Ashalim and beyond: What grid parity means for Israel

Just the other month, and with very little fanfare, the Israel electricity market reached grid parity. Yet the understated reception belies a truly significant milestone, one that only a handful of other countries have been able to achieve. Indeed, consider what grid parity actually means: that the cost of renewable energy has become equal to or less than the cost of energy generated by fossil fuels.

Israel effectively reached this point in early March. It was then that the Ministry of Finance announced the winner of a government tender for the construction of a 30 MW solar photovoltaic plant at Ashalim. This facility, which will be located in the Western Negev, will be able to power tens of thousands of homes in the region. The consortium Ashalim Sun PV won the tender with a bid of 53.65 agorot per kilowatt hour (kWh).

Currently, the Israel Electricity Corporation sells its electricity, generated mostly from coal and natural gas, for 62.54 agorot per kWh.

The advent of grid parity holds immense implications for the State of Israel. Not only does it provide significant environmental benefits, as it will encourage the broader adoption of solar energy, but it can also afford the country greater economic growth and enhanced energy security.

From an economic standpoint, grid parity implies that there will be less of a need for the government to stimulate the solar market. Currently, the government pays a subsidy of 0.98 agorot per kWh to large-sized solar power producers.

At Ashalim, this means that the state will save approximately NIS 900 million over the course of the installation’s power purchase agreement.

Moreover, any future tenders for solar installations will now be expected to meet – if not beat – this new baseline price.

Another economic advantage is that it can allow Israel to further capitalize on its recent natural gas finds. If solar energy is now able to satisfy more of the country’s energy demands at an economically viable price, then there will be less domestic demand for the natural gas produced from the Tamar and Leviathan fields. With solar energy powering more of the national grid, Israel’s natural gas finds, which are worth billions of dollars on the international market, can deliver the state an economic windfall in export revenue.

In terms of energy security, this imparts Israel with a number of strategic benefits. For one, increased installation of solar energy will help diversify the country’s energy portfolio.

At a time when Israel is facing a looming electricity crisis due to a shortage of natural gas, solar energy can play a critical role in reinforcing the country’s power generation capacity.

Secondly, the inherent distribution of solar facilities, which are installed on private homes, commercial buildings, and as standalone fields, means that damage or disruption to a single facility will not have a devastating effect on the entire national grid.

Lastly, grid parity will help decrease Israel’s reliance on energy imports. The recent termination of the gas accord with Egypt should serve as a stark reminder that energy independence is always an imperative. Solar energy, the expansion of which is facilitated by grid parity, ensures that Israel’s power generation capacity stays on its soil and is only dependent upon the sun.

While the overall picture of solar energy in Israel is certainly bright, challenges still exist. For example, more land needs to be made available for the development of large solar fields in order for solar energy to continue scaling at an appreciable rate. Zoning and approval processes need to be streamlined, too. This could pave the way for large solar fields to be built more quickly, which means consumers are more likely to see downwards pressure on retail electricity rates.

Ashalim certainly heralds a new and exciting era for Israel. However, it is important to remember that grid parity, while an impressive achievement, is not the end goal; rather, it is a key step in a longer process towards achieving broader sustainability. Let’s hope that Israel continues on this promising path and fully embraces the advantages being presented by solar energy.

The writer is vice president of marketing in Asia Pacific, Middle East and Africa for Suntech.