With policy uncertainty the bugbear that repeatedly dogs the solar industry worldwide, it would be natural to expect that the general election that recently took place in Israel was the biggest concern for the sector in that particular corner of the Middle East.
But as the dust settles on what most observers had long been predicting would be another clumsily bolted-together coalition, the latest early election in a nation that has become used to governments lasting less than a full term was no more than an irritation for developers bemoaning a three-year drought for solar in Israel.
The consensus, though, is that the color of the new Knesset is far less important than the long-awaited decision over what sort of incentive regime is needed to drive further solar development.
A still-modest solar sector is in stasis, awaiting the regulations to be issued by Israels Public Utilities Authority (PUA), which are guidelines that will dictate how the 340 MW of PV called for by a government quota in October will be implemented and what sort of energy mix is required to enable the nation to hit its 2020 climate change goal.
We have been in survival mode for three years now, says Jon Cohen, CEO of Arava Power, one of the pioneers of Israeli solar, which developed the Ketura Sun project five years ago, the countrys first commercial solar power field. The effectiveness of the management of renewables by the government is to blame for the three-year drought in PV. In 2012, the governments renewables ministerial committee reiterated the 2020 renewable energy target originally approved in 2009. The committee voted to drive forward renewables but the ministry of finance repealed the decision because that would mean subsidies and would have an effect on energy bills. The ministry wanted to put the brakes on, knowing the longer it delayed, the cheaper the cost of PV subsidies would be and the smaller the effect on consumer bills, though there is some fallacy in their thinking.
Still awaiting PUA regulations
We then went through the appeal, the government disbanded in 2013 and there were new elections, a new committee appointed, a new decision to drive renewables and a new appeal, by the ministries of finance and environmental protection, saya Cohen. In October, the decision was finally made to issue a quota for a further 340 MW. The PUA was tasked with issuing regulations for the quota by 1 January and we are still waiting for them. Honi Kabalo, an environmental economist at the PUA, tells pv magazine theregulations would be ready in the first half of 2015 but admitted that, even then, it would be difficult to put a date on when a final version would be published.
Kabalo extolls the virtues of introducing an energy tender bidding process for the 340 MW of projects that would take the form of reverse-bidding among developers for the final energy price, stressing the need to keep solar energy prices as low as possible to keep a skeptical Israeli public engaged.
If you are too stable and dont amend your tariffs, you end up like Spain, Greece, Italy, the Czech Republic having to introduce retroactive tariff cuts, says Kabalo. We have never had to do that. Once a project is built, that tariff is set in stone. If the situation changes during the development process, we feel entitled to amend the tariffs. I think the responsibility shown by the PUA in amending tariffs has ensured the public stay enthusiastic about renewable energy; we havent let renewables drive up the cost of energy so much that people are against them. It is a thorny issue, with first-mover developers like Arava fearful that the 150 MW of project licences gathering dust on PUA shelves under previous quotas will not be honored, and with the Green Energy Association of Israel (GEAI) expressing fears that only those renewables companies with the deepest pockets will benefit.
Referring to the influential Kandel Report, which calculated in 2012 a price of NIS0.52/kWh ($0.13/kWh) for PV power would require no government subsidy because of the real benefits it would bring to Israel, Eitan Parnass, director general of the GEIA, says: After the report, we expected the PUA to fix an 0.11 FIT for the next 500 MW renewable energy quota.
But Honi said, if the price fell further, we should be able to let market economics dictate the level through a tendering system. However under the energy tendering system reverse bidding only the biggest, most powerful companies will win because they will be able to use economies of scale to bid the lowest prices, and that goes against the grain of renewable energy values. It should be done in a smarter way. The quota should be divided into transmission and distribution segments. Aravas Cohen takes an even stronger line on the PUAs drive for reverse bidding.
