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דו"ח בלומברג לרגולציה הישראלית
דו"ח בלומברג לרגולציה הישראלית
דו"ח בלומברג לרגולציה הישראלית
דו"ח בלומברג לרגולציה הישראלית
דו"ח בלומברג לרגולציה הישראלית
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דו"ח בלומברג לרגולציה הישראלית

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דו"ח מכון מחקר בלומברג ניו אנרג'י פיננס

דו"ח מכון מחקר בלומברג ניו אנרג'י פיננס

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  • 1. §!~2m.2~rg 17 August 2012 SOLAR -ANALYST REACTIONContents Israel links tariffs to equipment cost for1. ISRAELS ENERGY SITUATION 2 new PV quota2. ISRAELS SOLAR Energy security continues to be the key driver of policy-making in Israel and FEED-IN TARIFFS 2 recent events in the surrounding Arab nations have only heightened concerns.3. THE NEW PLAN 2 The country plans a 1.4GW solar development boom by the end of 2014,4. BARRIERS TO awarding feed-in tariffs in a series of quotas. The latest seeks to minimise cost DEVELOPMENT 4 to consumers by linking tariffs to global module and inverter prices. Bloomberg5. OUTLOOK 4 New Energy Finance examines the novel aspects of Israels new PV quota and potential obstacles to its implementation. .. Israel plans to have 1,480MW of solar capacity on line by the end of 2014, of which 990MW is intended to be PV. To date, 215MW of PV has been built with a further 330MW approved for certain tariff rates. The overall targets are achievable assuming the countrys current convoluted project permitting process can be streamlined. • Some projects due to come online in 2013 and 2014 will receive Israels 2011 FiT rates and will enjoy very high IRRs due to the drop in system costs. In response, Israels regulator, the Public Utilities Authority (PUA) seeks lower tariffs to reduce the consumer burden. • SpeCifically, the PUA has proposed an immediate cut from NIS 980 ($242)/MWh to NIS 650 ($161)/MWh for systems over 12MW, for which the quota is 200MW. Not surprisingly, developers oppose the cut, claiming it does not properly reflect land and development costs. • What is novel about the new FiT is that instead of setting fixed values to be implemented over time it is to be pegged against inflation, exchange rate and currency parameters, plus the Bloomberg New Energy Finance Index for solar equipment costs. The goal is for the FiT to be transparent for industry, have longevity, and be relevant to current market conditions. • Israel is now holding a public consultation on the proposed reduction. The hearing is open to the public to comment through midday 6 September 2012. The question of how effective the new FiT might be and how quickly Israel might grow its PV sector is complicated by an unusually complex process for securing project permits, even after the PUA has approved projects for the quota. The ILA, which manages approximately 92% of land in Israel, has also raised the cost of land leases. • Bloomberg New Energy Finance expects the new tariffs to be sufficient to encourage new build, and to be effective at pushing down prices - particularly as the first tender has already been won by a US-Israeli consortium at a lower price than that proposed. We expect 170­Jenny Chase 218MW of new PV build in 2012 and 245-291MW in 2013.+41 442244144jchase12@bloomberg.net • At an unspecified point in the future, the system will change to a set of economic tariffs based on the expected savings on energy imports from a new solar plant. The PUA plans to submit aLogan Goldie-Scot report to the government for a methodology to do this.+44 207 073 3571Igoldiescot@bloomberg.net Strictly no copying, forwarding, shared passwords or redistribution allowed without prior written permission of Bloomberg New Energy Finance. For more information on terms of use, please contact© Bloomberg New Energy Finance 2012 sales.bnef@bloomberg.net. Copyright and Disdaimer notice on page 5 applies throughout. Page 1 of 5
