IEC signs deal with private power station

Ashkelon plant to produce 800 megawatts from natural gas by 2013

August 13, 2010 04:47
3 minute read.
Photo of the meeting where the new agreement was signed.

311_biz people. (photo credit: Courtesy)

In what the National Infrastructures Ministry hopes is a growing trend, the Israel Electric Corporation (IEC) signed a power-purchase agreement with Dorad Energy on Thursday. It is the largest such agreement signed thus far.

The power station, to be completed in 2013 near Ashkelon, will produce 800 megawatts from natural gas. The EMG company, which imports natural gas from Egypt, will supply the gas.

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After a protracted negotiation, the agreement was signed Thursday. It emerged after the ministry and other government bodies set the regulations for how the power station is to operate. Dorad Energy first received a license to build a power plant in 2003.

While most of the electricity will be sold to the grid run by the IEC, Dorad Energy also has private clients including the Defense Ministry and Mekorot (national water company), among others.

“This is an important road sign,” National Infrastructures Minister Uzi Landau said in a statement. “The entry of private power producers into the market is undergoing serious labor pains. We want to see private producers constructing plant after plant. We will continue to remove all obstacles to ensure their entry into the market.

“The success of Dorad, which will produce 800 megawatts from natural gas, is the success of the National Infrastructures Ministry, to ensure reliable delivery of electricity, as clean as possible, wherever possible.

“The power plant will enlarge the reserve and is an important addition to the market’s capacity, which suffers from a serious shortage.”

“Dorad, as a trailblazer in the field of private electricity production via licenses, is the first to sign an agreement of this size with the IEC,” Dorad chairman Amos Yaron said. “This is a key agreement not just for Dorad, which will decide the standards and implementation of regulations, but will be a stepping stone and foundation for the energy market, where more private producers are expected to emerge.”

“Dorad starts out today after a long and complicated period of effort and investment,” Dorad CEO Doron Grupper said. “We thank the government for the support and belief in us that the signing of the agreement with the IEC symbolizes. We are pleased that Dorad’s capacity represents a significant generator capacity for the energy market, especially during this critical time when there is a shortage of power-generation capacity in Israel.”

The National Infrastructures Ministry has been pushing to get private power producers into the industry to increase available megawatts. During heat waves, the IEC goes to maximum capacity and activates its contracts with backup private producers to redirect their electricity to the grid, but it still worries that demand will exceed capacity. Having regular private producers will increase overall capacity.

The private producers the ministry would like to encourage are in addition to renewable- energy producers. Dorad Energy will run its power station on natural gas. Natural gas is considerably cleaner than fuel oil or coal, but it is still a polluting fossil fuel and not as clean as solar or wind energy.

The ministry is considering producing much of Israel’s electricity from natural gas, although energy security dictates diversification to prevent outages. If the natural-gas pipeline were to be damaged, the power stations would immediately switch off. Coal, on the other hand, can be stockpiled.

The goal for 2020 is to have 50 percent of electricity produced from coal, 40% from natural gas and 10% from renewables. It is unclear how Landau’s plan to make Project D, two 620 MW generators, a dual-fuel (coal and gas) power plant will affect that.

The government has been pushing for more privatization and a general reform of the energy market for some time but with limited success. Former National Infrastructures minister Binyamin Ben-Eliezer and his director-general, Hezi Kugler, spent a lot of time negotiating with the IEC to little avail.

Dorad Energy is owned by the Eilat-Ashkelon Pipeline Company (37.5%), U. Dori Engineering Works Corp. Ltd. (18.75%), Edeltech (18.75%) and Turkish company Zorlu (25%). Financing is being provided by Bank Hapoalim and Clal Financing.

The power station will be built on land owned by the Eilat-Ashkelon Pipeline Company in Ashkelon.

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