Israeli homeowners and roof owners who do not act quickly to install solar panels on their roofs will receive significantly less money for the electricity they produce according to a draft decision published by the Electricity Authority. Starting in 2030, the fixed payment for owners of new residential solar panel rooftop systems will drop from the current NIS 0.48- NIS 0.54 per kWh to about NIS.0 35 (subject to foreign currency exchange rates).
How much will the payment for electricity decrease, and for whom?
Firstly, it is important to emphasize that those who have already installed a solar panel rooftop system have secured a high payment rate for the electricity they sell to the grid for 25 years - NIS 0.48 per kWh, or NIS 0.54 in major cities that qualify for an "urban premium."
Anyone who submits a grid-connection application by the end of 2026 and completes the actual installation of the solar panel system within one year will also be eligible for this payment rate for 25 years. Conversely, from 2027 through 2030, the payment rate for new solar rooftop systems will decrease by 5% each year (after which the Electricity Authority will implement a new policy). In addition, the "urban premium" - an extra NISA 0.06 per kWh is expected to be abolished, though it remains unclear whether an alternative arrangement will be put in place.
Accompanying this rate cut is an indexation mechanism: 40% of any fluctuation in foreign exchange rates (20% linked to the US dollar and 20% to the euro) will be directly reflected in the price. For instance, if the dollar and euro exchange rates were to fall by 10%, the price would decrease by an additional 4%. Conversely, an increase in foreign exchange rates would temper the cut. However, the basis for the calculation differs from current market exchange rates (NIS 3.70/$ and NIS 4/€). So even if exchange rates remain at their current levels, they will accelerate the decline in price. In 2027, for example, the price will not only drop by the planned 5% but will be further eroded due to the shift in currency exchange rates falling to about NIS 0 43 as early as the second half of 2027..
Those who install solar panels on their roof in 2027 will lock in their payment terms for 20 years (rather than the current 25), with the agreement concluding in 2047. Thus, those who install a solar roof at a later date will receive lower payments over time, locked in for a shorter duration. The objective is to encourage installation as early as possible. Those who delay will receive lower returns throughout the entire lifespan of the system.
Why is the payment being cut?
Roughly 10% of everyone’s electricity bill, amounting to about 3 billion shekels annually, consists of an "excess cost" stemming from the subsidization of renewable energy. Since Israel’s electricity sector operates as a "closed system," every shekel transferred to subsidized producers must come out of the consumers' pockets. A major portion of current subsidies is directed toward large, inefficient facilities established in the early stages, such as the veteran plant in Ashalim, which receives an exceptionally high tariff of NIS 0.85 per kWh.
Given the Ministry of Energy and Infrastructure’s target of adding 100,000 more solar panel rooftops, the burden on consumers is expected to grow. The Electricity Authority seeks to partially cut these subsidies to alleviate the load on the public - a move supported by the fact that installation costs have fallen and production capabilities have improved.
How will the new "market model" work?
The Electricity Authority is promoting a transition from a fixed "feed-in" tariff to a model based on free-market negotiations. Under this framework, rooftop owners will be able to sell electricity to private suppliers, potentially compensating for the cut in the government-set tariff.
In this model, rooftop owners will receive a "premium" (subsidy) funded by the electricity sector, while the remainder of the price will be covered by electricity suppliers. For instance, a small residential rooftop (up to 15 kW) would receive a premium of NIS 0.23.5 per kWh in 2027. For it to be worthwhile for a rooftop owner to forgo the guaranteed tariff of NIS 0.43, a private electricity supplier would need to offer at least an additional NIS 0.19.5. The Electricity Authority hopes this will incentivize suppliers to submit attractive offers and accelerate the installation of new rooftop panel systems.
Furthermore, starting in 2028, the Electricity Authority will implement an additional measure. Owners of medium-sized rooftops and larger (exceeding 15 kilowatts) will be able to propose a lower, competitive price for the electricity they generate. Those offering the lowest price will be connected to the grid first, while those offering a higher price will have to wait in line. This mechanism will encourage owners of large rooftop systems to propose a less subsidized rate in order to shorten connection waiting times. Small rooftop systems, up to 15 kilowatts, will be exempt from this mechanism and will be connected automatically.
Will this affect installation costs?
In theory, the new incentive scheme is likely to trigger a rapid surge in installations as people rush to take advantage of the higher rates - a trend that could drive up installation costs. Adam Cromer, CEO of GreenDays, a platform for comparing solar energy systems, says, "Following a Ministry of Energy campaign that highlighted the expected drop in returns starting in 2027, there has been a significant uptick in demand. We anticipate that the transition from mere announcements to concrete, actionable steps will trigger another major wave of demand."
However, Cromer does not currently observe any dramatic shift in pricing. He says, "So far, the rise in demand hasn't had a noticeable impact on system costs, and we hope prices will remain stable." That said, he notes a change in how companies are operating. "Installers are becoming more selective about the clients they take on. They are investing less effort in complex projects, for instance, cases that require an upgrade to the electrical connection. Companies are focusing their efforts on highly motivated clients, rather than attempting to persuade those who are less interested."
What will happen to the pace of installations and the target of 100,000 rooftops?
An opposing scenario suggests that the reduction in tariffs will actually cool down the market and slow the pace. Eitan Parnass, CEO of the Green Energy Association of Israel, expresses concern. "The solar energy market in Israel is still young and sensitive. The changes proposed by the Electricity Authority in its public hearing are causing a major shock, creating a ripple effect that hinders growth. Data on system grid connections point to a collapse in the sector this year. For the first time, capacity has plummeted to just a few hundred megawatts, whereas meeting government targets requires the connection of at least 2,000 megawatts annually. While the multi-year framework is a welcome development that provides a long-term outlook for the sector, the failure to meet targets, combined with a decline in new connections, calls for increased incentives, not a reduction."
On the other hand, the drop in solar panel prices, coupled with a model that encourages early deployment, could make installations cheaper and more cost-effective than ever before. Which of these forces will prevail remains to be seen.
Published by Globes, Israel business news - en.globes.co.il - on October 20, 2026.
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