  • 2. SOLAR - ANALYST REACTION 17 August 2012 1. ISRAELS ENERGY SITUATION With a population of 7.8m, few natural resources, and chilly relations with its neighbours, IsraelIsrael needs energy, but has serious energy security issues. Due to transitions prompted by last years "Arab Spring", itthe PUA is keen not to can no longer count on critical oil and gas imports. In April 2012, the Egyptian Natural Gasoverpay Holding Company cut gas supplies to Israel, complaining that a longstanding (and unpopular in Egypt) deal was underpriced. Supply does not appear to have restarted. In any case, Egypt is no longer a reliable source of fuel to Israel due to rising lawlessness in the Sinai and numerous attacks on the pipeline. Gas deliveries were disrupted on 225 days in 2011 and 66 days in early 2012 before ceasing altogether on 5 March, according to Ampal-American Israel Corporation. Secondly, Israel has a capacity shortfall in the peak demand hours in the middle of the day. In response, the Ministry of Energy and Water Resources in June ran an electricity drought campaign through the Governmental Advertising Bureau to ask the public to use less electricity during peak hours. The Ministry estimates that peak summer power demand is 12,370MW, while electricity generation capacity in Israel is 12,900MW, leaving a reserve margin of only 2-3%. In response, Israel is actively developing its offshore gas resources, solar and wind capacity, and possibly in the longer run a 2GW power interconnection to Europe via Cyprus.The first tender was won 2. ISRAELS SOLAR FEED-IN TARIFFSat a much lower price Israel in 2008 first launched its solar FiT, which has a complex system of quotas for different PVthan that proposed for system sizes (Table 1). The large project quotas were quickly filled, while residential andthe next 200MW quota commercial segments have some quota yet to be filled today, but have been built more quickly as there are fewer permitting issues. Approximately 215MW has been built so far, according to the Israel Renewable Energy Authority, and there is approximately 300MW with all relevant permits in the large project queue, to be built by the end of 2014. Only two large-scale projects have been built so far, most notably Arava Powers 5MW plant in Ketura. In addition to the FiT, Israel has also held a tender for 60MW of large projects. This was first published in 2008 and after many delays a winner for the first 30MW was declared. The winner is a joint venture between US developer SunEdison and Israeli private equity investor Clal Industries for a project in Ashalim, a small settlement in the Negev desert. The SunEdison-Clal bid came in at NIS 0.54 ($0.14) per kWh for 27 years.Table 1: Approved Israeli solar energy scheme until 2014 Cap just 15MW, not fully allocated. Most under 4kW threshold for paying tax. 0.65 ($0.16) PV Quota Updated June 2011, most built segment : .........._ ...............1 0.96 ($0.24) 300 PV Quota Updated lately in early 2012, quota fully allocated but not yet built 200 PV Proposed formula discussed in section 0 ... - ..__..--- --,,-,-----,,­ >12MW Quota >12MW Land Tariff relevant for 30MW of Ashalim tender only,r ......_..... _.+._................................._ ,......................... +.................... jTender ... .... unders,~p~ec:,i~al,rel~nl~dA~e:r.~~~~~:~~"~ ............................................. 1 to be Land Not yet allocated, land will be offered for tender Tender thermal Land Not yet allocated Tender ........ +.. All None· in public hearing Special quota for innovative renewable ,.."hnt,lnr.i.." TotalSource: Israel Public Utilities Authority, Bloomberg New Energy Finance Note: The PUA use the word ·commissioned" to refer to projects whichhave been approved for a feed-in tariff; we have used allocated quota instead as we use the term commissioned for built. Strictly no copying, forwarding, shared passwords or redistribution allowed without prior written permission of Bloomberg New Energy Finance. For more information on terms of use, please contactIt) Bloomberg New Energy Finance 2012 sales.bnet@bloomberg.net. Copyright and Disdaimer notice on page 5 applies throughout. Page 2 of 5
  • 3. SOLAR - ANALYST REACTION 17 August 2012 3. THE NEW PLAN Integrating the Bloomberg New Energy Finance data One unique aspect of the PUAs proposed FiT is that instead of setting fixed values to be implemented over time, it is to be pegged against inflation, exchange rate and currency parameters, plus the Bloomberg New Energy Finance Index for solar equipment costs, for when a project is built. This is part of an effort to avoid the kind of wrangling seen in Germany, Italy, Spain, the Czech Republic and the UK over adjusting rates. (For just one example of a legislative saga, see Italv reaches a compromise on its solar bill, 13 July 2012, Italys solar PV market too tough to kill the bull?, 17 April 2012, I;) the italian PV market at right of boiling over?, 3 August 2011, New Italian legislation boosts rooftop segment, 6 May 2011, Italys