Catching the Sun

How Israel went from being a world leader in solar energy to playing catch-up with the rest of the world.

Doral Energy’s solar field in Beit HaEmek Kibbutz (Wikimedia Commons).

Up until the 1990s, Israel was the world leader in solar energy—in both implementation and technological know-how. However, over the last three decades the renewable energy sector in Israel has severely lagged behind other developed countries. Today, renewable energy only provides 7% of Israel’s electricity needs. Throughout the contemporary history of Israel, energy security—not environmental concerns—has been the dominant force driving Israel’s quest for new sources of energy. The story of Israel’s rise and fall as a world leader in solar energy is a story about ingenious individuals, state policies, and bad bets.

The Birth of Solar Energy

David Ben Gurion, Israel’s first prime minister, saw the potential in solar energy at a very early stage in the country’s history. In his famous 1955 Negev speech, he proclaimed ”it is incumbent upon our scientists to concentrate on […] the research of inexpensive desalination of seawater, to utilize solar energy which is abundant in our country […]and use of wind power to generate electricity.” The most interesting part of Ben Gurion’s statement is that it was put forward decades before climate change became a global concern. As a young and embattled nation, Israel grew up with energy security as a major strategic concern. Israel’s ambition to diminish its need for fossil fuels stemmed not from environmental concerns, but from economic and military considerations. The young country’s industry, infrastructure, and military were dependent on oil and coal imports. Israel’s politicians were terrified by the possibility of an energy embargo—something that would bring the country to a standstill.

In order to fulfill his scientific vision, Ben Gurion set up the National Laboratory of Physics in 1949. It was tasked with finding ways for the country to harness the energy from the sun. Israel’s push for solar energy thus became an integral part of the country’s research institutions from the start of the nation. The story of Israel’s solar energy industry can best be told as a story of three great engineering heroes: Zvi Tabor, Yehuda Bronicki, and Arnold Goldman.

The founding father of Israel’s solar energy industry was Harry Zvi Tabor (1917-2015). Born in England, he was invited by Ben Gurion to make Aliyah and set up the National Laboratory of Physics. Before moving to Israel, he had worked with the paramilitary Hagana in France to help refugees immigrate illegally to the British Mandate of Palestine. Tabor led the National Laboratory of Physics for 25 years, and had a very prolific career as an inventor. His most important invention was the solar water heater (the ubiquitous dud shemesh) now found in 85% of Israeli homes. What makes Tabor’s solar heater so special is that it can heat water to high temperatures, and does not require a pump or any other electric device. A problem with solar heaters before Tabor’s invention was that the materials used to absorb the heat from the sun also emitted a lot of heat. Tabor developed a special color, particularly efficient at absorbing heat from the sun without emitting heat to the environment.

During the 1950s, Israelis started to install solar water heaters in their homes, the first widely deployed commercial application of solar energy in the world. The global increase in the price of energy commodities that followed the Yom Kippur War of 1973 further pushed the deployment of solar heaters in Israel. The energy crisis prompted the Israeli government to obligate all buildings less than nine floors high to install solar water heaters. Soon, solar water heaters provided 3-4% of Israel’s energy. As a comparison, solar energy only accounts for 1.7 % of Germany’s total energy supply today according to the International Energy Agency (IEA), despite the positive headlines trumpeting Germany’s energy transition.

Tabor’s solar heater was able to provide hot water; but another invention was necessary in order to produce electricity from solar heat. This came from Yehuda Bronicki, one of the most important engineers and entrepreneurs in Israel’s energy industry. Working at the National Laboratory of Physics, Bronicki together with Tabor invented a small turbine in 1960. He further developed his invention and patented the design; in 1965, he established the company Ormat together with his wife Judith. Bronicki’s turbine had many advantages over a conventional steam turbine. A regular steam turbine uses water steam heated to several hundred degrees to produce electricity. Bronicki’s turbine, however, could use fluids other than water, and could also produce electricity at temperatures below 100 °C.

