Overview of the Israeli electricity market 2019

This report encloses recent developments and statistics of the Israeli electricity market with emphasis on the generation segment. The past year was marked with the adoption of the Electricity Market reform in July 2018 and the beginning of its implementation in 2019, while in parallel a significant progress has been made in the renewables segment with integration of hundreds of MWp in 2018 and 2019. By the end of 2018, Israeli national electric generation capacity was at 18.1 GWp, with IEC making up 73.6% of total grid-connected capacity, while private producers made up the remaining 26.4%. In terms of electricity generation, 69.6 million kWh were produced in 2018 in Israel. In 2018, the generation segment was relying on a mix of fuels, dominated by natural gas and coal - both utilized by the Israel Electric Corp (IEC) as primary fuels. Secondary fuels of the IEC were diesel, oil fuel and methanol. Private generation facilities were primary relying on natural gas, while diesel, oil fuel, kerogen and renewables were secondary energy sources.

The past year was marked with the adoption of the Electricity Market reform in July 2018 and the beginning of its implementation in 2019, while in parallel a significant progress has been made in the renewables segment with integration of hundreds of MWp in 2018 and 2019. The first IEC privatization tender for Alon-Tavor power plants compound was finalized in summer 2019, while the second tender for Neot Hovav power plant compound is expected to be finalized in late 2019. By the end of 2018, Israeli national electric generation capacity was at 18.1 GWp, with IEC making up 73.6% of total grid-connected capacity, while private producers made up the remaining 26.4% (including renewables). By the end of 2019, the installed capacity of private electricity generation facilities is expected to surpass 30.0% share (including renewables) and is expected to reach as much as 60.0% share by 2025.

Figure 1. Installed electricity generation capacity in Israel as of December 2018 by producer: IEC (blue) and Private Producers including renewables (red).

For the past decade, the IEC has been denied from building new conventional power plants, thus practically all conventional additions have been made by the private sector. The IEC capacity reduced upon retirement of two generation units with 282 MWp capacity in early 2018 and several hundred more Megawatts expected to be retired in 2019. In terms of privately-held conventional generation, several power plants had already been supposed to be synchronized by 2017-18, but were mostly delayed: the Dead Sea Industries 222MWp gas-powered cogeneration plant received license in July 2018; the 300MWp pump accumulation power plant in Maaleh Gilboa was supposed to enter full operation in summer 2019, but unexpected incidents delayed its first 150MWp unit to late 2019 and second unit is not expected to begin operation until mid-2020; additional capacity of about 300MWp is expected to be synchronized in the second half of 2019. In parallel, one license of conventional 6.7MWp plant owned by Rotem Amfert was terminated. In regard to renewable electricity generation, much new capacity was installed in the solar energy sector with PV segment domination, which added some 300 MWp on the course of 2018 and an estimated 600MW to be added during 2019 (including 272MWp thermal solar Ashalim A and B plots). Solar electricity generation segment hence added about 1,450 MWp of grid-connected capacity by the end of 2018, and is expected to surpass 2,000 MWp by the end of 2019. Wind energy segment remained stable through 2018, with a total of four existing wind farms in Northern Israel; no new wind capacity is expected in 2019. Hydropower capacity remained stable in 2018 and is not expected to change in 2019. Finally, biogas segment added a single biogas plant in 2018 and two more small-scale biogas plants are expected to be added in 2019.

Figure 2. Installed electricity generation capacity evolution by producer in Israel (percent of total) as of December each year 2015-18 and 2019-20 projection: IEC (blue) and Private Producers including renewables (red).

In terms of electricity generation and supply, 69.6 million kWh were produced in 2018 in the Israeli market. IEC produced 68.8% and added with electricity purchased from private producers, the IEC altogether controlled 87.6% of total electricity supply, whereas the remaining 12.4% consisted of output supplied by private producers directly to customers or schemes of self-consumption (small PV producers and three conventional power plants). Private generation share hence reached 31.2% during 2018 and is expected to continue rising through 2019 to surpass 33%. This implies a significant overshoot of governmental original target of 20% private electricity production by 2020.

Figure 3. Supply of electricity by producer in Israel during 2018: IEC (blue), Private Producers who sell directly to consumers (red) and Private Producers who sell electricity to IEC for later distribution (green).

In 2018, the generation segment was relying on a mix of fuels, dominated by natural gas and coal - both utilized by the IEC as primary fuels. Secondary fuels of the IEC were diesel, oil fuel and methanol. Private generation facilities were primary relying on natural gas, while diesel, oil fuel and renewables were secondary energy sources. When combined, the electricity generation segment continued to be dominated by natural gas as the primary energy source (64.8% by capacity, 66% by generation), with coal as the secondary source (26.8% by capacity, 30% by generation) and third place taken by renewables (7.2% by capacity, 3% by generation) – predominantly solar PV technology (6.9% by capacity, 2.5% by generation). Other sources, including other fossil fuels contributed a tiny fraction (1.2% of total capacity, 1% of total generation). In 2019, renewables' share is expected to experience a significant growth (reaching about 10% of total capacity, 5% of total generation) on the expense of conventional capacity.

Figure 4. Capacity of the electricity generation segment in Israel by primary fuel type as of December 2018. Notes: diesel is calculated combined with methanol; natural gas is including both CNG and LNG.

In 2018, grid supply per capita slightly decreased from 6.5 thousand kWh in 2017 to 6.4 thousand kWh annually, whereas the electricity demand per capita also decreased from 6.0 thousand kWh in 2017 to 5.9 thousand kWh annually. Total electricity generation per capita in Israel was 7.8 thousand kWh annually, remaining almost unchanged compared with 2017.

Figure 5. Development of grid demand and grid supply per capita in Israel during 2010-18.

In the past, the Electricity Authority estimated that the growth in electricity demand in upcoming years is to be at 2.7% annually, which is slightly above the demographic growth rate. However, the growth of electricity demand  in Israel in 2018 was just 2.1%, which seems to be a slow down compared with previous years. Though there is still a total electricity demand growth due to demographic expansion, the only expectation for growth is future wide-spread adoption of electric vehicles.

The transmission and distribution segments continued to be controlled by the IEC, but upon the adoption of Electricity Reform in 2018, the grid control department was split into a separate company. Distribution has about 10% share controlled by the Kibbutzim and the rest by IEC; more players are expected to enter this segment upon the implementation of the market reform.

The off-grid electricity market in Israel is essentially small, estimated at only several megawatts deployed in desolate locations, including diesel generators and solar PV collectors.

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