PV sector down the nine rings of hell, 11 March 2011, Italian legislators not responsive to PV growth, 21 February 2011). The basic problem is that policy changes have struggled to keep up with declining equipment costs, and needed complete renegotiation each time, which is exhausting to policymakers and creates uncertainty and difficulty for developers. The newly adopted system will be much more transparent, and should allow adjustment for the external factor of global equipment prices. Bloomberg New Energy Finance expects this to give developers sufficient incentives without over-rewarding, and is likely to result in relatively stable, low tariffs for the next few years as equipment prices are expected to be stable. It will be updated quarterly on the first day of the quarter, using the latest overall average, and the new module and inverter prices will be published by the PUA as part of the price update. The new plan is to set the FiT for the 200MW quota of large-scale PV projects over 12MW quarterly, according to the following formula: RPt =P*[Dtl Do*(40% * MIt/Mlo)+40%*(cpJcpo)]*(0.15*{rt/ro+0.85»New projects will be Where RPt =new FiT for PV over 12MW, in NIS per kWhawarded a tariff adjusted P ::: the base ratequarterly, based on the Dt Monthly average exchange rates of USD NIS published by the Bank of Israel, during thecost of capital, inflation month preceding the update.and solar equipment Do::: Dollar exchange rate base ($1 =NIS 3.99)costs Mit ::: Bloomberg New Energy Finance multicrystalline silicon module and utility-scale inverter latest price Mlo Bloomberg New Energy Finance base rate for modules and inverters, $0.96 for modules and $0.14NIJ for inverters CPt = Consumer price index, as published by the Bank of Israel at the time of the update cpo::: Consumer price base rate, as of 22 June 2012 rt ::: Quarterly average for indexed non tradable A+ 10 or 12 years obligations for the duration of obligation 20 or 25 years by order. These will be calculated based on quotes from the company "Mirvah Hogen" or any other source that will be determined by the general accountant office. ro:= Base price offoreign capital (4.56% for 20 years or 5.03% for 25 years) As it stands, the PUA has proposed an immediate cut in the 20-year tariff from NIS 980 ($242)/MWh to NIS 650 ($161)/MWh for systems over 12MW, for Which the quota is 200MW. This rate may be altered to NIS 600 ($149)/MWh for 25 years as a result of the hearing. Not surprisingly, developers bitterly oppose the cut. This proposal is open for public consultation until the 6 September and the results will then be published at an unspecified date after this. The base rate was set in June 2012, calculated to give project owners a 14% return on equity. Strictly no copying. forwarding. shared passwords or redistribution allowed without prior written permission of Bloomberg New Energy Finance. For more information on terms of use, please contacte Bloomberg New Energy Finance 2012 sales.bnef@bloomberg.net. Copyright and Disclaimer notice on page 5 applies throughout. Page 3 of 5
  • 4. SOLAR - ANALYST REACTION 17 August 2012 Lease cost concerns One thorny issue that appears yet to be resolved is exactly how much the state (via the Israel Land Administration (ILA» will receive in lease revenue for projects developed on public lands. The ILA is understood to have increased the price of its land leases for solar. Developers view this as uncoordinated on the part of the government, since the PUA is trying to reduce tariffs on the one hand and the lLA is increasing lease rates on the other. The PUA counters that by giving long-term visibility on the tariff rates, it is clearly informing developers about what prices they can afford to pay for the land. 4. BARRIERS TO DEVELOPMENT A major complaint of developers is that the Israeli development process is extremely bureaucratic, and that the various authorities are uncoordinated. Consequently, to date only two major projects have actually been completed. Eitan Parness, head of the Renewable Energy Association of Israel, said he has high hopes that meetings underway between the PUA and the ILA will result in a better integrated policy. The major problem for developers is that they need permits from at least four different government bodies, all of whom have different concerns. Table 2: Israeli permitting process Agreement on land use with the local kibbutz or moshav (community) Check with the Israel Land The Israel Land Administration