The ministry of energy is delaying publication of its update because of the elections, he tells pv magazine , ahead of the vote that elected another Binyamin Netanyahu coalition government in March. After the elections, there will xAdvertisement
be new egos to contend with and more politicking, but eventually it will happen. Honi Kabalo has been on a crusade to cut the renewable energy tariff to its lowest level and has determined that the way forwards is not to publish FITs but to utilize market forces to get the developers killing each other for the lowest tariff. Weve told the PUA, if its going to hold us up for much longer there wont be any developers left to take part in its reverse bidding.
The government is killing solar
Cohen adds: The government is killing the industry. They had 20-something players in the market. Now, they are left with five and there will soon be three. Is that the market it wants, where Advertisementxthere is the risk of the same monopoly issue affecting the natural gas market, where only two companies are capable of operating? The developer says that the government should spend more time researching how best to introduce reverse bidding and, in the meantime, should get the solar industry moving again by honoring a slice of the licences awaiting PUA approval with a FIT payment.
Perhaps not surprisingly, a developer of the type Cohen and Parnass predict is likely to gain from the race-to-the-bottom energy price Energix is not so dismissive of the prospect of reverse bidding.
Asi Levinger, CEO of Energix, which floated out of the Alony Hetz multinational real estate group and which developed Israels only large-scale PV park to date, at Neot Hovav, says confirmation of a reverse-bidding system would bring the certainty his company needs to drive forward its ambitious plans for wind and solar in Israel. He cites the need for patience as part of being a good developer but issued a similar warning as his peers around the globe, when he added that his company had dismissed the idea of exploring solar opportunities in the U.K. because of policy uncertainty.
The one thing I need is certainty, says Levinger. I need to know what the rules of the game are and that they will not change. Right now we dont have that certainty under the system of tenders limited in total size, even if that is a respon xAdvertisementsible thing for the government to do with taxpayers money. Another aspect of the long-awaited PUA regulations concerns the rules governing net metering in the country. Israel has a 400 MW net metering quota, of which only around 25 MW has been taken up with around 30 35 MW being developed a take-up described as a failure by Parnass.
The PUA is simplifying the tariff regime for households installing net-metered systems and offers a 10-year guarantee of income for banks and other lenders generated by such systems in the event of owners going bankrupt both moves for which Parnass organization can claim credit and Kabalo hinted the imminent regulations may also contain rules to encourage larger net metering systems on businesses such as farms and factories.
Small-scale is the answer
More needs to be done to drive the take-up of such small-scale solar PV systems, according to Greenpeace Israel, which wants net metering to be made available to every Israeli household in a bid to halt the large-scale PV and thermo solar schemes that the countrys head of renewables, Yuval Zohar, says will make up around a third of Israeli solar up to 2020.
Citing government figures that predict medium and small-scale solar will remain unchanged at their current 350 MW and 200 MW levels respectively although Zohar says the latter figure will likely increase to around 310 MW up to 2020 as the government chases its target of 10% of energy from renewables by that date, Jonathan Aikhenbaum, campaigns manager for Greenpeace Israel, says Israels impressive biodiversity means large-scale PV farms are an inappropriate power solution.
According to Aikhenbaum, Israel generates only 0.2% of the worlds greenhouse gas (GHG) emissions while boasting 2% of the worlds total biodiversity wildlife that will be threatened by the advance of utility-scale solar and wind farms, says the environmentalist. His organization is calling for rooftop PV and solar storage advances to lead the way and, although Parnass says that a mixture of solar scales is required, both agree that more should be done to free-up financing for household-scale systems, with the GEAI calling for the government-guaranteed income on power generated by such systems to be extended from 10 to 20 years to de-risk household-system loans for lenders.
Zohar insists Greenpeace and the Society for the Protection of Nature in Israels desire for a rooftop revolution is currently unfeasible because of grid constraints, adding: There are lots of green organizations that want to push renewables but they can be a tailwind for the development of green energy, he said. We have to aim for what we can realistically achieve in the real world, not in our dreams.
The vision for renewables is not far away from that of Western countries, but we cannot make the same efforts because of the security issues we face in Israel and economic factors. In Israel, it will take more time. It is a refrain that will frustrate all corners of the solar industry waiting with baited breath to see exactly what proposals the PUA will, eventually, come up with.
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