On August 6, Israeli authorities approved new set of regulations requiring all new detached houses and nonresidential buildings with a roof area of at least 100 and 250 sq. m. respectively to install solar panels (of minimum 5kW capacity) for electricity generation. This came after a series of incentives announced by the energy ministry earlier this year which included special tariffs and exemption from construction permits, tax benefits, and premium payments for small-scale electricity producers.
October attack and energy sector fallout: Energy diversification has been high on Israeli government’s agenda for many years. But the issue gained urgency after the deadly Hamas attacks in southern Israel on October 7. As heavy rocket fire from the Gaza Strip continued, Israel ordered the temporary shutdown of the Tamar offshore natural gas field on October 9, resulting in major blackouts and power outages. Tamar platform falls within range of rocket fire from Gaza and is also susceptible to seaborne assault. Due to its strategic location, it is protected by Israeli security personnel and high-speed boats even during peace times.
Though no official reports or estimates have been released on the matter, it is highly likely that numerous industrial operations with domestic supply as well as energy exports to neighbours such as Egypt and Jordan were impacted. Even though the supply volumes were resumed in November, the conflict exposed serious vulnerabilities and weaknesses in the Israel’s energy sector.
Besides economic and industrial loss associated with such power outages, a major issue associated with such episodes is the psychological inability of the average Israeli to endure an extended power cuts, as pointed out by Prof Elai Rettig and Amb Michael Harari (Retd) in their detailed assessment. The Israeli electricity industry is among the best in the world in terms of stability and continuity of supply, and power outages lasting longer than a few hours are rare for Israeli citizens. Thus, considering the war, solar energy assumed greater significance in Israel’s energy mix. “If a solar field is hit, it may lose some panels but can continue to generate,” said Ron Eifer, head of the ministry’s Sustainable Energy Division.
Constraints and policy measures: Even though Israel receives ample sunlight, there are some inherent disadvantages in Israel’s geography. Israel lacks ample land for large-scale solar projects. Solar power generation is land-intensive and can require three to 12 times more land than fossil fuel-based energy generation. Israel is too small to rely on traditional, land-intensive photovoltaic power plants. Israel currently has only four solar plants; Ketura Sun solar plant in Kibbutz Ketura (2011); Ramat Hovav solar park in South Israel (2014); Zmorot solar farm in Beer Sheva (2019) and Ashalim solar station is located in the Negev desert (2023)
Rather than investing in land-intensive large scale solar plants, Israel has explored two alternate and viable options: firstly, investment in small-scale solar paneling and dual-use renewable energy generation systems. Dual-use refers to the installation of solar panels on facilities that already exist, such as buildings, reservoirs, parking lots, traffic junctions and even cemeteries. As per energy ministry’s online index-2023, Haifa, Jerusalem and Tel Aviv have realized only 10%, 5%, and 3% of their respective solar energy potential.
According to Solar outlook report 2024, Israel hopes to generate 30% of total energy from renewable sources by 2030, with majority contribution from solar energy. Currently, renewable sources contribute only 11% to total energy mix. Thus, the policy shift towards solar installation in detached houses and nonresidential buildings will likely promote and endorse use of solar energy at a larger scale. Additionally, once photovoltaic (PV) panels are installed, their capacity can be increased so that they can “convert about 40 percent instead of 20 percent of the solar radiation energy to electricity”, stated Gideon Friedmann, former chief scientist at Israel’s Ministry of Energy. In this vein, a team of researchers at the Hebrew University of Jerusalem, funded by Israeli innovation Authority, has produced a new PV cell which can “fully cover agricultural areas including greenhouses, orchards, fields and water bodies while simultaneously generating green electricity and agricultural production”. Such sponsored research initiatives will further enhance the potential of solar power generation across Israel.
Secondly, there has been an increased focus on micro-grids. In 2021, Israeli journalist Sue Surkes argued that one in eight Israelis who wish to install solar panels on their rooftops are unable to do so due to lack of enough space for the grid. Microgrids use solar energy from rooftop or land-based fields that can be stored in batteries for use at night. In 2022, the World Bank projected that by 2030, solar micro-grids might provide power to half a billion people, if serious action is taken by countries to address costing issues and overcome financial barriers.
Israel is taking additional steps in this direction by setting up of energy islands that are self-sufficient and can work without the support of national power grid. Kibbutz Maale Gilboa, located on a remote hilltop in northern Israel, is one such example. The pilot project is being led by Dovi Miller, who was instrumental in setting up the Kibbutz in 1960s and now heads its energy operations. The project is likely to be completed within two years, and will guide other similar projects across Israel.
History of Israel’s solar quest: Israel’s quest for solar energy goes back to the 1950s when Levi Yissar invented a solar water heater, marking the beginning of the usage of solar energy in Israel. Over 50,000 solar heaters had been sold by the late 1960s, and about 5% of domestic water was heated by the sun. The 1970s were an important milestone with regard to solar energy. After two decades of research, four solar ponds were constructed in Israel for pilot studies.
Solar Pond is a saltwater pool designed to gather and retain solar thermal energy. In 1975, the first solar pond was set up along the Dead Sea by Jerusalem-based Scientific Research Foundation. In 1977, another solar pond was constructed in Eilat along the Red Sea. The same year, American power company Ormat Technologies started two more solar pond initiatives: first Yavne in central Israel and second, Israel’s largest one, in Ein-Boqek on the shore of Dead Sea. After the success of Ein-Boqek, Israeli government sponsored its construction and the plant became operational in 1984. The solar pond was used for electricity generation for a year, but was finally it was shut down in 1989 due to financial constraints. Meanwhile, in 1980 the Israeli Knesset had also passed a law requiring the installation of solar water heaters in all new homes with sufficient roof area. The collective efforts led to Israel’s rise as the world leader in the use of solar energy per capita by 2007. Despite that, solar energy generation over the years has remained dismal, compelling the government to revisit the policies and promote new incentives to achieve the 30% target!
Can Israel learn from the USA? The USA, which is world’s second largest solar energy producer, has some interesting lessons to offer. For a long time, high cost was the main factor holding Americans from investing in solar energy systems, explained Sumit Malhotra, a US-based structured credit investor in the Solar space. To address this concern, the US government had introduced the “federal solar Investment Tax Credit (ITC)” as one of the most lucrative solar incentives which provides up to 30% of the cost to install solar panels back to the taxpayer in the year after installation, he explained. This solar incentive, applicable to residential and commercial properties, will remain available till 2035, decreasing to 26% in 2033 and down to 22% in 2034. Since the ITC was enacted in 2006, the U.S. solar industry has grown by more than 200 times. USA’s clean energy policy is largely based on a tax credit policy, along with some low-cost and low-risk public financing options for clean energy.
Though everyone is aware of the need to embrace cleaner energy sources in theory, large-scale shifts in energy mix cannot be achieved in practice without a top-down approach backed by government-funding. Taking a leaf out the US model, Israel must introduce similar tax benefits and credit policies to encourage and endorse large-scale installation of micro-grid dual use solar systems, explained Malhotra.
*Author’s note: With inputs from Sumit Malhotra, a US-based structured credit investor specializing in the Solar financing sector. He has held key positions at prominent institutions, including Moody’s, Deutsche Bank, WebBank, and i80 Group.
