Overview
As of 2022, Israel has the second highest population growth rate among the Organization for Economic Co-operation and Development (OECD) member countries. It is ranked third in population density among OECD member countries, and in a few years, it is projected to become one of the most densely populated countries in the world. In 2040, 13.2 million people are expected to live in Israel (in comparison to 9.6 million in 2022). Additionally, by 2040, the number of vehicles is expected to increase to 6.4 million (60% increase from 2021 figures) and electricity demand will double. Israel’s domestic energy demand will increase significantly in coming years as Israel has announced plans to move to cleaner sources for power generation and transportation. In light of these challenges, the Government of Israel is promoting several programs to respond to electricity consumption forecasts, while reducing pollution and increasing the use of natural gas and renewable energy.
Electricity Infrastructure
Israel is currently an electricity island; its grid network is not connected to the systems of neighboring countries, and therefore, it has to be self-sufficient in meeting its energy demand, which has grown by an average of 3% annually between 2010-2020. There has been some public discussion about linking Israel to other grid networks including in Europe via an undersea interconnector line. Overall installed capacity in 2021 totaled 21.5 GW, with parastatal company Israel Electric Corporation (IEC) accounting for 61% of production, with independent power producers accounting for the remainder. According to the Electricity Authority, installed capacity in 2025 should reach 27.9 GW to meet the electricity consumption forecasts. 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 (the sole vertically integrated electric utility company in Israel), enhance efficiency in the electricity market, and increase 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.
Natural Gas
Since the first commercial discovery of natural gas in 2000, Israel has continuously developed its offshore gas resources. In the past 20 years, the country has been transformed from a net importer of fossil fuels to being self-sufficient and an exporter of natural gas. Coal-generated power is gradually diminishing and accounted for only 21.8% of Israel’s power in 2022 compared with 61% in 2012. The Israeli Ministry of Energy’s 2030 goal for electricity generation is to substitute coal primarily by natural gas, reaching a 70% use of natural gas and 30% renewables, while shutting down all coal plants and retaining some generation capabilities for events of emergency. 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. Domestic consumption of natural gas is steadily growing and has reached 12.7 billion cubic meters (bcm) in 2022 (a 3% increase from 2021.) The growth in natural gas consumption was led by the electricity sector, accounting for 79% (10.1 bcm) of generation sources.
In 2009, U.S. company Noble Energy (acquired by Chevron in 2020) and its local partners discovered the Tamar field, which until 2020 provided the majority of Israel’s natural gas. A more recent development by Chevron and its local partners is the Leviathan gas field, which started production in late 2019 and has contingent resources totaling 605 bcm of natural gas (almost double the size of Tamar and approximately two thirds of the gas discovered to date offshore Israel). In 2021, Leviathan surpassed Tamar and provided more than 50% of Israel’s natural gas. Additional Exploration and Production International Oil Companies (IOC’s) operating in Israel are Greek company Energean and its partners, developing the Karish and Tanin fields (Karish project began gas production in October 2022), as well as block D (awarded in 2019), and their most recent gas discovery - the Katlan deposit (also known as Olympus). In addition, British companies Cairn and Pharos and their Israeli partners were awarded blocks A and C in 2019.
Other than supplying Israel’s domestic natural gas demand, the export market for natural gas produced in Israel is growing significantly. Total exports of natural gas from Israel in 2022 increased by 29% compared to 2021. Of the total exports, exports to Egypt grew by 37%, and exports to/via Jordan grew by 16%. The Government of Israel is planning to increase its gas exports; in a recent announcement, the Minister of Energy announced plans to increase gas exports from the Tamar field to Egypt by 60% starting in 2026. Also, discussions are underway to establish a liquefied natural gas (LNG) vessel at the Leviathan gas reservoir to reduce dependance on Egypt’s LNG facilities.
Renewable Energy
Despite ample solar power potential, Israel continues to fall short of meeting previously stated renewable energy targets, producing in 2022 only 10.1% of its electricity from renewable sources. Bureaucratic bottlenecks, a lack of land resources, underdeveloped transmission infrastructure from remote generation sites, and recent discoveries of offshore gas that can produce electricity at a lower cost than solar are often cited as factors explaining the lower-than-expected use of renewable energy. In line with Israel’s commitments to the Paris Agreement, in July 2021, the Israeli government updated its 2015 greenhouse gas (GHG) emission reduction goal to 27% decrease in GHG emission levels by 2030, using 2015 as the base year. As part of this decision, the government commits to reducing 2030 GHG emissions originating from electricity generation by 30%, using 2015 as the base year. An earlier government decision from 2020 sets renewable energy targets of 30% of electricity to be generated from renewable sources by 2030. According to this plan, solar will account for approximately 90% of the electricity, and wind, water and biomass will provide the remaining 10%. To reach this new goal, Israel will need to increase its overall installed capacity from solar systems to 17.1 GW (almost 3.5 times of its capacity in 2022– 4.7 GW). It will also need to increase overall storage capacity by 10 times from 300 MW in 2020 to approximately 3,000 MW in 2030.
