some of
these problems, home roofs must be used at a large scale. This can be done through incentives and
promotional policies, with prices affordable for the buyers and profitable for the sellers.
Distribution companies (including municipalities)
We concluded from the interviews that the municipalities– being distributors that only buy and sell
electricity– do not have a role in promoting renewable energy. They have no role because there is no
legal framework to regulate the sector.
There role of distribution companies, such as Jerusalem District Electricity Company, in
strengthening the grid for the purposes of producing renewable energy is not well-defined. It is the
Energy Authority that is supposed to install transformer, cables and grid lines and bear the other
costs. In reality, however, it is the distribution companies that bear these costs while the government
and users reap the benefits.
There are no potential investors in renewable energy production. All what we have is small investors
who only seek to cut their electricity bill.
Because Israel controls prices, there is a problem in pricing policies. The distribution companies buy
the surplus energy from producers at prices higher than the Israeli price, which means that these
companies do really promote the production of renewable energy. Therefore, the claim that
distribution companies consider producers as potential competitors is untrue. For example, Jerusalem
District Electricity Company allows excess energy to be fed into the grid for one year at a nominal
cost. The company also provides power to vulnerable areas and refugee camps without charge. It is
unfair that distribution companies give incentives and bear additional costs which are basically the
responsibility of the Palestinian Authority.
Because there are no laws governing the renewable energy sector, electricity companies had to use
their independent reasoning and set a price for storing excess energy. However, Jerusalem District
Electricity Company has always been prudent and open to initiatives and opinions from stakeholders:
the Solar Energy Initiative, Surplus Storage Systems, producers, municipalities and power plants– a
total of 88 clients with a capacity of 2254 KW and within the Electricity Company Law. Renewable
energy production in the first six months of 2015 reached 1,665,608 KW. The goal is to reach a
production capacity of 2 MW.
In sum, the Palestinian energy sector is state-owned.And because the welfare of the people is the
responsibility of the state, the PA should be responsible for developing this sector and installing grids
and sub-grids, as well as undertaking maintenance services. Part of the duty is providing investment
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incentives and enacting laws for distributors, producers and municipalities, as well as defining
specifications, standards and methods of action for the Palestinian Union of Electrical Engineers and
companies working in maintenance and installation.
Conclusion
Despite the strenuous efforts by the public and private sectors, renewable energy production remains at a
standstill. If the present trends continue, Israel will continue to dominate the production and sale of
energy to Palestine. Special efforts are, thus, needed to address inadequacies and obstacles to the growth
of this sector. Below, we suggest some policy recommendations:
Making this sector one of the national economic independence issues, as renewable energy
production increases GDP, reduces dependence on Israel and improves sustainability of power
service.
Speeding up the process of establishing a legal framework for renewable energy with all stakeholders
involved to ensure addressing concerns of all parties, particularly producers and small home/business
consumers. The absence of a legal framework is a major obstacle to the development of this sector.
So far, the PA and other concerned authorities, such as municipalities, have failed to pay sufficient
heed to developing a viable strategy that seeks to gradually reduce imports from Israel, particularly
electricity, through improving local production. Investment policies/incentives are, thus, urgently
required. This is the case in many countries, such as the European Union, the United States, Israel and
Japan, where the governments subsidize alternative energy purchases for every kilowatt fed into the
grid.
Motivating banks operating in Palestine to grant guaranteed credit facilities for renewable energy
small investors.
Promote the formation of cooperatives aimed at producing renewable energy for residents of blocks
and neighborhoods.
Municipalities and licensing authorities are advised to encourage the production of renewable energy
by making the issuance of building permits conditional on providing architectural drawings for solar
panels to be installed on roofs or walls or in open spaces.
Encourage home owners to use roofs and open spaces to invest or lease them for electricity
production.
Launching consumer awareness campaigns on the economic/environmental benefits of solar energy
and methods to reduce costs
Solar energy saves money. For example, by installing solar panels, Palestine Economic Policy
Research Institute– MAS saves around NIS 2,000 a month on average. This is a call for public and
private institutions to consider installing solar panels to produce power.
Some financial, technical and human barriers need to be tackled. Suppliers, for example, need some
maintenance training. Research in this area is rare, which requires more scholarly efforts.
Efforts should be made to overcome the obstacles imposed by Israel which controls the grid
infrastructure in Areas A, B and C, which ultimately aborts Palestinian endeavors, particularly setting
up power production plants in Area C. Any Israeli attempt to hinder the Palestinian efforts should be
exposed before the international forums.
Distribution companies should upgrade the grid and install new transformers so as to reduce power
loss, with substantial amounts of money wasted annually and borne by the PA, providers and
consumers.
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Questions for discussion
Why haven’t significant investments been made yet in this sector?
Has the national strategy for the energy sector 2001-2013 been reconsidered? What objectives have
so far been achieved?
Why are families and businesses still unwilling to invest in renewable energy despite the well-proven
benefits?
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