Gilad Yavetz, CEO of Enlight Energy, called it “an energy revolution” for Israel. On Tuesday, his company and two others were awarded the country’s first-ever contract to build photovoltaic power stations backed up by battery storage that will generate electricity at a lower cost than fossil fuels.
Enlight, Doral Group and Ellomay Capital, all traded on the Tel Aviv Stock Exchange, won a tender from the Electricity Authority to supply 168 megawatts of power annually over 23 years at a price of just 19.9 agorot (less than 6 cents) a kilowatt-hour.
That cost is about 25% less than the power-generation component used to set electricity rates for power generated by natural gas and coal, Israel’s two biggest sources of energy. That figure doesn’t reflect the cost of so-called externalities such as air pollution and increased incidence of respiratory disease that come with fossil fuels.
“The ability to produce and store solar electricity and supply it at all hours at a price of 20 agorot per kilowatt-hour has made renewable energy competitive with conventional energy from gas at all hours of the day and enables us to produce electricity from renewables in huge amounts,” Yavetz said.
The new solar farms are part of a worldwide transition away from fossil fuels. A decade ago, coal was generating nearly half the U.S. electricity supply, but this year the U.S. government forecasts that its share will fall to just 19%. Renewables, including hydropower, will supply more electric power than coal for the first time ever.
In Israel, the Electricity Authority said the tender marked an important milestone on the way to meeting the goal, set by Energy Minister Yuval Steinitz last month, of generating 30% of Israel’s electricity by renewables. The goal is to wean Israel off coal use altogether, although given Israel’s big reserves, gas will remain the key power source.
Nevertheless, Israel’s Electricity Authority said it did not believe that the solar farms with battery backup could yet replace conventional electricity sources that can provide power 24 hours a day under all weather conditions. It estimated that the price it paid for stored solar power was half of what it paid for electricity produced from backup unconventional power stations used to top up electricity supply at peak demand times.
As a result, the Electricity Authority is rethinking the need to build more conventional backup power stations, which are costly and inefficient as they are paid to generate electricity 24 hours a day but typically only provide power about half that time.
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Two such stations are under development – one being erected by OPC Energy at a cost of 1.4 billion shekels at the Plugot Junction with a 400-megawatt capacity and the other a 186-megawatt plant by Shikun & Binui Limited in Ashdod at a cost of 700 million shekels.
Doral was the main winner in the bidding, winning rights to build a 100-megawatt solar farm with storage capacity of 400 megawatts. Its shares closed up 8.6% on the TASE on Tuesday.
Enlight, whose shares rose 1.6%, said it won rights to build a 48-megawatt facility. The company said it would be building a facility with 130 megawatts of capacity to ensure a steady supply to the national grid of 48 megawatts throughout the day thanks to its storage capacity.
Enlight said it expected development costs to range between 410 million and 460 million shekels (around $120 million to $135 million), with the facility generating revenues of 45 million to 55 million ($13 million to $16 million) annually over the life of its 23-year contract. The facility has a 30-year lifespan and is the final seven years it will charge a lower rate and earn lower revenues.
Enlight stressed that storage technology will enable solar farms to generate significantly more power because they have the option of keeping some of the electricity they produce in batteries and supplying it to the grid when needed. Solar plants’ peak generating hours tend not to match peak demand times for electricity.
The three companies are required to get their facilities up and running within two-and-a-half years. The solar farms, which are expected to use lithium-ion batteries, the most widely used in the industry, will be required to have storage capacity equal to four hours of production.
In addition to the companies that submitted the winning bids, another 12 participated in the tender with a total of 45 proposals. They will get another chance after the success of their bidding because the Electricity Authority plans another one by the end of this year for the same kind of facilities.