Nonprofit research organization Rand Corporation advises that Israel should drastically raise electricity rates as the most effective way to deal with the crisis in the electricity market. The Y&S Nazarian Family Foundation funded the two-year study, which was carried out with the coordination and cooperation of the Israeli government.
Rand Corporation analyst Steven Popper said, "Curbing growth in demand is the most effective policy action the nation could make to shape future energy demand. Almost all the scenarios in which Israel fails to achieve its objectives for the power sector involve high growth in demand for electricity."
Popper said that electricity rates were substantially lower than in several European countries, some of which are poorer than Israel. If Israel were to raise household tariffs to the average rates of Ireland, Portugal, Spain, Slovakia, Hungary, Switzerland, and Poland, all of which charge more for electricity than Israel, which would entail a 30-40% rate hike, "demand for electricity in Israel might fall by 22%."
Such a reduction in demand is equal to the output of two large coal-fired power plants.
Popper gives Israel a low grade for energy efficiency and electricity conservation. While favorably noting recent government initiatives to encourage electricity conservation, he recommends additional measures, including the building of a smart grid that will charge variable rates during the day, depending on demand.
The $1 million study examined strategies for developing Israel's energy market, based on hundreds of scenarios. The study's starting point is Israel's unique reality, of total isolation from neighboring countries' power grids, which means that Israel has no external back-up in the event of a major outage.
Popper told "Globes", "Israel's dependence on all of its power plants is the highest among developed countries. What will you do if Hamas gets very lucky and damages the Ashkelon power plant or if there's a breakdown in the undersea natural gas pipeline?"
Popper added, "There are other isolated economies in the world, such as Japan and South Korea, but they are much larger economies."
In the medium term, the Rand Corporation says that if its scenario of rapid growth in Israel's electricity demand is borne out, current and planned power plants will not be able to meet it. Israel will therefore have no choice but to build more coal-fired power plants or increase its dependence on foreign and unreliable energy sources. Popper said, "I'm not sure that Israel is heading in the right direction in this matter. The prevailing attitude in Israel asserts that there is improvement. There's a need for a system-wide perspective. The current attitude examines each project on its own, such as the coal-fired power plant in Ashkelon, but this approach invites unpleasant surprises."
As part of its system-wide perspective, the Rand Corporation recommends investing in additional gas turbines and increasing natural gas deliveries from sources such as Egypt as much as possible via the current pipeline. It also advises Israel to maintain a large diesel reserve to protect itself against problems in natural gas deliveries.
The report notes that there is also gas offshore of Gaza, and that the Gaza Marine field has estimated reserves of about 35 billion cubic meters, slightly larger than the estimates for Yam Tethys. When Ehud Barak was Prime Minister, "the government set aside this field as a resource to be at the disposal of the Palestinian Authority or a Palestinian state that might succeed it. Israel is expected to be a customer for this gas. However, no development work has been undertaken to date for several reasons, including the ongoing political turmoil in Gaza."
Gina Cohen, who has been working on the Gaza Marine project for several years, disputed the Rand research, saying noone at the Gaza Marine project had been interviewed, and that "negating its significance by dedicating only 11 meaningful words to the issue (no development work has been undertaken to date for several reasons), suggests the report is not as well founded as one would expect a million dollar report to be." Cohen also said that while she agreed with the reommendation for more natural gas, combined with more renewable and more energy conservation, "the report is flawed in failing to take an in-depth look at the proven natural gas reserves within the regional sphere of Israel (Gaza Marine Field) and instead looks at the wider opportunities of supply (Qatar, LNG, pipeline from Ceyhan) which although they exist are most unlikely to be developed in the near or medium future."
Popper also believes that Israel should carefully consider whether to allow Yitzhak Tshuva and his partners to export gas from their offshore natural gas discoveries. "It's your decision, but you should know that if you export gas, it will be at the expense of gas available for your future generations," he said.
Published by Globes [online], Israel business news - www.globes-online.com - on December 20, 2009
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