Overview of the Israeli electricity market 2021

This report overviews the 2020-21 developments in the Israeli electricity market with emphasis on the power generation segment. Despite delays attributed to the pandemic lockdowns, a significant progress continued in the renewables segment with integration of hundreds of MWp in 2020 and 2021, led by the solar segment while also finalizing the start-up of the first major pump accumulation project in Gilboa. By the end of 2020, Israeli national electric generation capacity was at 21.4 GWp, with IEC making up 55.7% of total grid-connected capacity, while private producers made up the remaining 44.3%. In terms of electricity generation and supply, 73.5 million kWh were produced in 2020 in the Israeli market, up from 72.5 million kWh in 2019. The 2020 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 power generation facilities were primary relying on natural gas, while diesel, oil fuel, kerogen and renewables were secondary energy sources.

Despite delays attributed to the pandemic lockdowns, a significant progress continued in the renewables segment with integration of hundreds of MWp in 2020 and 2021, led by the solar segment while also finalizing the start-up of the first major pump accumulation project in Gilboa. The second tender for Neot Hovav power plant compound was closed in December 2019 and finalized in June 2020. By the end of 2020, Israeli national electric capacity reached 21.4 GWp, while the installed capacity of private electricity generation facilities (including renewables) surpassed the 40.0% share and is expected to reach as much as 62.0% share by 2025.

Figure 1. Installed electricity generation capacity in Israel as of December 2020 by producer: IEC (blue) and Private Producers including renewables (red).

For the past decade and a half, the Israel Electric Corp (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 further reduced upon retirement of some generation units in 2019 and privatization sale of two compounds in 2019 and 2020 respectively. In terms of privately-held conventional generation, several power plants began continuous operation over the past year and a half: the 300 MWp pump accumulation power plant in Maaleh Gilboa entered partial operation in late 2019 while its second unit began operation in summer 2020; OPC Hadera power plant received permanent operation license in July 2020. In regard to renewable electricity generation, much new solar capacity was installed, and surpassed 3,300 MWp by the end of 2020. Wind energy segment remained stable through 2020. Hydropower capacity remained stable in 2020 and is not expected to change in 2021. Finally, no small-scale biogas plants were added in 2020-21.

Developments in the generation segment include transfer of the 1,150 MWp Neot Hovav power generation complex from the IEC to the tender winning consortium by Shikun veBinui & Adeltek; construction of solar+storage facilities as part of the first tender of this kind concluded in 2020 - 100 MWp by Doral, 41 MWp by Enlight and 20 MWp by Ellomay Capital; tender quota of 271 MWp small natural gas generation facilities was closed in November 2019 and will be gradually deployed in upcoming years. Around 12 GWp renewable capacity is planned to be installed by 2030, thus about 1,000 MWp of mainly solar capacity is to be installed annually in upcoming years. Finally, by 2023 two coal generation units of the IEC in Hadera are to be retired in favor of a 1,200 MWp gas power plant.

Figure 2. Installed electricity generation capacity evolution by producer in Israel (percent of total) as of December each year 2015-19 and 2020 projection: IEC (blue) and Private Producers including renewables (red).

In terms of electricity generation and supply, 72.5 million kWh were produced in 2019 in the Israeli market, and about the same in 2020. IEC produced 65.9% and added with electricity purchased from private producers, the IEC altogether controlled 77.8% of total electricity supply, whereas the remaining 22.2% 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 38% during 2020 and is expected to continue rising through 2021 to surpass 40%. 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 2019: IEC (blue), Private Producers who sell directly to consumers (red) and Private Producers who sell electricity to IEC for later distribution (green).

In 2020, 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 (60.8% by capacity, 63.4% by generation), with coal as the secondary source (25.6% by capacity, 32.8% by generation) and third place taken by renewables (10.5% by capacity, 5.0% by generation) – predominantly solar PV technology (8.9% by capacity, 3.6% by generation). Other sources, including other fossil fuels contributed a tiny fraction (1.1% of total capacity, 1.1% of total generation). In 2021, renewables' share is expected to experience further growth, reaching about 12% of total capacity and 7% of total generation.

Figure 4. Capacity of the electricity generation segment in Israel by primary fuel type as of December 2019. Notes: diesel is calculated combined with methanol; natural gas is including both CNG and LNG.

In 2020, grid supply per capita slightly decreased from 6.4 thousand kWh in 2018 to 6.3 thousand kWh annually, whereas the electricity demand per capita also remained stable at 5.9 thousand kWh annually. Total electricity generation per capita in Israel was 8.1 thousand kWh annually in 2019 and 2020, slightly increasing from 2017 and 2018, when it was at 7.8 thousand kWh. The generation per capita in 2021 is expected to slight increase.

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. The growth of electricity demand in Israel was at 4.1% annual growth in 2019; but in 2020 experienced flat growth due to the Covid19 crisis. Though there is still a total electricity demand growth due to demographic expansion, the only expectation for electricity demand growth in upcoming years is wide-spread adoption of electric vehicles in the near future.

The transmission and distribution segments continued to be controlled by the IEC, but after the adoption of the Electricity Reform, the grid control department was split into a separate company in 2019 and received operation license in June 2020. Distribution segment 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. Notably, in 2021 it was announced that ten players would enter the distribution segment under this framework.

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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