National Economic Council: No need to subsidize solar energy

The calculation's basic assumption is that solar power is better than electricity generated by coal or natural gas because it does not pollute the environment.

The National Economic Council will shortly submit to the cabinet a report, which concludes that the current tariff of NIS 0.5416 per kilowatt/hour, solar powered electricity is economical and there is no need to subsidize it for the industry to survive.

"Globes" is the first to report the findings, which are the first serious attempt to determine the economic value of electricity generated by solar energy. The calculation's basic assumption is that solar power is better than electricity generated by coal or natural gas because it does not pollute the environment, saves security costs, and the construction of big and expensive power stations. The inter-ministerial team tried to precisely estimate the value of these advantages, in shekels per kilowatt/hour.

Determining the value of solar powered electricity should decide the battle over the future of this new industry, which began operating in 2008. Under the current method, the feed-in tariffs method, the government requires Israel Electric Corporation (IEC) (TASE: ELEC.B22) to buy in advance all the electricity that will be generated from a solar facility over 20 years at a tariff linked to the Consumer Price Index (CPI). IEC's payment to the power producer is reimbursed by consumers through the electricity tariff.

The tariffs in the latest solar power quotas are around NIS 0.60 per kilowatt/hour, a price at which the power producers can make a handsome profit. But the Ministry of Finance and the Public Utilities Authority (Electricity) are not prepared to continue the feed-in tariffs policy on the grounds that it will raise electricity rates by 15%. As far as they are concerned, the best way to generate electricity is to use the cheapest fuel - natural gas - the current price of which is NIS 0.23 per kilowatt/hour.

But solar energy ventures and environmental organizations argue that electricity generated by gas and coal is far more expensive than the end price when all the costs and damage to the economy from the production and supply are factored in.

The inter-ministerial team found that electricity generated from an ordinary 200-megawatt photovoltaic facility saves NIS 0.278 per kilowatt/hour for purchases of alternative fuels and power station operating costs, as well as NIS 0.07 per kilowatt/hour for the construction of a power station and its equipment. It estimates the saving from lower emissions of pollutants at NIS 0.074 per kilowatt/hour, and the savings on security costs of energy sources at NIS 0.026 per kilowatt/hour. The total savings is NIS 0.456 per kilowatt/hour. This means that below this price, the economy profits from solar energy, and above this price, the government is subsidizing solar energy.

The team priced other advantages from specific solar energy facilities. For example, facilities near consumption points, eliminating the need for power lines, save NIS 0.035 per kilowatt/hour. Facilities with electricity storage systems save NIS 0.177 per kilowatt/hour, bringing the total savings to NIS 0.633 per kilowatt/hour.

Published by Globes [online], Israel business news - - on July 9, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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