In June 2011, at Kibbutz Ketura on the Arava plain, Israel's first solar energy farm was inaugurated. The promoters, Arava Power, waited five years before they received the permits to construct the installation. "It's fine," Arava Power CEO Jon Cohen said in an interview with "Globes" at the time, "That's the price you pay for a project that's the first of its kind. That's the price paid by pioneers. For the second and third projects, a two-year waiting time will be inconceivable." Cohen was naive.
Almost a year and two months have passed since the first field was inaugurated at Ketura, without even a single ground-based solar installation being constructed. "We didn't expect to remain alone for such a long time," Cohen says today, "but after six years in this rubbish heap, nothing surprises me any more."
In 2009, the government decided that, by 2014, 1,550 megawatts of electricity would be produced from renewable energy sources. Dozens of energetic entrepreneurs flocked to the solar energy industry and sought to realize the vision that had been set out.
So far, installations amounting to only 205 megawatts have been hooked up to the power grid, all but one of them, the 4.9 megawatt Ketura installation, rooftop installations.
The government's goal is by now no longer attainable, as senior officials of the Public Utilities Authority Electricity and the Ministry of Energy and Water Resources admitted at a session of the Knesset Internal Affairs and Environment Committee two weeks ago. Don't worry. No official will be found responsible for this failure, and no public servant will pay with his job for failing to execute a government decision. On the contrary, in the officials' view it is the government that is to blame for setting unattainable goals.
"The decision by the government of Israel was a little hasty," Dr. Yehuda Niv, head of the Electricity Administration at the Ministry of Energy and Water Resources, explained at the Knesset, "because it did not allow time for planning and preparation."
The writing was all over the wall two years ago. "Landau warns of power drought but solar market stuck", "Globes proclaimed on December 21, 2010. By then applications for constructing medium-size solar installations totaling 1,000 megawatts had piled up at the Public Utilities Authority Electricity. Meanwhile, the drought has arrived, and the applications still lie on a desk at the Authority. Even in bankrupt Greece they have managed to construct solar installations faster. "We could have had 200 megawatts of ground-based installations today, but eighteen months were wasted, and, at best, we'll have 50 megawatts here in a year's time," says Eitan Parnass, founder and CEO of the Renewable Energy Association of Israel.
"I estimate that ego and prestige battles between the authorities held up the projects for six months. Add to that 'learning time' spent on solving unforeseen problems that cropped up, and in the background there are all kinds of conspiracy theories according to which the government is deliberately delaying the project to save the costs of the incentive tariffs."
What's wrong with the regulator putting the good of the consumer first?
""The good of the consumer means that you should let him generate electricity for himself. If that is ever to happen in Israel, you need an industry. The regulator is killing an entire industry that could have generated hundreds of jobs, and helped collapsing agricultural settlements in the periphery. Only cynics advocate a policy of 'wait and see'. Nobody will wait. The entrepreneurs will simply move on, to other countries or other industries."
Last week, the four largest promoters of solar installations in Israel decided they had had enough. The four CEOs of Arava Power, SunPower, EDF-EN, and Shikun & Binui Renewable Energy sent a sharply-worded letter of protest to Landau, and demanded an urgent meeting. The immediate reason for the meeting was the decision by the Public Utilities Authority-Electricity to reduce by 40% the tariffs that will be paid to the large ground-based installations. The Authority is of the view that the new tariff leaves the promoters a suitable return on their investment.
In the Authority's calculations, the cost of land for the installations is put at $4,000 per dunam. In May, the Israel Land Administration (ILA) decided to demand NIS 100,000 per dunam from the promoters, which amounts to almost NIS 2 million per megawatt. Two months before that, the amount was NIS 75,000, and beforehand there was talk of NIS 20,000. These unending changes put the financial models of the promoters in a spin. Like a ping-pong ball, they are batted to and fro between the ILA and the Authority. This game has carried on for two years uninterruptedly.
"Following the change in the policy of the ILA on land values, we find ourselves facing a severe blow to the economic worthwhileness of the projects", the four CEOs write in their letter to Landau, "and in a position in which a crisis of confidence has arisen vis-a-vis the financing bodies and the overseas partners that have invested in the companies and in the projects." Projects for constructing solar fields amounting to hundreds of megawatts are liable to go down the tubes unless a mechanism is set up for coordinating the demands of the Public Utilities Authority Electricity with those of the ILA, the CEOs warn.
Landau met the CEOs last Wednesday. The Minister of Energy and Water Resources is full of good intentions, willing to listen to the promoters, and he tries to help. The problem is that the Minister of Energy and Water Resources is a representative figure in the industry for which he is responsible, rather like the president of the state. The Public Utilities Authority Electricity has already decided on reduced tariffs, and agreed to delay an announcement of the decision by a week only to save the minister's face.
"The government has to decide whether it intends to meet its targets," says Cohen. "If it does, then they must confront head-on the major obstacles standing between the promoter and a return on his money. Once and for all, let them sort out the chaos over the land, capital restrictions, capital costs, and the duration of regulatory farmeworks."
Published by Globes [online], Israel business news - www.globes-online.com - on August 6, 2012
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