"The high tariff that the state is offering people who set up photovoltaic electricity systems is very attractive for businesses, but will it ultimately generate only 50 megawatts of power for seven years," says Life and Environment economist Roy Kfir.
Kfir believes that the 50-MW limit was created because the government does not want to create an incentive that is not linked to the price per kilowatt/hour. In other words, it does not want to grant a VAT exemption or offer set-up grants, which is the normal practice in other countries. Another reason is that the government wants to include enterprises and households in a single and uniform arrangement even though it would have been more correct to offer to separate arrangements for the two sectors.
Kfir emphasizes that whereas households are very sensitive to the initial investment cost, the business sector is much less so. The result is complaints are already heard from in the business sector about the installation restrictions since it will reportedly make a 14% return on investment.
As for households, Kfir says, "Set-up costs of tens of thousands of shekels are a significant barrier, and it is doubtful if they will be able to exploit the 15 MW promised to them. The result is that the state is offering too high a price, which will ultimately raise the price of electricity for all consumers while simultaneously blocking the scale of production."
Kfir added that the Public Utilities Authority (Electricity) said in explaining the decision, that while the arrangement was more attractive for businesses, it also ensured that 30% of all facilities would be set up at households, a proportion similar to the distribution of electricity consumption between the two sectors. Kfir believes that had the state set the correct price, it would create the right quantitative effect, which would benefit the environment rather than one sector or another.
Kfir said that he hoped that the banks, which have already announced financing packages for photovoltaic projects, will also lobby the government to expand the arrangement as soon as possible.
Published by Globes [online], Israel business news - www.globes-online.com - on July 10, 2008
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