Dei'ah veDibur - Information & Insight

A Window into the Chareidi World

2 Tammuz 5765 - June 28, 2006 | Mordecai Plaut, director Published Weekly









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Observations: Should You Build a Power Plant in Your Backyard?
by T. Katz

In 2004 a major revolution took place when a private power plant in the North operated by Rafael Ltd. began selling electricity to the Israel Electrical Corporation. The plant, with a moderate output of 20 megawatts, provides electricity for Rafael and sells its surplus energy to the Electrical Corporation.

Most electricity consumers were wholly unaware of the private plant, but it is a harbinger of a major revolution expected in the electricity industry in the coming years.

Built by Noga Paz, the private power plant is merely the first of a wave of private electricity producers set to enter the energy market. For the first time ever, competition against the Israel Electrical Corporation is starting to materialize. Experts say the competition will reach consumers within a few years, resulting in lower prices.

"In the coming years the electricity industry will undergo the same change the communications industry underwent at the beginning of the 90s," say ranking sources at the Finance and Infrastructures Ministries. A quick reminder: As early as 1996 the government had already decided to transfer 20 percent of electricity production to private corporations. The plan was to build a private power plant that would compete with the Israel Electrical Corporation and help break its monopoly. But as in the case of many other government projects, the bureaucracy exhausted the entrepreneurs.

Four years ago the Infrastructures Ministry decided to change the regulations, allowing the construction of private power stations using natural gas. According to this method, any entrepreneur who owned land and met certain criteria could receive a license to generate electricity. At the same time the Electricity Authority publicized the regulations, allowing private producers to begin selling electricity to consumers using the Electrical Corporation's conducting and distribution infrastructures.

But the primary change to alert the attention of the private producers was the introduction of natural gas, an inexpensive and readily available energy source, into the industry at the beginning of 2003. Until then it was more cost-effective for private producers and industrial facilities to purchase electricity from the Electrical Corporation. But now that the construction of the natural gas pipe has gotten underway and natural gas suppliers — Yam Thetis, British Gas, the Egyptians and even Gazprom of Russia — have begun to operate in the market, entrepreneurs can estimate in advance the cost of producing and selling to consumers.

"The main reason for the awakening in private electricity production is the availability of natural gas," says Ran Carol, former director of the Energy Ministry and today one of the owners of Etgal Investments. "For large consumers like industrial factories the difference between gas and diesel or fuel oil is significant. Today we can compete with the Electrical Corporation and offer lower prices."

Indeed, recently more and more investors and large industrial companies are taking the initiative and entering the field of private electricity production.

Electricity production is divided into two groups: private producers, which build power plants and natural gas to sell electricity to consumers alone, and industrial companies, which build power plants to produce electricity through a special method using heat released during electricity production for the manufacturing process at the factory.

The details are not particularly interesting, but what is interesting is that final regulations are currently being set for private producers, particularly those that operate on renewable energy, such as wind and other alternative forms of energy. If you live in the Golan Heights, for instance, you could build a wind turbine and sell the electricity to the Electrical Corporation, or if you live in a very sunny area you could build a small solar power plant. The big advantage is that the producer receives a special premium for generating electricity without creating pollution. Somewhere between 1.5 and 2 cents per kilowatt hour — not bad at all.

So what are you waiting for? Whoever wants to can build a little power plant on the rooftop and sell the surplus to the Electrical Corporation. Just buy a photovoltaic cell and install it on the roof. Unlike solar heat apparatuses, like solar water heaters, photovoltaic cells generate electricity using electrons from sunlight.

What's the problem? Well, setup costs will run you $5,000- $15,000. Industry figures claim you can get a return on your investment within 10-20 years. And if it's any consolation, prices are expected to go down...


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