controls 92% of the land in the Administration that it is feasible to country. connect a site to the transmission grid Obtain a license to produce i- electricity from the PUA Pennit from the Zoning Authority This can take from six to 18 months, or even longer if the national for the land zoning authority needs to be consulted (for projects over 50MW). Environmental surveys and pennits from the Ministry of Agriculture and the Ministry Energy and Water Resources are also required. Developers must demonstrate that they have at least 20% of the capex for a system - ie 51,000 per kW - in an attempt to reduce applications by developers who plan to sell development ClOsing financing Once the PUA has issued a license, developers have a 90-clay deadline to close project financing. Source: Bloomberg New Energy Finance The PUA says that the permitting process has recently been significantly improved, and the approval process shortened from two years to six months, with licences and tariffs being given to entrepreneurs this very day. This is just as well, as if the country is to have over 1GW of PV by the end of 2014 it will need to start approving them at some point. 5. OUTLOOK Regulators will receive feedback on the proposal until midday 6 September. Should the proposal be implemented in its current form, Israel will be the first to base its subsidy scheme on an industry price index, which will be provided by Bloomberg New Energy Finance. Overall, we view it as reasonably likely the new rules will be approved, though challenges could come over the fact that it relies heavily on a single source about the industry - Bloomberg New Energy Finance. Strictly no copying, forwarding, shared passwords or redistribution allowed without prior written permission of Bloomberg New Energy Finance. For more information on terms of use, please contactCI Bloomberg New Energy Finance 2012 sales.bnef@bioomberg.net. Copyright and Disclaimer notice on page 5 applies throughout. Page 4 of 5
  • 5. SOLAR - ANALYST REACTION 17 August 2012 The PUA will need to gain the necessary political support for this design and convince the policy­ makers that it ensures a transparent and predictable subsidy scheme for developers whileOne area where it may minimising the costs. The PUA estimates it could save Israeli consumers several billions ofbe challenged is the fact dollars over the lifetime of the projects.that it relies heavily 011 asingle source, ie If successfully implemented, the new policy should be watched with interest by its neighbours and European nations. Bloomberg New Energy Finance has long argued that uncertainty about cutsBloomberg New Energy to feed-in tariffs, caused by equipment costs falling much faster than legislative processes areFinances indices designed to change, are often more harmful than the cuts themselves. Should Israel succeed, it may well prevent such a nuisance and serve as a model to other markets. ABOUT US SUBSCRIPTION DETAILS SOLAR sa les.bnef@bloomberg.net CONTACT DETAILS Jenny Chase, Manager, Solar Insight jchase 12@bloomberg.net +41442244144 Logan Goldie-Scot, Lead Analyst, Middle East Igoldiescot@bloomberg.net +44 20 7073 3571 COPYRIGHT © Bloomberg New Energy Finance 2012. This publication is the copyright of Bloomberg New Energy Finance. No portion of this document may be photocopied, reproduced, scanned into an electronic system or transmitted, forwarded or distributed in any way without prior consent of Bloomberg New Energy Finance. DISCLAIMER The information contained in this publication is derived from carefully selected public sources we believe are reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New Energy Finance. The opinions presented are subject to change without notice. Bloomberg New Energy Finance accepts no responsibility for any liability arising from use of this document or its contents. Bloomberg New Energy Finance does not consider itself to undertake Regulated Activities as defined in Section 22 of the Financial Services and Markets Act 2000 and is not registered with the Financial Services Authority of the UK. Strictly no copying, forwarding, shared passwords or redistribution allowed without prior written permission of Bloomberg New Energy Finance. For more information on terms of use. please contact1:l Bloomberg New Energy Finance 2012 sales.bnef@bloomberg.net. Copyright and Disdaimer notice on page 5 applies throughout. Page 5 of 5

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