Generator Failure Could Spell Summer Power Shortages in Israel

Repairs could take up to one year and 15 million euros, but replacement might be necessary, potentially forcing the utility to institute rolling blackouts at times of peak demand in Israel.

There is growing concern that a critically malfunctioning generator in a power station could reduce the Israel Electric Corporation's capacity enough to cause power cuts during peak demand periods this summer.

A gas-fired generator at its Gezer power station has suffered a severe malfunction, the IEC said Sunda. Without the Gezer generator the power company will be hard-pressed to meet demand during the hottest days of the summer. As a result the utility could be forced to institute rolling blackouts at times of peak demand.

The generator, which normally provides some 370 megawatts of power, first malfunctioned on March 16 but the full extent of the problem was only discovered after the generator was disassembled.

The company said repairs could take up to one year and 15 million euros, while an industry source said a complete replacement might be necessary. IEC is likely to sue Siemens, the manufacturer, and insurers, for damages.

Last summer IEC’s reserve generating capacity amounted to just 1.8% of installed generating capacity as a result of equipment malfunction and the suspension of natural-gas deliveries from Egypt, but the utility made it through the hot weather without brownouts.

The absence of the Gezer generator will reduce reserve generating capacity this summer by 5%.

Meanwhile, IEC canceled its decade-old agreement to buy natural gas from the East Mediterranean Gas Company only last month, two years after the supply of gas from EMG effectively ended, according to the utility’s financial statement for 2012 released last Thursday.

Egyptian Natural Gas Holding Company and the Egyptian General Petroleum Corporation broke off their contract with EMG last April, citing contractual irregularities, leaving the latter with no gas to sell. But in fact supplies had effectively been suspended for more than a year due to repeated attacks on the Sinai pipeline transporting the gas.

EMG is owned by an international consortium that includes Egyptian and Thai partners as well as a minority stake held by Israeli businessman Yossi Maiman though Ampal American Israel Investments.

In September 2011 the IEC board of directors began an international arbitration process with EMG and EGAS, citing breach of contract. IEC also sued for at least $2 billion in damages. The arbitration process is still underway in Paris under the auspices of the International Chamber of Commerce. IEC submitted its statements last month, and the first hearing will take place in July.

Meanwhile, EMG is pursuing an arbitration process with the Egyptian government and its national energy companies on the grounds of breach of contract. These arbitration processes are taking place in Geneva and New York. EMG is believed to have suffered some $8 billion in losses between the loss of its supply of natural gas and the cost of laying the pipeline.

Ofer Vaknin