Israel Poised for Energy Revolution as Solar Prices Fall

Surge in development puts country in line to meet target for 10% renewable energy generation by the end of 2020

Ora Coren
Solar panels in moshav Peduim.
Solar panels in moshav Peduim.
Ora Coren

When officials at Israel’s Electricity Authority began reviewing bids for the construction of solar power farms, they were shocked at the low prices the dozen applicants were demanding for the electricity they would generate — less than 15 agorot (4 cents) per kilowatt-hour.

Prices for solar energy are lower in Latin American and Persian Gulf, at just a few cents per kWh. But the Israeli bids were 25% less than those placed in response to the authority’s previous request for proposal.
They were also 90% less than the bids submitted in response to the authority’s first RFP for a solar farm, in 2008. Then, using a different system to award contracts, the government promised to pay at least 2 shekels per kWh.

Indeed, solar is now competitive locally with natural gas, once seen as the most promising source of relatively clean, low-cost energy. It now costs 50% less to generate electricity from the sun than from natural gas.
The RFP, whose final results will be issued later this month, is just one sign of the solar-led energy revolution that’s just around the corner in Israel.

It wasn’t long ago that the government’s goal of generating up to 10% of its power with renewable energy sources by the end of 2020 looked like a long shot. But officials say it’s now within reach, as are the more ambitious targets going forward — 17% by 2030 and 50% by 2050.

Last year marked a big step forward in renewable energy for the country, with record growth in generating capacity. The Electricity Authority says 430 megawatts of green energy were developed, bringing the total to 1,450 MW at the end of the year, or 4.15% of total power generation nationwide.

The increase included 600 rooftop solar power facilities and more than 40 new solar farms on open land. By the end of this year, the authority forecasts renewable energy production will reach 2,670 MW, or 7.48% of Israel’s total. One reason for the big expected increase is that the Israel Electric Corporation’s Moneh Neto program goes into effect this year.

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The program allows businesses and homeowners to install approved solar panels on their roof or other areas in order to generate power for their own use. Any surplus can be sold to the utility company. As a result, the number of rooftop solar installations is expected to double by the end of 2020, to more than 24,000.

“The world is moving toward clean, decentralized energy, and Israel is moving in the same direction,” Assaf Eilat, the chairman of the Electricity Authority, told TheMarker.

“We believe that renewable energy will have a significant role and we’re preparing for this. We’re already seeing a huge momentum in developing solar farms and roofs and financing for the construction of wind farms.”

David Fairman and Solomon Abebe Asfaw of Ben-Gurion University of the Negev said in a study that Israel could produce 90% of its electricity from photovoltaic solar farms, with the rest coming from natural gas — provided a way can be found to economically store solar energy, which can only be generated when the sun is shining.

One reason key reason Israel is undergoing a solar revolution is that the manufacturing cost for solar panels, and their prices, have tumbled in recent years, the result of growing global demand for renewable energy and subsidy-driven overproduction In China, the world’s leading panel manufacturer.

China needs a lot more solar power to solve its air- and water pollution problem,” said Fairman. “They had an urgent need to find an alternative to coal and the two ways they took were renewable, like solar and wind, and nuclear. It created competition between factories, mainly in China, and prices fell.”

In the past year, China reduced subsidies but prices continued to fall. To raise cash and stay afloat, manufacturers rushed to sell off inventory and diverted sales offshore, sending prices into a downward spiral. It was a windfall for solar power generators and investors in solar farms as prices for panels, as measured in cost per watt they generate, dropped by 25% to 30%.

In addition, the price of the silicon the panels use, which account for 90% of their cost, has fallen. As a result, more manufacturers have started using costlier monocrystalline silicon that boost the panels’ generating capacity by 10%.

One issue holding back Israel’s solar revolution is land use. Although rooftop installations are being used in greater numbers, the big solar farms that will produce most of Israel’s solar power need lots of land, which usually means repurposed agricultural land.

The Energy Ministry is encouraging kibbutzim, some of Israel’s biggest holders of farmland, to host solar facilities. But the Justice Ministry, backed by a High Court of Justice ruling, says kibbutzim can’t switch the land to non-farming activities because they were allocated it on condition they used it for agriculture.

The Justice Ministry says farmland that will be repurposed for solar power should be auctioned off to the highest bidder.

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