Despite a recent flurry of activity, the country is far away from meeting its targets, and not everyone is on board
Shuki Sadeh Published on 20.11.2020
Until a little more than a decade ago, Ofer Yanai, 45, worked at NDS, a company that makes encryption systems for the television industry. Winning 70,000 shekels ($20,900) on the game show “One Against a Hundred” enabled him to shift gears and study full time for an MBA at Ben-Gurion University of the Negev. After graduating, he worked for a while at companies that install solar panels and in 2011 set up his own business, Nofar Energy.
Israel’s renewable-energy industry was in its infancy. Entrepreneurs traveled around the country in pickup trucks filled with panels to erect on cowsheds, chicken coops and the roofs of anyone wanting to save a few hundred shekels on their monthly electric bills. But instead of installing panels, Yanai became the intermediary between companies, investors and roof owners. Nofar, which now has a staff of 40 and employs another thousand indirectly, is considered one of the leading Israeli companies in the sector.
Nofar is just one example of how renewable energy has turned into a big business. On the Tel Aviv Stock Exchange, alternative energy companies are going public and share prices have boomed over the past year. Earlier this year, the Noy Fund, a private equity investor specializing in infrastructure, paid 250 million shekels for a 25% stake in Nofar Energy, which is expected to make an initial public offering later this year at a 1.5 billion-shekel valuation.
“Renewable energy, and in particular solar panels, is giving young people opportunities to build empires,” says Eitan Parnas, the CEO of the Green Energy Association of Israel, who remembers Yanai from the days before he had an office and worked from his car with a cell phone. But for all the excitement alternative energy has elicited, Israel is still way behind much of the developed world, he adds.
“You’re looking at a country that found natural gas, got confused, and now is several years behind, even though its roofs and lands are exposed to the sun almost the entire year. We just haven’t managed to get on the right track,” says Parnas
Indeed, Yanai’s success story conceals a different, much gloomier reality, reflected, among other places, in a State Comptroller’s report published last month. Eleven years ago, the government set a goal of generating 20% of the country’s energy from alternative sources; at the end of 2019, the figure was only 5%. Among other things, the comptroller’s report found that the government had missed a major opportunity to install solar panels on public buildings, such as schools, due to a lack of coordination. The Environmental Protection Ministry estimated that only 587 public buildings, less than a tenth of the 6,500 structures the Government Housing Administration is responsible for.
Last month the government increased its renewable-energy target to 30% of all consumption by 2030. This is a welcome decision, albeit controversial; there are those who argue that the goal is too low, while many Energy Ministry officials doubt that the goal can be reached. Although a host of regulatory barriers have been removed over the past two years, enabling several alternative energy projects to get underway, by mid-2021, renewable energy’s share will still only be between 8% and 8.5%.
“There are a lot of imbroglios in this story,” says a ministry official who asked not to be identified. “For example, you can put panels in shopping centers in the center of the country, but strip mall owners say, ‘Leave me alone. I know how to sell clothes and I’m making money from the real estate. Why do I need to deal with bureaucracy for another 100,000 shekels a year?’ When you want to build on roofs in the Negev there’s the question of how to transmit the electricity to be produced, because the infrastructure isn’t there. The green groups wanted us to raise the goal to 50%, but in the ministry they are very concerned that we won’t even get to 30%.”
Around a decade ago the renewable energy field was associated primarily with small business and idealistic green entrepreneurs, who were seeking both to reduce greenhouse gas emissions and bring power to people without a developed electricity infrastructure, like unrecognized Bedouin towns in Israel or remote African villages.
Early on, the government subsidized alternative energy at a fixed price of 2 shekels a kilowatt/hour for small initiatives. For larger power providers the price was lower, but it still looks astronomical compared to prices now. For example, in 2013, Shikun & Binui Ltd. agreed to supply electricity from its thermo-solar plant at Ashelim at 76 agorot per kw/h for 25 years. Now the price for similar contracts is 14 agorot for large solar fields and 19 agorot for those on rooftops.
The price has dropped so much because the panels, which come mainly from China, have become so much cheaper. Electricity from renewable sources is now cheaper than electricity produced with natural gas, which today runs at 27 agorot or more per kilowatt hour, taking into account the cost of state investments in the natural gas industries.
Recently there was another dramatic price drop to 19.9 agorot per kw/h in a tender for solar power with a manadatory energy-storage capability, enabling electricity to be supplied at night and on cloudy days. The low price reportedly led the Energy Ministry three months ago to cancel plans to construct four power stations fired by natural gas. “The results were very surprising. That’s a game-changing price,” says a senior investment house executive. “If it works, we will see in the future more tenders that call for storage. The advantage of producing electricity from gas-based power stations will drop.”
Energy shares soar
While the price of generating electricity is dropping, the shares of renewable energy companies are skyrocketing. The TASE has launched an index for such companies, one of the most prominent of which is Enlight, which has a market cap of 5.3 million shekels. Founded in 2008 by three high-tech entrepreneurs – Gilad Yavetz, Zafrir Yoeli and Amit Paz – they invested just 50,000 shekels of their own money and borrowed the rest from banks.
