Israel signs unprecedented deal to buy solar energy

By Ehud Zion Waldoks
November 21, 2010
Globes

State inks 20-year, NIS 250 million agreement with Arava Power 
Company; first power purchase agreement for solar energy in Israel.
 
National Infrastructures Minister Uzi Landau (Israel Beiteinu) 
signed the first power purchase agreement (PPA) for renewable 
energy in Israeli history on Sunday with Ketura Sun, a joint 
venture of the Arava Solar Power Company (APC) and Kibbutz 
Ketura in the southern Arava near Eilat. The agreement is worth 
NIS 250 million over the next 20 years.

By signing the agreement, the government committed to purchasing 
every kilowatt-hour produced by the medium-sized 4.9 MW solar 
photovoltaic field at a rate of NIS 1.49 per kilowatt-hour for the 
next 20 years. APC CEO Jon Cohen said the field would be 
producing electricity by May.

During a festive signing ceremony and toast at the ministry’s 
offices, all sides acknowledged the difficulties and the hard work 
that went into reaching this point. They also noted that with the 
details of a first PPA worked out for the first time for solar 
energy, others would likely follow closely on the heels of this 
one. A representative of the Israel Electric Corporation (IEC) 
said there were between 200 to 300 similar projects waiting in 
the pipeline. The PPA represents the last bureaucratic hurdle 
an entrepreneur needs to overcome before securing the financing 
for a field and beginning to erect the solar panels.

“This process sometimes had to be forced through, but it is a new 
initiative which we will continue to push forward,” the minister 
said.

Head of the Public Utility Authority - Electricity Amnon Shapira 
also alluded to the difficulties overcome along the way.

“Mabruk to the Arava Power Company. There were a lot of 
unforeseen issues that arose from drafting a PPA for solar power. 
However, the two teams from the IEC and APC were extremely 
professional.

To my dismay, this is the first time that I’ve seen negotiations in 
the electricity market take place so politely and with such respect 
on both sides,” he said.

APC’s Cohen said they had learned an important lesson during the 
three-year process to reach this point.

“It’s not easy being the pioneer company, in a pioneering industry, 
in a pioneering state,” he said to a round of laughter. He said this 
was the first of dozens of such projects APC had in the pipeline.

Siemens bought 40 percent of the company last year and will 
provide the equipment and project management.

Cohen said they would now go to Bank Hapoalim to secure 
financing for the project.

While the PPA was a major milestone on the road to significant 
quantities of solar energy in Israel, he said he would not be able 
to relax quite yet.

The Israeli solar market has been broken down into three 
segments: small, medium and large installations. Small 
installation of up to 50KW do not require PPAs and have been 
proliferating since the feed-in tariff was announced in 2008.

Medium installations of 50KW to 5MW as well as larger 
installations of 5MW and up do require a PPA however. 
The medium and large solar fields represent the state’s efforts 
to fulfill a government decision to produce 10% of electricity 
from renewable sources by 2020 and 5% by 2014.

Landau said an announcement regarding the feed-in tariff - 
how much the government will buy the electricity for - on large 
fields was expected within two weeks.

APC president and cofounder Yosef Abramowitz (with David 
Rosenblatt and Kibbutz Ketura) referenced this week’s Torah 
portion to signify the importance of the occasion.

“In this week’s parsha [Torah portion], we read about a man [Yosef] 
who interpreted the movements of celestial bodies.

He was thrown into a pit by a band of brothers. We have been in 
that pit and today we crawl out of that pit,” he declared.