Israel - Energy Israel - Energy
Overview
Israel’s domestic energy demand will increase significantly in coming years as Israel moves to cleaner fuels for power generation and transportation. In 2040, 13 million people are expected to live in Israel (in comparison to 9 million in 2019). Additionally, by 2040, the number of vehicles is expected to increase to 6.4 million and electricity demand will double. In light of these challenges, Israel is promoting several programs to reduce pollution and increase the use of natural gas.
Israel has had the second most rapid growth of natural gas use in the world, following Peru. Coal-generated power accounted for 30 percent of Israel’s power in 2018 compared with 60 percent in 2015. The Israeli Ministry of Energy’s goal is to reach 83 percent use of gas and 17 percent renewables for electrical generation by 2030, while closing all coal plants. Transportation plans call for a gradual transfer to electric cars and natural gas trucks with a ban on imports of gasoline cars starting in 2030.
Leading Sub-Sectors
Leading sub-sectors for U.S. companies include electricity, renewable energy, and natural gas. Specifically, supply of electricity transmission and distribution equipment, IPP investments and operation of power generation sites, natural gas pipeline equipment, electric vehicles charging stations, and consulting services, are all viable opportunities for U.S. exporters.
Natural Gas
Since the first commercial discovery of natural gas in 2000, Israel has been continuously developing its offshore gas resources. In the past 18 years, the country has been transformed from a net importer of fossil fuels to being self-sufficient and an exporter of natural gas. Domestic consumption of natural gas is steadily growing and has reached 10.4 BCM in 2017 (an 8.3% increase from 2016.) The 2017 growth in natural gas consumption was led by the electricity sector which consumed 8.5 BCM, accounting for 63% (42.8 TWh) of generation. Natural gas consumption for electricity generation is expected to reach 12.4 BCM in 2030 which will account for 70% (67 TWh) of expected generation.
U.S. company Noble Energy and its local partners discovered the Tamar field that provided more than 90% of Israel’s natural gas in 2017. After a protracted public debate and the Israeli High Court’s intervention, the Israeli Government finally agreed on a revised Gas Framework agreement in late May 2016, paving the way for Noble Energy’s development of the Leviathan gas field, expected to start production by the end of 2019. Other than Noble Energy, Greek company Energean and its partners have been awarded exploration licenses for developing the Karish and Tanin fields. In addition, the Israeli Ministry of Energy announced in November 2018 the launching of its second Offshore Bidding Round (OBR2) for natural gas and oil exploration licenses offshore Israel. The successful bidders are expected to be announced in July 2019.
Israel plans to use its abundant gas resources to leverage the development of a gas-based auxiliary industrial sector. Coupled with the recent reform in the Israeli electricity market, this presents opportunities for Independent Power Producers (IPPs) to purchase and operate gas-based electricity generation plants, as well as for manufacturers of natural gas pipeline equipment. In addition, the government’s plans to gradually transfer to electric cars and natural gas trucks with a ban on imports of gasoline cars starting in 2030 presents opportunities for the supply of equipment and services pertaining to electric vehicles charging stations.
Electricity
Israel is an electricity island; its network is not connected to the systems of neighboring countries. The demand for electricity in Israel is growing at a fast and steady pace, from approximately 4,000 MW in 1990 to 12,741 MW in 2017. Demand is driven by population growth, the increase in electricity use per household, and growth of the business sector. According to the Israeli Electricity Authority, the projected peak demand in 2030 will reach 19,600 MW.
Overall installed capacity in 2017 totaled 17,837 MW, including Israel Electric Corporation Limited (“IEC”), and Independent Power Producers (“IPPs”.) According to the Electricity Authority, installed capacity in 2030 should reach 23,350 MW in order to support the electricity consumption forecasts.
IEC is Israel’s state-owned electricity utility company, and the second largest procurement organization in Israel, with $1.56 billion spend in 2017 (excluding fuels), and 5,000 active suppliers worldwide. IEC is currently the sole vertically integrated electric utility company in Israel, operating in all segments: generation, transmission, distribution, supply and system operation. The majority of the electricity generated in Israel (71%) is supplied by IEC, with installed capacity of 13.6 GW as of December 2017. The company owns, maintains and operates 17 power stations, including 5 sites for steam driven power stations, and the national transmission and distribution systems. In 2017, IEC supplied 76% of Israel’s installed generation capacity, IPP’s (gas-fired) accounted for 18%, and 6% of generation originated from renewables.
In June 2018, the Government of Israel approved a comprehensive structural reform in the Israeli electricity sector, planned to be implemented over the course of 8 years (2018-2026). The reform’s main objectives are to decentralize IEC, enhance efficiency and environmental sustainability in the electricity market, and reduce electricity rates through increased competition. As part of the reform, IEC’s share in electricity generation will be reduced from 60% to 40%. IEC will retain a monopoly in the transmission and distribution segments, which require significant upgrading. It will work to develop a smart and modern grid that will improve the quality of electricity supply. Significant opportunities exist for manufacturers of relevant equipment for substations, switching stations, power lines and more (such as power cables, transformers, electronic meters, etc.)
As a state-owned company, IEC is committed to Israel's WTO/GPA agreement concerning public tender procedures. While some projects are tendered out in open tender procedures, in most cases, a selective tendering process requires potential suppliers to pre-qualify to be included in IEC's approved suppliers' list.
Renewable Energy
In 2009, the Israeli government established a target for renewables to reach 5% electricity generation from renewable sources by 2016, and 10% by 2020. Despite ample solar power potential, Israel fell well short of meeting the initial 5% target, producing only 2.6% of its electricity from renewables in 2016. Bureaucratic bottlenecks, cumbersome regulations, a lack of land, and anticipation of newly discovered offshore gas coming online that can produce electricity at a lower cost than solar are often cited as factors explaining the lower than expected use of solar energy. In September 2015, the Israeli Cabinet adopted a greenhouse gas (GHG) emission reduction goal of 26% reduction in GHG emission levels by 2030, using 2005 as the base year. Sector specific targets include a 17% reduction in electricity consumption by 2030 and 17% of electricity generated in 2030 from renewable sources. Thus, Israel’s current targets for producing electricity from renewable sources are: 10% by 2020; 13% by 2025, and 17% by 2030.
Israel has numerous technology firms developing renewable energy technologies, many of which operating outside of Israel. Some renewable energy infrastructure projects (primarily PV and Wind) are planned in the coming years, and will be implemented by private electricity producers. U.S.-Israeli cooperation and joint R&D in the renewable sector is growing. The BIRD Foundation provides a good platform for joint U.S.-Israel commercial R&D in renewable energy and energy efficiency and has announced a new call for proposals in May 2019.
Natural Gas Pipelines
The state-owned Israel Natural Gas Lines company (INGL) is the owner and operator of the national pipeline transmission infrastructure, the trunk line. Six private and public companies are holding regional franchises to build and operate distribution networks to connect industries to natural gas pipeline networks. With extensive investment in pipeline construction, there are ongoing opportunities for U.S. equipment suppliers and engineering consultants.
For additional information, please contact Commercial Specialist Naama Altman at: naama.altman@trade.gov.
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