Strangely enough the rally in alternative energy shares has little to do with Israel, but due to the fact that companies like Enlight are developing projects overseas. In Israel, meanwhile, entrepreneurs in outlying areas say the Israel Electric Corp. is refusing to connect their solar plants to the national electricity grid because there is no transmission infrastructure in places far from the center of the country, an issue also raised by the State Comptroller.
A document IEC has given to solar power developers shows that large areas of Israel are deemed “red,” i.e., there is no available infrastructure to deliver the electricity produced by renewable energy facilities. They include places such as Nahariya, Maalot, Acre, Haifa and its bayside suburbs, Caesarea, Ashdod, Kiryat Malachi, Kiryat Gat, Ashkelon and Sderot.
“It’s much easier to develop big solar farms, as large companies do, but it’s a waste,” says the owner of a mid-size renewable-energy company. “The real market driver is rooftops. There, you find a lot of small, medium-sized and large producers. But many people who got excited about it found out it was too early, because the government didn’t take care to ensure there was transmission infrastructure.”
One example of this is Sagit Sabagi, a farmer on Moshav Maslul, near Ofakim, who is trying to get a permit to install panels on the roofs of new chicken coops with an area of 12,000 square meters to produce 1.2 megawatts.
“They keep telling me the network is full,” she says. “But just across the road I see Housing & Construction’s huge solar farm. In Ofakim, the roofs of big factories are full of panels. My feeling is that the big guys are eating us, the little guys. We aren’t being allowed to enjoy the natural resource that belongs to all of us – the sun.”
Danny Danan, the CEO of Greentops Neto, which installs solar roof panels, blames the Electricity Authority, which is responsible for the bidding processes, for not doing anything to improve the transmission infrastructure. “It was easier for me to do business when they thought we were some sort of ‘tree-huggers.’ The more we became a serious alternative to gas or coal, the feeling is that they are putting more obstacles in front of us.”IEC says in its defense that it is investing 4 billion shekels a year in upgrading and expanding the network and adapting it to the renewable energy revolution in the Negev and Galilee. “It should be recalled that the electricity grid was planned decades ago in accordance with the accepted perceptions in the world at the time,” it said.
Large solar power projects need lots of land and the easiest way to obtain it is by using land leased by the government long ago for farming. Kibbutzim and moshavim that got in early with developers and leased them their land are now guaranteed income for many years ahead without the sweat and vicissitudes of traditional farming.
An example is one of the large projects by Doral Energy, which has partnered with eleven kibbutzim in the Beit She’an Valley. The project, which will go online in four years, will produce 200 megawatts of power and bring in an estimated 55 million shekels in revenue a year. However, at the end of 2021, the emergency regulation of the Israel Land Authority, which allows communities in the north and the south to band together to develop large projects on pooled lands, will expire. After that, each kibbutz or moshav will be allowed to build energy facilities on no more than 250 dunams (about 60 acres) of their own land, which is much less attractive financially than solar farms on larger parcels.
The appearance of energy companies in rural communities often creates tensions within the communities. That’s been the case recently with the issue of wind farms in the Gilboa region and the Golan Heights. Many residents are concerned about the noise of the spinning turbines, the shadows cast over nearby homes and the impact of the turbines on birdlife.
At Kibbutz Geva, for instance, the company EDF Renewables got approval to erect 16 wind turbines despite opposition from many residents. “Wind-turbine technology isn’t appropriate to Israel, says Naama Solomon, who belongs to the activist group Wind Turbines – Not All Green.
“They may make nice pictures and stand for progress, but they create environmental damage that threatens biological diversity and the residents of the periphery,” she says. “There’s no justification for projects like these, certainly when you consider that erecting hundreds of turbines will contribute just 2% of energy output in the most optimistic scenario. All this will be done at inflated prices and associated costs of hundreds of millions of shekels, which will be passed on as a regressive tax on electricity consumers.”
In response, an industry executive, speaking on condition of anonymity, says wind turbines are more efficient generators of electricity than solar power farms. The biggest wind farms use relatively less land. “Apart from that, it’s very important to diversify renewable energy sources. For its part, the Electricity Authority says wind turbines are a critical component of the alternative-energy equation, if for no other reason than that they complement solar facilities, which only generate power on sunny days.
On the Golan Heights, Energix Renewable Energies is moving forward with erecting 24 turbines at a cost of 600 million shekels an agricultural land belonging to the Druze towns of Ein Qiniyye, Majdal Shams, Mas’ade and Buq’ata. Over the last few years wind farms have stirred up a lot of emotions in the community, leading to fist fights, vandalism, boycotts and threats. In recent months, several landowners have notified Energix that they are pulling out of the contracts they signed. The company says that all the agreements it has remain in force and that cancellation notifications it has received are invalid because they were made under duress.
On Kibbutz Merom Golan, some members accused the kibbutz secretary, Gabi Coneal, of conflicts of interest because he is married to a relative of one of Enlight’s founders.
“Over the years no one told anyone here about the plans,” says Aharon Haviv, who lives in a kibbutz home but is not a member. “The kibbutz members decided themselves and later told us that if they didn’t allow the turbines, the government would take away the land and someone else would get the money. That’s how they sold the idea, but there was a big controversy.”
In response, Enlight noted that 89% of kibbutz members supported the wind farm proposal. “Enlight has maintained a comprehensive, professional and transparent process of public participation with local residents, which has included multiple meetings with individuals and groups,” it said.