Israel faces water surplus

The Water Authority is considering scaling back production at desalination plants.

Winter is late this year, and the Water Authority is monitoring the water level in the Kinneret with concern. If you think you know the rest of this sentence, you're in for a surprise: the Water Authority is not worried that the Kinneret's water level is too low, but that it is too high. Its website states that, as of Tuesday morning, the Kinneret's water level was 211.34 meters below sea level, just 3.5 meters below the upper red line of minus 208.80 meters, above which the lake will overflow its shores.

This may sound like a lot, but that depends. In an above-average winter rainy season, the Kinneret rises by three meters, and in the very wet 1992 season, it rose by no less than five meters. This year's precipitation is forecast to be average, but Mekorot National Water Company has decided not to take chances, and two weeks ago, it carried out a secret test to open the Degania Dam. This obsolete dam allows water to flow from the Kinneret to the water-deficient lower Jordan River, which flows to the Dead Sea. The last time that the Degania Dam was opened was in the winter of 1992.

The glass is half full

Both the Water Authority and the Ministry of Finance take the water surplus very seriously, and a dramatic decision has been reached in internal discussions: according to preliminary assessments, Israel's desalination plants will be asked to scale back production by 100 million cubic meters. This is the annual capacity of the new desalination plant that Mekorot is building at Ashdod at a cost of NIS 1.5 billion.

The Water Authority states with pride that the government made sure to include in the contracts with the desalination companies a clause allowing it to pay a reduced rate for water that it does not buy. But this is the half-full part of the glass. Although the government is exempt from paying the desalination plants' operating costs, such as electricity and labor, for water that it does not buy, it is committed to pay the capital cost, which is mainly repayment of the investment in these very expensive facilities. The price of desalinated water is NIS 2.60 per cubic meter (1,000 liters), 40% of which is for variable operating costs, and 60% of which is for fixed costs.

Therefore, if we look at the half-full part of the glass, we can say that the heavy rains in the past few years enables the government to save NIS 100 million by not buying expensive desalinated water from the desalination plants. But if we look at the half-empty part of the glass (the 60% empty part to be precise), we can say that the government will have to pay the desalination companies NIS 160 million not to work. Sounds hallucinatory - no? Wouldn’t it be better to operate the plants and increase the farmers' water quota or lower consumer water rates?

Mutual loss

The odd thing about this story is that, in the past few years, we have heard the Ministry of Finance's constant refrain about the great desalination scandal. How is it, that after one good rainy season, the ministry halted plans to build seawater desalination plants, threatening the country with dehydration? Even with Israelis' short public memories, we ought to remember the draconian ban on watering lawns and the "Israel is drying up" campaign hosted by Renana Raz.

The fact that water rates have been hiked 30-40% has been interpreted as part of the important government effort to reduce consumption. How is it that, within two years, Israel has changed from an arid desert to the Norway of the Middle East? Who is to blame? What can we do about the water surplus?

The answer to the first question is quite simple, at least according to the Water Authority. The weather is to blame, because, as we know, it is fickle. Israel was brought to brink of drying up after eight straight years of drought: "The longest drought since Jacob and his brothers went down to Egypt," as Water Authority spokesman Uri Shor put it.

But the 2012 and 2013 winters both had above average rainfall, and hundreds of millions of cubic meters of water were unexpectedly added to Israel's natural reservoirs. At the same time, Israel's desalination production capacity will be doubled from 300 million cubic meters a year in 2012 to 600 million by June 2014, when Mekorot's Ashdod desalination plant will come online. In addition, the Soreq desalination plant, the world's largest, became operational in October. This was not enough for the Ministry of Finance, and, two years ago, it initiated the doubling of the Palmachim desalination plant's capacity.

Was the huge NIS 3 billion investment in desalination plants in vain? "Not really," insists the Water Authority. "Even if the plants don’t work at full capacity in the coming year, we will soon definitely need their output. Our models predict an even worse drought than the one before 2011 at the end of the decade. In addition, the Kinneret and aquifers still lack one billion cubic meters of water. The Israeli economy has a structural water shortage, and one rainy year does create a new reality."

This is where the really hard question arises. Both sides lose from the non-operation of the desalination plants: the plants' franchisees will not see their hoped-for profits, and the public is paying for desalination plants that are not producing water. However, the Water Authority is convinced that this is the most economical decision for the economy, because any other solution will cost more. For example, the idea of using desalinated water to refill the dwindling aquifers is more expensive than waiting for the sky gods to fill them for free. For this reason, Mekorot will continue pumping water from the Kinneret to prevent it overflowing its banks. "It is cheaper to pump water from natural sources than to buy water from the desalination plant at the full rate," says a Water Authority source.

Some people in Israel's water economy think otherwise. "The Water Authority is conservative and does not look at the full picture," says a source involved in desalination. "Let's assume that the government buys the surplus water and sells it to farmers at a reduced rate. The result will be less than the NIS 160 million that will go down the drain, and Israel's agricultural produce and exports will increase in exchange."

Another option is to subsidize consumer water rates for less than NIS 160 million. The savings won't be great, but at least the public will feel that, after the ban on watering lawns, it gets something when the rain falls.

The Water Authority said in response, "There is no water surplus. There is water production capacity for guaranteeing a reliable water supply, even during droughts. The Israeli government prepared for this in part by building seawater desalination plants, which supply water on the basis of need and the condition of the water economy. During droughts, when natural water supplies fall, we'll need maximum production by the desalination plants, because the water demand does not change. In years with heavy rain, we have to deduce desalinated water production, because the variable cost is higher than the cost of natural water production (depending on the condition of the water economy). The reduction in production is on the basis of the contracts with the companies.

"The outcry by the companies which built the desalination plants is understandable, even though they are not losing money from the measure, but will make smaller profits. The proposal to sell water to farmers is irrelevant. In the past two years, water quotas for farmers have been greatly increased, and for the first time in history, the farmers have a three-year quota. The allocation of fresh water for agriculture in the next three years is 1.8 billion cubic meters. The annual allocation is 570-640 million cubic meters, compared with 530 million cubic meters allocated this year. We hope that the farmers will use these quantities, because in past years, even when the allocation was much smaller, the full allocation was not used. It's important to note that the water allocation for different farmers is based on regulations set by the agriculture minister, pursuant to the law."

Published by Globes [online], Israel business news - - on November 5, 2013

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

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