Rather than continuing to employ the traditional feed-in tariff strategy to
purchase electricity from renewable sources, the government should be making
such purchases on the basis of the benefits derived from the technologies,
according to Prof. Eugene Kandel, head of the National Economic Council
and chief economic adviser to the prime minister.
“Without knowing the
benefits, it’s hard to argue that you’re making reasonable decisions,” said
“We’ve reached a whole bunch of very interesting conclusions in
the process – first of all, it’s not a linear benefit. The benefit
depends on the introduction of the technologies.”
Kandel presented on
Tuesday the results of an inter-ministerial renewable energy committee that he
had led in order to provide recommendations to the government on achieving grid
parity. He delivered the proposals publicly during a session of the Eilat-Eilot
Fifth International Renewable Energy Conference, as well as at a subsequent
Up until now, the government has used the most popular
method for determining renewable energy pricing, the feed-in tariff, explained
Netanel Oded, an economist in the National Economic Council, who was a principal
coordinator of Kandel’s report.
Under the feed-in tariff, the government
evaluates how much every technology costs and then determines quotas and subsidy
amounts for each. Each entrepreneur can then come on a first-come, first-serve
basis to claim the quotas and receive a certain amount of return on the equity,
Oded told The Jerusalem Post
“What we suggested doing is
looking from the benefit side instead of the cost side,” he said.
technology provides certain benefits, such as solar power operating particularly
well during the day. However, such factors were “absent from all policy-making
until now,” according to Oded.
In developing their recommendations, the
interministerial committee team members wrote out formulas as to how to measure
the benefit of every technology currently available as well as those that do not
yet exist, Oded explained.
The researchers examined how inserting an
additional unit of each different type of renewable energy on the electricity
grid would influence market development in Israel, and made forecasts for 25
years into the future, Kandel said. Such forecasting needs to continue to occur
periodically to include updated parameters and to add a sense of certainty, he
Four key benefits that can be derived from the use of various
renewable technologies include fuel and capital savings, emission reductions,
energy security and price stability, and impact on regional development, Kandel
After quantifying all of the benefits generated by the
different renewable modes, the government can then determine a premium – the
price that is worth paying for the resultant electricity, according to
Looking at the results for solar, for example, the team found that
electricity generated from this source would be worth 52 agorot per
kilowatt-hour, and anything above that would constitute a subsidy, he explained.
If a manufacturer was able to produce electricity from solar power at 52 agorot
per kilowatt-hour or less, there would be no need to enforce a quota.
long as there is no engineering problem to the grid, as much as you can produce
we’ll buy it because it’s worth it for us,” Oded said.
The premium that
the government is paying accounts for benefits like the reduced illness in the
population due to decreased pollutants in the environment generated by the
“We’re buying emissions off of him, you can say,” Oded
In order to fully achieve grid parity – when costs are at or below
the benefit amount – several different key steps still need to be taken,
according to Kandel. The government must reduce the approval time for permits
and improve coordination among regulators, and both consumers and producers need
to understand that “certainty is good to everyone,” he explained.
seems to be some kind of belief that in the world of renewable energy, if you
provide certainty to the producer you are somehow doing it at the expense of the
consumer,” Kandel said. “In this case it is simply incorrect.”
pre-commitment to prices for at least 25 years is ultimately good for both
producers and consumers, as consumers will no longer be subject to fluctuations
and producers will have lower financing costs, Kandel said.
the government needs to develop a mechanism for pricing land reasonably, so that
producers can actually get their projects on the ground, he
One final recommendation that the interministerial committee
has made is allowing for the hybridization of power plants on the grid, the
“It might be most sufficient if you have a
conventional plant and also added a solar capacity,” Oded said, noting, for
example, that the solar portion could operate during the day and the traditional
portion at night.
“Break this religious separation of renewables and
nonrenewables,” Kandel said, noting that it is crucial to calculate the degree
of renewability of everything – from solar, to wind, to
Economically and environmentally, these two worlds can no longer
afford to be polarized, he added.
“The government is committed to adding
renewable energies,” Oded said, “but as the market has grown very, very mature
lately, it looks to do it without significantly elevating the electricity