Improving Israel’s Electricity Sector

By: Gerald Myers, MQG member and MIET (Member of the Institution of Engineering and Technology)

There are many things seriously wrong in Israel’s electricity sector, mainly attributable to shortcomings in government; some of these are detailed below.

1. Defective Functioning of the Israel Electric Corporation

Electricity is generated at power stations and supplied to consumers over a transmission/distribution system. The buildings and equipment in these two branches of the national electrical infrastructure are very expensive, and their financing forms a significant part of the cost of electricity. Obviously, reducing this component of the costs of the Israel Electric Corporation would greatly improve the Corporation’s financial situation. (Its debt in 2014 was NIS 73 billion.)

The electrical infrastructure must be sufficient to meet the maximum load, with some reserve. If the maximum load could be reduced, the capacity of the generating infrastructure and of the transmission/distribution infrastructure could be correspondingly reduced, this allowing a corresponding reduction in the costs of the IEC, a reduction in IEC’s debt, and in the cost of electricity.

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IEC Headquarters, Haifa

Throughout the day, the total electrical load on the IEC varies. The part of the load represented by households obviously depends on the extent of household activities which require a supply of electric current. Normally, such activities are concentrated during the day, and the total load corresponding to these activities is greater during the day than at night. If householders could be persuaded to run appliances that require a heavy current (washing machines, dryers, electric room heaters, room storage heaters, which heat up at night and release heat during the day, electric hot water boilers, etc.) during the night instead of the day, this would result in a significant smoothing of the daily load curve, and a reduction in the peak demand for electricity. In turn, this would mean that the generating and transmission/distribution infrastructures could be reduced.

In a 2012 report, the IEC predicted an annual growth rate of 3-4% in electricity demand. If it were possible to smooth out the 24 hour demand curve for electricity, so that the maximum demand was reduced, this 3-4% annual increase in demand could be met without incurring any financial costs for new generating, transmission and distribution infrastructures.

In most developed countries, in addition to a regular tariff, the electricity utility offers consumers a cheaper night-time tariff. This is made possible by the use of smart meters, which can distinguish between electricity usage during day and night hours. Information on the subject can be obtained at this website: https://en.wikipedia.org/wiki/Smart_meter#Purpose

which also lists countries where such smart meters are used, and countries with plans for their future use. The fact that many electricity utilities use smart meters shows that it is a standard method of reducing costs.

Many domestic electrical appliances are now equipped with time clocks, to allow the user to set the appliance to work during a cheap-tariff time. This is evidence of the widespread use of smart meters.

If the IEC were to make available such smart meters to consumers, it would be able to offer domestic consumers a cheaper night-time tariff. Consumers who opted for such meters would pay less for their electricity, and the IEC would be able to reduce its maximum load demand, thus benefiting from the above reductions in its costs.

The IEC does already offer a reduced tariff plan (Ta’oz – https://www.iec.co.il/businessclients/pages/optionaltariff.aspx), which gives consumers load-related savings. In exchange for transferring electrical load to off-peak hours, the consumer is offered a reduced tariff. However, to be eligible for Ta’oz, the consumer must have a three-phase, 200 amp installation, and use at least 5,000 kilowatt-hours a month. In households that have a three-phase installation, this is usually of 40 amps, and the average monthly household consumption is probably in the region of 1,500 kWh. Private households thus cannot take advantage of the Ta’oz tariff.

2. Government Supervision of the IEC

Arising out of the above information, the question arises: Why does the IEC not make use of smart meters, to reduce the maximum electricity demand?

The IEC comes under the authority of the Electricity Administration, a division of the Ministry of National Infrastructures, Energy, and Water Resources. An objective of the Administration, as stated on its website, is minimizing costs. The IEC has not introduced the use of smart meters, and the Electricity Administration has not forced the IEC to use smart meters. These facts indicate that one or more of the following possibilities are correct:

– The IEC is not aware of the existence of smart meters, or (more likely) the IEC is aware of the existence of smart meters, but does not bother to introduce them, because it knows that the Electricity Administration is either not aware of their existence, or will not attempt to encourage the IEC to introduce them.

– The Administration does not have engineers, technical personnel, and economists on its staff, with the knowledge necessary to supervise the technical and economic aspects of the operations of the IEC, this shortcoming explaining the Administration’s probable ignorance regarding smart meters.

חברת חשמלIn addition to an Electricity Administration, Israel has an Electricity Authority. According to its website, one of the Administration’s objectives is to “streamline the [electricity] monopoly.” The extent to which the Authority is not succeeding in this can be judged by the fact the State Comptroller recently blasted the IEC for over-staffing.

It may also be pointed out that the existence of both an Electricity Administration and an Electricity Authority (neither of which – as indicated here – seems to be achieving anything) is a bureaucratic duplication.

3. Israel’s Energy Sources

Geothermal power generation is a method of providing electric power by utilizing the heat available at depth in the Earth’s crust. The UN Environmental Program estimates that the geothermal energy potential of the Rift Valley is in the thousands of megawatts. Israel is situated at the northern end of the Rift Valley.

An assessment of geothermal resources in Israel was published in November 2008. It was commissioned by the Ministry of Infrastructures. A recommendation of this assessment is:

A geothermal system with high temperature and groundwater pressure occurs at the south border of the Golan Heights at relatively shallow depth and is suggested for further exploration toward generating geothermal energy.

One may ask: Having commissioned this assessment, why has the Ministry not followed up on the recommendation to undertake further geothermal exploration at the southern border of the Golan Heights? This question is made more pertinent by the fact that the world leader in geothermal energy is an Israeli company, Ormat, which claims to have geothermal electricity generating projects in 75 countries (but none in Israel!). It may be contended that this is due to lack of initiative and technical know-how on the part of the IEC, the Electricity Administration and the Electricity Authority.

5. Staffing of Government Ministries

These remarks apply to Israel’s electricity sector, but also to all Israel government ministries and agencies.

It is well known that bureaucracy severely impedes the Israeli economy. According to the Wall Street Journal, it takes six working days to start a business in the USA, while in Israel it takes 34.

The technical and economic failings like those in the electricity sector noted above probably exist in all sectors of the economy, this situation being largely due to an innate character of bureaucracies – they are staffed by bureaucrats who recruit other bureaucrats, rather than technical staff and economists.

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