Israel testing industry with lowest FIT rates possible

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At a hearing that took place in Israel on Tuesday, the Public Utilities Authority (PUA), the country’s electricity market regulator, clearly attempted to test the limits of the local PV industry by suggesting a feed-in tariff (FIT) for the 50 MW Timna solar park at 36 agorot (€0.07) per kilowatt hour for 20 years.

Israel’s Eilat-Eilot Renewable Energy Initiative had announced the tender for the Timna solar park in September. Speaking to pv magazine at the time, Dorit Davidovich-Banet, CEO of the Eilat-Eilot Renewable Energy Initiative, said that the tender winner would receive a fixed price per generated kilowatt hour (kWh), which had already been determined by the PUA at about 50 agorot/kWh (€0.11/kWh).

Eitan Parnass, general director of the Green Energy Association, told pv magazine that the hearing would be be finalized by November 6. He added, however, "Israel’s regulators are trying to find the right formula to allow new projects while minimizing the burden on national electricity bill. The Timna tariff hearing is an aggressive test to see how low they can go."

Israel runs a complex system of subsidies for solar PV that currently includes a feed-in tariff model, land tenders and net metering. The Timna tender belongs to the land tenders category, according to which winners are decided by the highest bid to the Israeli Land Authority per dunam (1,000 square meters) of land. The winner receives the right to install a PV system and sell the generated electricity to the grid in a fixed tariff set by PUA.

Photovoltaic developers will need to take into account the new FIT when finally decided on November 6 to decide their bids to the Israeli Land Authority later in the year.

Previous examples of land tenders included a FIT at around €0.20 per kWh.

PUA thinks that 36 agorot per kWh is good enough for achieving a 10% investment rate of return for the Timna project, local PV market representatives told pv magazine. However, this will also depend on the bid price for the land, they added.

Last week, Israel’s government also decided to divert some 520 MW of quotas of various renewable energy types to solar PV. It appears that the Israeli government has decided to expand its photovoltaic sector beyond the 500 MW of solar PV currently installed in the country. But it also wants to do so at the lowest cost possible.

Should the new Timna tariff becomes finalized at €0.07 per kWh, this would actually mean that electricity generated from solar PV in Israel have reached grid parity prices. The average cost of grid electricity in Israel is currently about $0.12 per kWh.

It also means that solar energy in the Mediterranean region is common sense. Last year, a solar auction in Cyprus led to similarly low tariffs and the parks have already been developed. Mediterranean governments should rather learn a few lessons from Israel and Cyprus.

Readers who would like to learn more about Israel’s complex subsidy schemes and energy policy can find a detailed analysis in the September issue of pv magazine. PV in Israel will also be a topic at the upcoming Forum Solarpraxis in Berlin. Honi Kabalo, a top official at Israel’s Public Utilities Authority, will attend the conference.