Leading Sub-Sectors
Leading sub-sectors for U.S. companies include Electricity Infrastructure, Natural Gas, and Renewable Energy (including Energy Storage). Specifically, supply of electricity transmission and distribution equipment, purchasing and operation of power generation sites by Independent Power Producers, and development of renewable energy projects including supply of relevant equipment, are all viable opportunities for U.S. exporters.
Opportunities
Electricity Infrastructure
Israel Electric Corporation (IEC) is Israel’s state-owned electricity utility company, and the second largest procurement organization in Israel, with 5,000 active suppliers worldwide. IEC is currently the sole vertically integrated electric utility company in Israel, operating in all segments, and the majority of the electricity generated in Israel is supplied by IEC.
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). 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. IEC is planning significant upgrades to the transmission and distribution infrastructure across Israel through massive investments in the procurement of equipment for new power generation units and the expansion of its transmission and distribution infrastructure. IEC recently published a five-year (2022-2026) procurement plan valued at more than $2.5b, across multiple categories, including: transformers, switchgear, protection systems, zero-point earthing equipment, D.C. equipment, power cables, towers, insulators and more. IEC invites U.S. suppliers to register to become certified suppliers and participate in future tenders. Coupled with the 2018 reform, this presents significant opportunities for U.S. manufacturers of relevant equipment, as well as for U.S. IPP’s to purchase and operate power generation sites that are being sold by IEC.
As a state-owned company, IEC is bound by 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. For additional information on becoming an IEC supplier, contact our Tel Aviv office (contact information below).
Upcoming projects include:
(1) The construction of a greenfield 600-900MW gas-fired combined cycle Sorek power plant that is currently in the review process of the pre-qualification stage.
(2) The privatization of Israel’s largest power station, a 1693MW gas-fired Eshkol power plant.
(3) The Electricity Authority will publish a tender in September 2023 for the establishment of Energy Storage facilities with a total capacity of 900MW.
Natural Gas
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 IPP’s to purchase and operate gas-based electricity generation plants. In addition, the Ministry of Energy is issuing licenses for small scale, gas-based generation sites for industrial plants, which presents opportunities for U.S. manufacturers of relevant gas turbines and engines.
Lastly, the Israeli government periodically issues international tenders for offshore exploration and productions licenses. In December 2021, the Minister of Energy announced her decision to halt new exploration permits in an attempt to focus on renewable energies. However, in June 2022, the Minister reversed her decision and instructed the Ministry to prepare for the launch of Israel’s fourth offshore bid round. The Minister quoted the war in Ukraine, the global energy crisis, and the need for natural gas as a transition fuel as the primary justifications for the shift in the Ministry’s policy. The fourth bid round was launched in December 2022 and closed for submission in July 2023. The results will be reviewed in the upcoming weeks by Israel’s Petroleum Council.
Renewable Energy
A Government of Israel decision from October 2020 sets renewable energy targets of 30% of electricity to be generated from renewable sources by 2030. According to this plan, solar will account for approximately 90% of the electricity, and wind, water and biomass will provide the remaining 10%. To reach this goal, Israel will need to increase its overall installed capacity from solar systems to 17.1 GW (almost 3.5 times of its capacity in 2022– 4.7 GW). It will also need to increase overall storage capacity by 10 times from 300 MW in 2020 to approximately 3,000 MW in 2030. To tackle one of the primary hurdles for increases in PV capacity, the lack of land resources, the Government of Israel is promoting dual-use solar projects including rooftops, water reservoirs, agrovoltaic, and more.
The significant increase in renewable energy capacity which the Government of Israel is promoting to reach its 2030 goals presents substantial opportunities for U.S. firms, including (a) suppliers of PV, wind and storage technology and equipment; (b) suppliers of transmission and distribution equipment for the construction of additional substations, switching stations, etc., to support new transmission infrastructure from remote generation sites; and (c) IPP’s to develop and operate renewable energy generation plants.
U.S.-Israeli joint R&D and cooperation in the renewable energy sector is growing. The BIRD Foundation supports joint U.S.-Israel commercial R&D in renewable energy and energy efficiency and publishes new calls for proposals regularly.
Energy Infrastructure Projects
The current scope of infrastructure investment in Israel is lower than comparable countries around the world. To address this gap, the Israeli government is planning large scale infrastructure projects across almost all industries, and publishes the multi-year Infrastructure for Growth (in Hebrew) workplan, a national infrastructure strategy consolidating all projects valued at more than 100 million shekels (~$30 million) that are either in progress, budgeted or approved by the government. The 2023 workplan includes 228 projects, valued at $114 billion in total, across many industries including several projects in the environmental sector. A significant portion of the projects will be implemented via a public-private partnership (PPP) model.
Resources
Ministry of Energy and Infrastructure
Infrastructure for Growth 2023 (in Hebrew)
Eilat-Eilot Renewable Energy Conference
For additional information, please contact Commercial Specialist Naama Myers-Altman at Naama.Altman@trade.gov