One of the world’s first commercial solar power plants was constructed in Israel in 1980 by Ormat. It made use of a novel concept: using salt ponds to heat water. In these salt ponds, heat from the sun was absorbed at the bottom of the ponds, heating the water there to 100 °C. The plant initially provided only 150 kW of electricity, but was later expanded to a 5 MW power plant (enough power to supply around 500 homes with electricity). Ormat later gave up on the idea of using solar heat to drive their turbines, as it was not commercially feasible. Instead, Bronicki found a strong niche market for his sturdy turbines as Remote Power Units, providing small amounts of electricity for remote locations not connected to the electricity grid. In the 1980s Ormat went into the area of geothermal energy, and has so far been very successful in this field, constructing hundreds of power plants around the world. Today, the company is based in the USA, but its main factory in Israel provides employment to more than 700 locals.

Arnold Goldman (1943 – 2017), a pioneer of today’s commercial solar power industry, was a remarkable man, being both a philosopher and an entrepreneur. Goldman grew up in the United States, and made his first million dollars in the computer industry. In 1977, at the age of 34, he moved to Israel in order to write a philosophical book, A Working Paper on Project Luz, about the meaning of life. Luz is the location of the biblical story of Jacob and his dream in which he had a vision of angels going up and down a stairway. Goldman, fascinated with the mystical meaning of Luz and Jacob’s dream, later named his solar company Luz as well. Drawing on a pool of talented Israeli engineers, Goldman was able to create the technology needed for large-scale solar power projects in just a few years. Luz built nine huge solar thermal power plants in California’s Mojave Desert between 1984 and 1990. The power plants used a technology called Concentrated Solar Power (CSP), which concentrated sunrays with the use of mirrors. These nine power plants had a total capacity of 354 MW, the equivalent of 90% of the world’s total solar power production at the time. The successful company was brought to an abrupt end when changes to both federal and state tax codes removed government subsidies for solar power. Goldman went on with his career, but returned to the solar industry in 2004 when he created Luz II—later to become BrightSource, one of the largest CSP companies today.

Betting on the Wrong Horse

Tabor was able to harvest the heat from the sun; Bronicki was able to take that heat and turn it into electricity; and Goldman showed the world that solar power could be commercially viable. For all three, utilizing solar heat stood at the center of their technologies. Today, almost all solar power plants use PV cells, a technology that is very different from the heat-harvesting technologies of Israel’s early solar industry. With PV cells, the photoelectric effect directly transforms sunrays into electricity without first heating a medium. In the early years of the solar power industry, CSP was the leading technology. But the staggering fall in the cost of solar PV cells over the last 20 years has made this technology the cheaper option today. According to data from a 2019 report published by the International Renewable Energy Agency (IRENA), CSP was slightly cheaper than solar PV in 2010, with the average cost of 0.35 $/kWh for CSP, and 0.38 $/kWh for solar PV. By 2019, the cost of solar PV had fallen by 82%, making CSP two and a half times more expensive than solar PV. As a result, solar PV dominates the solar power market today, with 98% of global installed solar capacity. In Israel, the birthplace of CSP, 83% of all solar power comes from solar PV. As the cost of solar PV cells fell during the 2000s, advocates for CSP pointed out the benefit of energy storage, possible with CSP. Many CSP plants store heat generated from the sun in large containers of molten salt. This heat can then be used to generate electricity in the evenings, after the sun has set but demand for electricity remains high. Advances in battery storage technology—and a consequent fall in its cost—removed the competitive edge that thermal energy storage gave CSP. Today most solar PV projects in California, and in many other places around the world as well, incorporate energy storage so that the power plants can produce electricity in the evenings. This has left CSP with very few advantages over solar PV, as CSP is both the more expensive technology and cannot provide better storage than solar PV. In defense of CSP, it should be noted that some recent reports have been optimistic about the future of this technology. A 2019 report from the National Renewable Energy Laboratory (NREL) predicts an increase in CSP installations if the cost of this technology can be reduced; a report from Research and Markets predicts 16% yearly growth until 2030. According to separate 2020 reports from IRENA and the International Energy Agency, most of the increase in CSP installations will be in emerging markets, especially in China.

