On October 10, 2016, The Israeli Public Utilities
Authority-Electricity (the "PUA") published a hearing
concerning the development of new solar photovoltaic power (PV)
facilities with a total capacity ranging between 800-1700 megawatts
(final MW capacity to be determined by the PUA) (the
"Publication"). The Publication follows an earlier
decision by the Israeli Government to produce at least 10% of the
total energy consumption in Israel from renewable energy sources by
2020. According to the Publication, the rights to develop new PV
projects under the new quotas shall be granted on the basis of a
competitive bidding process, in which the bidders shall propose the
applicable tariffs they expect to be paid for each KW/h supplied to
the electric grid, and the grants shall be generally allocated
amongst the lowest bidders (subject to the terms and conditions
outlined below).
Public Responses to the Hearing are due by November 10, 2016 at 12
p.m.
Below is a quick a review of the pertinent terms and conditions of
the Publication:
1. Quotas
The Publication contemplates the following quotas for the years 2017-2018 (all references are to megawatts):
January 2017 – 150-300
July 2017 – 150-300
January 2018 – 150-300
July 2018 – 150-300
Power Systems Connected to Transmission Grid (Ultra High Voltage):
April 2017 – 100-250
January 2018 – 100-250
The maximum quota for the year 2018 will be determined by the
PUA's assembly in accordance with, inter alia, the quotas
allocated in 2017. The quota to be allocated in the competitive
bidding process for the Transmission Grid (Ultra High Voltage)
depends also on the feasibility studies and reports, as well as the
actual bids submitted in connection therewith.
Judea and Samaria
In addition to the quotas detailed above, an additional quota equal
to 10% of the total power supplied to the Distribution Grid from PV
power plants pursuant to the table above will be allocated to the
construction of PV facilities in Judea and Samaria. The tariff for
this quota will be determined in accordance with the results of the
competitive bidding process conducted under the Publication. The
PUA also clarified that the winning bids in the competitive bidding
process conducted under the Publication cannot be carried out by
developing facilities in Judea and Samaria.
2. Principles for Determining Successful Bids and
Tariffs
Bidders shall submit in their respective bids a proposed tariff for
one KW/h of electricity to be supplied to the grid. The PUA will
rank such Bids on the basis of the proposed tariff (from the lowest
to the highest proposal). Bidders who submit the lowest proposals
that collectively fall within the quota limits (as outlined above),
will be entitled to develop a PV facility and sell electricity to
the grid at a price equal to the lowest proposed tariff which did
not make it into the quota (meaning the lowest tariff proposal
amongst the unsuccessful bids). Consequently, all successful
bidders shall eventually sell electricity at the same tariff.
The final tariff will be valid for a period of 23 years for
facilities connected to the Distribution Grid, and 22 years for
facilities connected to the Transmission Grid, starting from the
date of commercial operation or upon receiving a permanent license
to produce electricity and the commencement of commercial
operation, as shall be determined in accordance with the then
applicable licensing regulation.
The tariff will be linked to the Israeli CPI. The PUA has requested
to receive comments from the public with respect to the possibility
of linkage of the tariff for the Ultra High Voltage facilities to
the Bloomberg Index, the Construction Input Index or other
indexes.
3. Submitting Bids
Bids per participant shall not exceed 100 megawatts with respect to
the Distribution Grid, and 70 megawatts with respect to the
Transmission Grid. Bidders may submit bids for both the
Distribution Grid and the Transmission Grid.
A bidder is defined as the holder, directly or indirectly, of at
least 10% of the means of control in a bidder.
Further limitations may be placed by the PUA upon the allocation of
the 2017 quotas.
4. Guarantees
Bidders will be required, as part of the competitive bidding
process, to deposit guarantees in the sum of $20 U.S. dollars per
installed kilowatt in their bids, which will be returned to
unsuccessful bidders. Following conclusion of the bidding process
and publication of the results thereof, the successful bidders
shall increase their guarantees to $70 U.S. dollars per installed
kilowatt, guaranteeing the due construction of the facilities.
5. Term of Construction Period
Successful bidders will be required to connect the facilities to
the grid and complete their acceptance tests within 18 months, with
respect to the Distribution Grid, and 36 months, with respect to
the Transmission Grid, from the date of being awarded the tender.
Successful bidders will not be required to meet additional time
limitations.
