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).
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
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
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
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.
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
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