International perspectives

Israel: The "Energy Island's" Transition to Energy Independence

After several decades of stagnation, the recent discovery of significant natural gas deposits in the Mediterranean, which could supply Israel's energy needs for the coming decades, and the introduction of domestic renewable energy generation could signal a rapid energy transition for Israel.

By Noam Segal, Executive Director, Israel Energy Forum May 2016

Israel the energy island

For several weeks in the autumn of 2015, tens of thousands of Israeli demonstrators took to the streets of Tel Aviv and other cities in Israel. What was unique to this protest, the largest public demonstration in Israel since 2011, was its topic: energy policy. Despite its significance to the country's national security and economy, energy has never been an issue of public discourse in Israel. The demonstrators were protesting the government's proposed plan for the country's natural gas sector (termed the "Gas Deal"), demanding more energy security, sustainable energy and a just distribution of the profits from this national resource.

In February 2016, the Supreme Court of Israel ruled in favor of the protesters, despite Prime Minister Benjamin Netanyahu’s extensive involvement in support of the gas deal and his unprecedented move in appearing before the court in person.

These demonstrations highlight the main elements of Israel's energy transition over the past decade, reflecting several domestic, regional and global developments. On the world energy map, Israel presents an interesting case study for energy policy making. Due to its geopolitical positioning, Israel cannot connect its energy system to the grids of neighboring countries. This has effectively rendered Israel an "energy island" that must be able to supply all of its electricity needs at any given time. In addition, Israel has traditionally been dependent on fuel imports to supply its energy needs due to lack of local natural resources.

Israel’s energy transition: natural gas and renewable energy

In the late 1970s, following the 1973 oil crisis, Israel initiated its first major energy transition when it introduced coal to replace oil as a primary fuel in electricity generation. A further outcome of the oil crisis was a unique regulation requiring rooftop solar thermal water heating systems to be installed on all residential buildings.

A second energy transition for Israel occurred in the early 2000s when natural gas was introduced to its energy system. This resource was imported in part from Egypt as well as extracted from newly-discovered local offshore gas wells in the Mediterranean. The transition to natural gas eliminated oil in the power sector and replaced coal as the primary fuel for electricity generation (with a share of over 50%).

In 2009 and 2010, two major offshore natural gas deposits were discovered in the Mediterranean in Israel's Exclusive Economic Water Zone, which could supply Israel's needs for the coming decades. These discoveries are part of the regional transition from oil to natural gas as a primary energy source, occurring simultaneously in neighboring countries such as Egypt and Cyprus. It is due to these discoveries that Israel has been able to achieve some level of energy independence for the first time since its founding.

A third significant development in the Israel energy market is the introduction of renewable energy sources to its energy mix. Historically, Israel has been a global leader in renewable energy research and development, but has not managed to follow suit in terms of domestic power generation. In 2015, only 2% of total electricity generation in Israel came from renewable sources.

But the prospects of renewable energy in Israel appear more promising and are beginning to change: by the year 2020, as new solar facilities currently under construction are scheduled to come online, Israel is expected to generate about 7% of its electricity from renewable sources. Following the global trend and the 2015 Paris Agreement, the Israeli government adopted a resolution in April 2016 which set a new target: having 17% of annual electricity generation in Israel delivered from renewable sources by the year 2030.

Israel’s energy transition coupled with deregulation

Complementing Israel's energy transition are measures taken by the Israeli government to deregulate the electricity market. In the past, Israel's electricity market was dominated by the vertically-integrated, government-owned utility, the Israel Electric Corporation (IEC), which had a complete monopoly over the country's electricity generation, transmission, distribution and supply structure. The first steps at deregulation started in the early 1990s, but it was only in recent years, reflecting domestic socio-political trends, that private companies and individuals have been permitted to generate and sell electricity. Experience around the world shows mixed evidence as to the benefits of deregulation for promoting sustainable, renewable energy, but in the case of Israel, deregulation has had a positive impact on the energy transition. According to new regulations set by the Israeli government, all Israeli homeowners can now install a rooftop PV solar panel and supply their own energy needs at a lower cost than purchasing electricity from the grid, and without producing any pollution.

The Israeli Government's April 2016 resolution confirms its commitment to renewable energy, but the targets it sets are considered low and reflect an underlying internal dispute as to the future of the country's energy market. Coal continues to be a significant primary energy source, used to supply about 40%-50% of Israel's total electricity demand. This remains the case primarily because the Ministry of Energy and Water does not consider renewable energy technologies ‒ or natural gas ‒ secure sources of energy. Instead, it gives preference to keep coal in place and consider nuclear energy for the long term.

Despite obstacles, renewable energy may begin to prosper in Israel. A shortage of available land in Israel presents a major challenge to a more rapid increase in the share of renewables in electricity generation. On the other hand, Israel has abundant solar resources, presenting an important opportunity to utilize roofs to install solar systems. As the price of renewable energy technologies declines, it is hoped that their share will grow, and possibly surpass the government's 17% target, improving air quality and increasing Israel's energy independence and security.