6. Licensing
The PUA will issue a permanent license to produce electricity to a
successful bidder who will (a) construct a PV facility having a
capacity of at least 5 megawatts and (b) comply with the terms and
conditions set forth in the Electricity Market Regulations (Terms
and Procedures for Granting a License and Duties of the License
Holder), 5758-1997, for to the entire commercial operation period.
The Publication further provides that the participation in the
competitive bidding process as well as the development of the
facilities are not conditioned upon receiving a provisional license
or compliance with other schedules and milestones (the successful
bidder, however, shall still be required to meet the deadline for
commencement of commercial operation, as provided in Clause 5 (Term
of Construction Period) above).
7. Existing Facilities
According to the Publication, a successful bidder may develop a PV
facility pursuant its applicable quota by way of expanding existing
facilities.
8. Conditions to Submitting Bids and Additional
Requirements
With respect to the Distribution Grid: no conditions precedent
other than the issuance and deposit of guarantees.
With respect to the Transmission Grid: in addition to the issuance
and deposit of guarantees, a positive feasibility study is
required, in accordance with the following instructions:
a. Bidders wishing to participate in the competitive bidding
process must submit to the Israel Electric Corporation
("IEC") a request to conduct a feasibility study by
November 30, 2016. Bidders can submit such request before the
conclusion of the hearing.
b. IEC will conduct feasibility studies according to the order of
submission of such requests (to ease bureaucratic concerns, IEC
need not obtain authorization from the Head of the Division of
Engineering to conduct such feasibility studies). IEC shall
complete all feasibility studies, submitted on or before the above
deadline, by no later than February 2, 2017.
c. Upon the completion of the last feasibility study, IEC will
publish a matrix depicting all of the bidders and their direct and
indirect competitors, in customary form.
d. A positive, uncontested feasibility study, is a necessary
precondition to submitting a bid under the Publication.
e. The quotas allocated in the competitive bidding process to
facilities connected via the transmission grid will be determined,
inter alia, by the contents of such feasibility studies, subject to
the PUA's discretion.
f. In the process of determining the successful bidders in the
competitive bidding process, and guaranteeing their spot in the
grid, the following shall apply:
1. A bidder who submitted the lowest proposal will be guaranteed a
spot in the grid, as of the date of its designation as a successful
bidder.
2. All proposals which include a grid connection survey that is
dependent on the actual successful proposal, will be disqualified
and their guarantees returned.
3. The next successful bidder will be the bidder who submitted the
lowest proposal following the disqualification of the
aforementioned proposals.
4. The remaining successful bidders will be determined in
accordance with the aforementioned procedure from the remaining
bids, until the total quota for the competitive bidding process is
fully allocated.
5. The final tariff applicable to all bids will be equal to the
lowest tariff amongst the unsuccessful bids who did not make it
into the quota (essentially equal to the tariff set forth in the
bid subsequent to the last bid which made it into the quota in
accordance with the above procedure).
g. The successful bidder will be required to complete the
feasibility study vis-à-vis IEC, namely with respect to
plans inspections and system stability inspections. Nevertheless,
guaranteeing a place in the grid is not conditioned on completing
the feasibility study.
h. The responsibility for meeting the date of commercial operation,
including acquiring the permits for the facility, in accordance
with the abovementioned schedule, lies solely with the bidder, and
any deviation therefrom may lead to the forfeiture of the
guarantees.
9. Status of Conditional Licenses which did not Receive
Tariff Approval under Previous Regulations
The Publication provides that licenses issued in the course of
previous regulation and which did not receive tariff approval, are
hereby terminated, and that licensees that performed a grid
connection survey can use the survey to satisfy the precondition
for participation in the competitive bidding process for
determining a tariff with respect to the Ultra High Voltage.
This draft resolution creates new opportunities in the Israeli solar / PV field, which has been stagnant in recent years, and determines the principles of participation in the Israeli PV market in the near future. Nevertheless, the draft resolution raises several questions that require clarification. Therefore, it is important that you take a closer look at the draft resolution and its ramifications and submit your remarks to the PUA by the final date (November 10, 2016), and before the draft resolution is accepted. For further information and questions, please feel free to contact us.
We emphasize that this memorandum is intended for your attention only and does not include a comprehensive analysis of all the facts and details mentioned therein. Data, information and analysis set forth in this memorandum is subject to change, without further notice. This memorandum does not replace, in any way, an independent review of any document in connection with the information referred to in this memorandum, including the PUA's Publication.
Originally published on 31/10/2016
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.