Last week, renewable energy experts from around the world gathered in Herzliya. Participants in the International Conference on the Future of Solar Energy toward Grid Parity reached an embarrassing consensus: Israel of all places, known for its hi-tech acumen and its “start-up nation” innovations – not to mention its abundant sunshine – is missing out on perhaps the most important technological revolution of the 21st century.

Representatives from international alternative energy firms such as Suntech, the world’s largest producer of solar panels, US-based Hoehner Research and Consulting Group, Power-One, the world’s second-largest producer of solar inverters, and Italian-based Enerpoint criticized the State of Israel’s political leaders for placing obstacles in front of the development of a vibrant alternative energy sector.

Part of the problem is planning. Countries such as Germany, which gets 40 percent less sun than Israel, and Denmark, which gets even less, have set the goal of 100 percent dependence on renewable energy in coming decades.

Israel’s goal is profoundly more modest. After bickering with the Treasury, the cabinet last year rolled back the goal of reaching 20% dependence on renewable energy by 2020 to just 10%. And even this modest target will not be met unless a radical change is made in the way the government encourages the use of alternative energy sources.

The most absurd aspect of our renewable energy policy is the ridiculously low caps placed on production of electricity via renewable energy sources. In theory, small, medium-size and large entrepreneurs can sell energy produced from the sun, the wind and bio-gas to the Israel Electric Corporation. But the government puts limits on the amount of energy it must buy in this way.

This made sense as long as the state provided significant subsidies in the form of a “feed-in-tariff” for each kilowatt of solar or wind-produced energy fed into the electric grid.

This subsidy reimbursed the entrepreneurs for the extra cost of producing energy via alternative energy sources as opposed to via coal, oil or other polluting means.

But we are fast approaching what is known in renewable energy circles as “incentive parity” or “grid parity” – a situation in which the cost of producing electricity using conventional sources of energy is the same as the cost for renewable energy sources – particularly solar. And this is true even in Israel, where electricity prices are artificially low due to government regulatory intervention. A kilowatt hour of electricity produced by the Israel Electric Corporation costs 62 agorot, including value-added-tax.

The feed-in-tariff for renewable energy is 65 agorot. Nevertheless, the government continues to impose strict caps, despite the fact that even at “grid parity” there is a tremendous willingness on the part of entrepreneurs of all sizes to produce electricity via renewable energy sources. In a recent tender of feed-in-tariffs, the 30 megawatts were sold off within minutes of being offered to the public.

It makes no sense for the government to prevent entrepreneurs from selling electricity at almost the same price as the Electric Corporation, but without all of the negative side effects (pollution, environmental damage, health risks) connected to the burning of fossil fuels.

Open market forces should be allowed to determine supply and demand.

Adding insult to injury, the government, in preparation for a shortage of natural gas resulting from an end to the Egyptian deal, purchased huge generators powered by diesel fuel to meet our energy needs. The shortfall – or at least a part of it – could have been filled with solar energy, particular in the summer months. And solar energy’s output peaks at midday when the sun is hottest, corresponding to peak demand hours for electricity as people turn on air conditioners.

Unfortunately, the government not only lacks long-term vision regarding use of renewable energy, it is placing illogical caps on production of energy from non-polluting sources. And we have not even mentioned debilitating red tape and bureaucracy governing the process of receiving a license to produce energy from renewable sources.

The government needs to take to heart the criticism voiced last week in Herzliya by a slew of alternative energy firms. They might have been motivated by capitalistic interests. But developing a dynamic renewable energy sector in Israel is not just good for business, it is good for Israel.