By Itai Trilnick and Avi-Bar Eli | Nov.11, 2012

Officials at the Energy and Water Resources Ministry are currently trying to facilitate amended regulations that will pave the way for Israeli entrepreneurs to build solar energy-based generators on the West Bank. In addition, the ministry is attempting to establish a program of state guarantees for bank financing of the projects.

Solar entrepreneurs claim that banks are unwilling to provide long-term financing over a period of 10 to 15 years for the establishment of photo-voltaic installations in Jewish settlements in the West Bank, out of concern that the settlements might be evacuated in any peace treaty with the Palestinians. The ministry has therefore submitted a proposal that would have the state bear the cost of the risk financing and guarantee the loans provided for the project.

It should be noted that no specific plans have been submitted by entrepreneurs for any specific location, so it is not clear where in the West Bank solar farms might be set up. (Portions of the West Bank are under the full control of the Palestinian Authority, while other portions are under partial Israeli control and regions designated as Area C, including Jewish settlements, are under full Israeli control ).

The Energy Ministry proposal does not state the amount of the guarantee that the state would provide, and officials have suggested disparate amounts. At the Finance Ministry and the Public Utility Authority-Electricity, the sum of the guarantee has been pegged at NIS 200 million, while at the Energy Ministry, they speak of a more modest NIS 40 million.

For its part, the Energy Ministry responded as follows regarding its effort: “It’s a matter of correcting a distortion in which residents of Judea and Samaria [the West Bank] are discriminated against and do not receive conditions equal to those of other residents of Israel. These are basic human rights. We are working to encourage electricity production through renewable energy sources all over Israel, including Judea and Samaria, with an emphasis on giving equal opportunity to every citizen. With regard to everything related to the amount of guarantees, we suggest contacting the Finance Ministry, which is responsible for this subject.”

The sense in the energy sector is that with the approach of the January 22 Knesset election, government ministries are unlikely to put up substantial opposition to a plan to facilitate solar installations. It is expected that Finance Minister Yuval Steinitz will agree to a budget allocation limited to NIS 40 million for the venture, despite the fact that it could spur demands from other business ventures seeking state support for projects in the West Bank. The Energy Ministry’s proposal will be considered this week by the ministerial committee on renewable energy.

In July 2007, the Israeli cabinet approved a decision to allocate 10% of subsidy quotas for Israeli solar energy production in the West Bank. As part of the arrangement, the state has committed to buy electricity from the solar installations in the territory for a period of 20 years. Most of the residents of the West Bank are Palestinian, and Israelis in the territory represent just 5% of the combined Israeli population within Israel proper and in West Bank settlements.

At least as relates to future solar projects in West Bank settlements, solar energy entrepreneurs say the banks have balked over financing the solar installations because they fear that if the settlements are dismantled in any peace agreement, the solar facilities will be dismantled with them. The banks fear the solar farms under such circumstances could default on their loans. In most cases funding for solar projects requires the business to front 20% of the financing itself and receive a loan for the other 80%.