State Faces First Lawsuit Over Solar Policy U-turn

The state faces its first potential lawsuit after changing its policy on high-voltage solar power installations.

Until last week, a group had to prove prior international experience to get a license to sell power from solar power systems in Israel. But a week ago, the Public Utilities Authority abolished the prior experience requirement.

Yesterday, the company SBY Solutions (formerly known as Solar By Yourself ) wrote to the Utilities Authority and warned that unless it reversed itself again, it would face legal action.

The policy change obviated the need for the contract SBY had signed with a foreign subcontractor with experience, the company explained in its letter. The contract, signed in January 2010 with the German company Colexon Energy, is now pointless. SBY claims millions of shekels in damage, because of money already paid to Colexon to collaborate on photovoltaic power plants.

In December 2009, the Utilities Authority issued regulations for the establishment of PV facilities hooked up to high-voltage systems. The Israeli companies were required to have an experienced foreign partner in order to get a license to produce electricity. Such projects are highly complex, and the local industry is too immature to know how to handle them, the authority explained.

As a result, a number of Israeli companies entered into agreements with foreign companies, mostly from Germany and Spain, where the solar power industries are relatively advanced. The authority has received no less than 420 requests for licenses, of which 140 seek connection to high-voltage systems.

Under its agreement with Colexon, SBY said on its website, the two companies were to "exclusively cooperate in Israel in the establishment of PV power plants in a capacity between 51KWP to 10MW, in accordance with the applicable Israeli Electric Authority regulations." The companies were slated to collaborate on "designing, licensing, engineering, development, authorization, construction, and operation & maintenance of the PV plants" for their customers, SBY wrote.

SBY argued that the authority had no substantive grounds for the policy reversal, which does harm not only to SBY, but to all solar energy companies that had contracted with other companies to meet the requirements.

Nevertheless, it is also true that the authority's requirement for an experienced foreign partner outraged many in the local industry. More than a few companies called for a policy reversal and sought succor at the Ministry of National Infrastructure. The ministry in turn applied pressure to the Utilities Authority to change its position.

Banks insist on knowhow

The upshot is that last week, the Utilities Authority's plenum convened and approved the reversal, by a majority of two National Infrastructure Ministry representatives against one opponent, the chairman of the Utilities Authority. After a raucous debate, the decision was made that any experience whatsoever in planning and building high-voltage systems would suffice for licensing.

But that decision could still end up being moot, because the banks have suggested they will not lend money for solar power projects unless experienced foreigners are involved in the borrowing groups.

SBY said the authority may of course reverse prior decisions, but only under extreme circumstances. It also accused the authority of incoherence, because solar power vendors are still required to produce an opinion from an international consultant both at the stage of obtaining approval for pricing and at the stage of financial closing.

It appears, moreover, that the authority would have considerable difficulty fending off a case in court. TheMarker has obtained an internal legal opinion that the requirement of prior experience is "reasonable and proportionate."

Any change in that policy could expose the authority to lawsuits, continued the opinion, which was written by attorney Michael Macchia. And at hearings, the companies indicated they wouldn't hesitate to sue, Macchia noted. "In my humble opinion, the respondents' arguments have a legal basis, too," he concluded.