Further to the recent hearing held in October 2016 (see our clients update dated 01 December 2016), the Electricity Authority published on 19 December 2016, a decision detailing the main principles of the upcoming competitive process for the construction of Solar Power Plants in Israel, with a capacity of up to 1,000 MW.
Few days later, the Electricity Authority also organized a conference to meet the entrepreneurs and explain the guidelines and principles detailed in its decision. After few moments of uncertainty, the Israel Land Administration finally announced on December 28th, 2016 that it should confirm in January 2016 the final prices of the lands for the erection of the projects.
Unprecedented Scale and Method
The announcement of this large scale national project is the first of its kind in Israel, for two reasons.
- Firstly, the expected capacity of the projects to come is tremendous: up to 1200 MW capacity PV Plants are to be built in Israel in only two years (2017-2018). This expected capacity exceeds the actual capacity of PV Fields already erected in Israel.
This unprecedented measure is one of the Israeli Regulator’s major steps to meet the targets set in the framework of the Paris Climate Convention, to produce at least 10% of the total energy consumption in Israel from energy renewable sources by 2020.
- Secondly, the method of the competitive process is also unprecedented: the bidders’ offers will be evaluated based on the price of the kilowatt of electricity sold to the Israeli Electric Company. The lowest price proposals for the kilowatt of electricity will be awarded the projects.
The method is one example of the persistent efforts of the Israeli Regulator to reduce the electricity prices eventually paid by the Israeli end customer.
The Electricity Authority contemplates that the competitive process will be held through four successive bidding rounds as follows:
The competitive process will be based on the “clearing price” method, which will determine the final price per kilowatt of electricity sold by the producers to the Israel Electric Company for the 23 years following the commercial operation of the projects.
- The bids will be sorted from the lowest electricity price proposal to the highest;
- The lowest price proposals, up to the capacity ceiling set by the Electricity Authority during a specific bidding round, will be awarded the projects;
- The lowest price proposal not selected by the Authority shall be the price applicable to all successful bidders.
To participate to the tender, each bidder shall provide a Bid Bond in the amount of 100 NIS per kilowatt of proposed capacity. Within 7 days of the publication of the final electricity tariff by the Authority, each successful bidder will then submit a Performance Bond equivalent to 300 NIS per kilowatt of proposed capacity.
No bidder will be allowed to submit offers for a capacity exceeding in the aggregate 70 MW, or to hold directly or indirectly tariff licenses for a capacity superior to 70MW.
The Electricity Authority sets strict deadlines for the beginning of the commercial operation: each successful bidder will undertake to achieve the commercial operation of the PV Plant within 18 months as from the publication of the results of the tender. No postponement will be granted unless in case of force majeure event recognized as such by the Electricity Authority in accordance with Standard no. 130.