The story of BrightSource is a good example of what happened to the CSP industry. By 2010, the company had over $380 million in investments, with investors including large companies such as Google, BP, and Morgan Stanley. It was listed as a top 10 global energy startup by Green Tech Media and CBS News, and had plans to build plants capable of producing thousands of MW of power. But from 2010 on, the company’s hype disappeared as did the CSP economy. In 2011, Google announced that the company would no longer be investing in CSP, as solar PV was already the cheaper option. BrightSource has not announced any new projects for seven years.

Israel’s solar industry has gone through a “Kodak moment.” Kodak completely dominated the film and camera market during the twentieth century. However, the company, which employed the best chemists in the world, was not prepared for the digitalization of cameras, and as a result went bankrupt in 2012. The digital camera acted as a disruptive technology, changing the industry forever. Israel’s solar industry was similarly focused on a specific technology, thermal solar—a technology that has become outdated due to the disruptive force of PV. Israel might have been a world leader in producing solar collectors and CSP, but has struggled to transfer this knowledge into a solar industry dominated by solar PV.

So, Israel is no longer the world leader in solar technology. However, there are several recent Israeli success stories that show that the “startup nation” has not yet given up on solar power. The best example of an Israeli company that has thrived in the new age of Solar PV is SolarEdge. Today, this company is the largest Israeli company on Wall Street, with a market cap of $15 billion. The company produces inverters—the component that takes the DC electricity produced by PV cells and converts it to AC electricity.

An interesting note is that a 2011 government study proposed that only 46% of Israel’s renewable power should come from PV by 2020, with the rest to be provided by CSP and wind energy. The dramatic drop in the cost of PV has made this technology the clear winner today; it provides more than 77% of Israel’s electricity derived from renewable sources.

Policy as the Driving Force in the Solar Energy Sector

Israel’s investments in solar energy are closely linked to government policies. The solar heater was not developed as a result of market forces, but rather in a government institution; its deployment was largely dependent on government policies and incentives. Also, Israel’s relatively low deployment of renewable energy today is the result of government policy, specifically a historical lack of ambition in developing sources of renewable energy.

In 2009, the Israeli government put forward the goal of having 10% of its electricity come from renewable energy sources by 2020. This was a modest target, compared to other developed countries. For example, the EU’s 2020 target was for 20% of its electricity to be generated through renewable sources. What is even more disappointing than Israel’s low target is the fact that it was not met. Last year, only 7% of Israel’s electricity came from renewable energy sources, while the EU reached its target of 20% of its power coming from renewable energy sources.

One of the main reasons for Israel’s low ambitions for renewable energy over the last decade is the discovery of Israel’s huge gas deposits. Since the days of Ben-Gurion, Israel’s forays into renewable energy have been driven by the need for energy security—a need that is no longer seen with the same importance, due to the emergence of its domestic gas resources. The discovery of huge reservoirs of natural gas has meant that Israel is much less dependent on imported fuel for its power sector. During the last few years, Israel been able to close most of its coal power plants, instead using natural gas for its power production. This has significantly lowered Israel’s local air pollution levels and reduced Israel’s CO2 emissions. Israel produced 14% more electricity in 2019 compared to 2012, while its CO2 emissions from the electricity sector shrank by 20%. Natural gas power plants emit around half the CO2 produced by coal power plants, and have therefore traditionally been seen as a good alternative to coal from a climate change perspective. During the 2000s, natural gas was often referred to as a “bridge fuel”: an alternative to coal and oil until renewable energy becomes cheap enough to be deployed at full scale. Lately, research has shown that leaking methane, the main component in natural gas, has a much greater impact on climate change than previously thought, undermining earlier presumptions about the climate advantage of natural gas over coal power. Methane is a very potent greenhouse gas, and there are significant leaks of methane during the production, distribution, and use of natural gas. In 2019 an open letter opposing the construction of a new gas power plant was signed by 112 Israeli scientists. The letter cited research claiming that natural gas and coal are similar in terms of their effect on climate change. As natural gas enables energy security, comes with economic benefits, and was believed to be good for the environment, it is fully understandable why in 2010 Israel planned for an energy system mainly based on gas power. The fall in the cost of solar PV and newly gained understanding of the environmental impact of natural gas has changed this equation over the last few years. Solar PV is today seen as the cleaner—and often also the cheaper—alternative.

The government’s energy policy is not just shaped by environmental and security concerns. Large companies operating in the energy sector can also influence government policy. There are two main players in the Israeli gas market, Chevron (which acquired Noble Energy in 2020) and the Delek Group. The monopoly status of these companies has been a heavily debated topic during the last decade. Several important players in Israeli and US politics have pressured the Israeli government on favorable taxation and permits for Noble Energy and Delek group. In 2015, Israel’s antitrust commissioner David Gilo quit his position, after the government worked against his efforts to break up the gas monopoly. One of the results of the current gas market is that the Israeli Electricity Company (IEC) is paying almost three times the market price for gas. These gas companies now face competition from solar power, and are the big losers in the transition to renewable energy.

The last year brought some interesting announcements from the Israeli government, signaling a change of opinion regarding its ambitions to develop renewable energy sources. In June 2020 Yuval Steinitz, the minister of National Infrastructure, Energy and Water Resources, presented a plan to increase the proportion of electricity used in Israel from renewable sources to 30% by 2030, with 90% of this electricity to come from solar power. Steinitz holds that Israel will become the world leader in solar power once the program has been implemented.

The Ministry of Energy’s position on renewable energy has long been criticized by environmental groups, politicians, and other ministries. Most notable perhaps is the critique by the Ministry of Environmental Protection. In the summer of 2020, the Ministry of Environmental Protection issued a report arguing for 40% renewable power by 2030. According to the report, increasing the amount of renewable energy in the electricity system will not only be beneficial for the climate and local air quality, but will also have economic benefits. The Organization for Economic Co-operation and Development has taken the side of the Ministry of Environmental Protection, issuing a statement last year criticizing Israel’s planned expansion of gas in the energy sector.

Energy Minister Yuval Steinitz responded: “Israel has no rivers like in Norway or Albania, wind like in Denmark, or geothermal energy like in New Zealand, and so we cannot be compared to these countries.” He further claimed that his energy program, which will take Israel to 30% energy use from renewable sources, pushes the limits of what is technically feasible.

What Yuval Steinitz could have added to his list of geographic disadvantages is that Israel is an energy island (exports to the Palestinian Authority aside). Large parts of the United States and most of Europe operate very large electricity grids, where electricity is sold and transported over long distances. This enables a much larger deployment of intermittent renewable energy sources such as wind and solar power. European countries buy and sell electricity based on how the sun is shining and the wind is blowing. Large amounts of hydropower in Scandinavia and the Alps work as a large battery for the rest of Europe. Israel does not have this luxury; the power produced in Israel must equal the power used at any given moment. According to Steinitz, the 2030 target for the deployment of renewable power means that solar power will generate more than 100% of the power needed during summer days. As Israel cannot sell this power to neighboring countries, the excess electricity needs to be stored. Only a few years ago, this would have been impossible. But the recent fall in battery storage technology costs, no less dramatic than the fall in the cost of solar PV, has made battery storage an economically viable solution.

The government has already started to implement its energy ambitions, with two large tenders concluded for solar plus storage in the last year. The total amount of solar power in these two tenders alone adds up to more than 1 GW—or roughly the same as the total amount of solar power installed in Israel by 2020.

Israel, once a leader in the solar race, is now playing catch-up. This time around, the push for solar energy is driven by environmental concerns and not energy security. Israel has companies that provide some of the world’s best technologies in solar energy, but has failed to build a substantial solar industry. The Ministry of Energy took a big bet on natural gas, but has recently realized (a bit too late) that fossil fuels are not the future. It will be interesting to see if Israel will be able to reach its 2030 target of 30% renewable power; but as always with the Middle East, the one thing you know for sure is that the future is unpredictable. In this regard at least, there is nothing new under the sun.

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