This report overviews the 2023-24 developments in the Israeli electricity market with emphasis on the power generation segment. The deployment progress in renewables continued to slow down, especially in the second half of the year and in early 2024 due to security crisis. In terms of conventional generation, the market mainly followed the implications of the Electricity Reform, continuing to tansfer Natural Gas-powered generation from the Israel Electric Corp to the private segment and preparing to retire old coal units in the Hadera power plant. By the end of 2023, Israeli national electric generation capacity stood at 23.9 GWp, with private producers (IPPs) making up 53.3% of total grid-connected capacity and Israel Electric Corp (IEC) making up the remaining 46.7%. In terms of electricity generation in the Israeli market, 77.4 million kWh were produced in 2023, up from 76.9 million kWh in 2022. The 2023 generation segment was relying on a mix of fuels, dominated by natural gas and coal - both utilized by the Israel Electric Corp (IEC) as primary fuels. Secondary fuels of the IEC were diesel, oil fuel and methanol. Private power generation facilities were primary relying on natural gas, while diesel, oil fuel, kerogen and renewables were secondary energy sources. Notably, renewables reached the share of 11.5% of market supply in 2023 (close to LNRG's projected 12%) and are expected to reach 12.8% in 2024, primarily driven by solar PV generation.
From early 2000s and until early 2020s, the Israel Electric Corporation (IEC) had been denied from building new conventional power plants, thus practically all capacity additions during the period had been made by the private sector. Moreover, upon the Electricity Market Reform, the IEC was forced to sell several of its generation units, whilst enabling it to upgrade some of its units in the future. The IEC capacity further reduced upon retirement of several generation units in 2019 and privatization of three compounds in 2019 and 2020 respectively; another IEC site of Hagit completed the privatization process in December 2021, followed by Eshkol in 2024 and then additional compounds in the second half of 2020s. In 2023, the IEC completed the complementary Natural Gas-powered unit 70 at the Orot Rabin site, aimed at replacing the retiring coal units 1-4. IEC's Unit 80 at the Orot Rabin site is expected to go online in September 2024.
The deployment progress in renewables continued, but slowed down in the second half of the year and in early 2024 due to the security crisis. The eruption of regional war in October 2023 affected the deployment rate of new projects, primarily delaying multiple projects and notably cutting the Israeli electricity supply line to the Gaza Strip. About 1.05 GWp of renewable capacity was added in 2023, including some 860 MWp solar PV and inaugurating the 189 MWp Beresheet wind power project (it was projected that 0.7 GWp would go online, with dramatic decline of decentralized PV installations). In 2024, only 0.65 GWp is expected to go online, continuing the reduced addition rate of decentralized PV generation installations. By the end of 2023, Israeli national electric generation capacity stood at 23.9 GWp, with private producers (IPPs) including renewables making up 53.3% of total grid-connected capacity and Israel Electric Corp (IEC) making up the remaining 46.7%. The private power generation segment, including renewables, has surpassed the one half share of the market capacity and is expected obtain about 60% share in 2024 and 62% share by 2025.
In terms of conventional generation, several power plants began continuous operation during 2023 - most notably the 396 MWp Tzomet Energy power plant and the 630 MWp IEC Natural Gas generation Unit 70 at the Orot Rabin site; In 2024, the Kokhav Yarden 344 MWp pump accumulation project was connected and the Etgal Power Plants project is expected for connection and synchronization. Among renewables, the major wind energy site of Beresheet underwent connection and synchronization in 2023, added with the 40 MWp solar Ashalim PV 2, 48 MWp Yachini PV, 23 MWp Sde Nitzan in the solar domain; In 2024, and 156 MWp Teralight's Taanach 1 project is being connected. Hydropower capacity remained stable in 2023 and is not expected to change in 2024 beyond eight existing facilities, with 9th facility entering planning stage. Furthermore, no small-scale biogas plants were added in 2023 on top of the fourteen exisiting and none are planned during 2024. Overall, 66 utiliy-scale high-voltage power plants contributed to Israeli electricity generation correct for December 2023 and this is expected to grow to 69 power plants by December 2024.
In terms of electricity market generation and supply, 76.9 million kWh were produced in 2022 and 77.4 million kWh in 2023, with about 79.5 million kWh expected to be generated in 2024. Through 2023, IEC produced 46.1% of electricity supply and added with electricity purchased from private producers, the IEC altogether controlled 71.8% of total electricity supply, whereas the remaining 28.1% consisted of output supplied by private producers directly to customers, power purchase agreements (PPAs) or schemes of self-consumption (small PV producers and four conventional power plants). Private generation share hence surpassed the 50% margin during 2023 and is expected to continue rising through 2024. This brings the market closer to the electricity reform target of 60% private electricity generation output by 2025.
In 2023, the power generation segment was relying on a mix of fuels, dominated by natural gas and coal - both utilized by the IEC as primary fuels. Secondary fuels of the IEC were diesel, oil fuel and methanol. Private generation facilities were primary relying on natural gas, while diesel, oil fuel and renewables were lesser energy sources. When combined, the electricity generation segment continued to be dominated by natural gas as the primary energy source (57.4% by capacity), with coal as the secondary source (17.9% by capacity) and third place taken by renewables (combined 23.2% by capacity) – predominantly solar PV technology (20.5% by capacity), as well as smaller capacities of solar thermal (ST), wind, biogas and hydro. Pump accumulation accounted for 1.3% of capacity, while other fossil fuels contributed a tiny 0.3% fraction of total capacity. In 2024, the fuel rations are mostly to remain stable with 57-58% natural gas, 17% coal, 23% renewables, 2.6% pump accumulation and other fossil fuels at 0.3%. Notably, renewables reached the share of 11.4% of market supply in 2023 (close to LNRG's projected 12%) and are expected to near 13.0% share in 2024, primarily driven by solar PV generation.
In the past, the Electricity Authority estimated that the growth in electricity demand during the second and third decades of the 21st century is to be at 2.7% annually, which is slightly above the average demographic growth rate of 2.0%. In reality, the growth of electricity demand in Israel was at +4.3% in 2019, flat growth 0.0% in 2020 due to the Covid19 crisis, with +1.6% rebound in 2021 and +3.6% growth in 2022. In 2023, supply grew by 0.6%, while the demand grew by +1.2%, making the five-year average demand growth at +2.2%. Though there is still a total electricity demand growth due to rapid demographic expansion of about two percent annual, the main element to support electricity demand growth in the upcoming years is the wide-spread adoption of electric vehicles and other electrical transportation means including electrification of light rail and heavy rail.
Grid supply per capita (excluding peer-to-peer deals) decreased from 6.4 thousand kWh in 2018 and 2019 to 6.2 thousand kWh annually in 2020, and further decreased to 6.0 thousand kWh in 2021 and to 5.6 thousand kWh in 2022, but slightly rebounded to 5.6 thousand kWh per capita in 2023. The electricity demand per capita (excluding peer-to-peer deals) also decreased from 5.9 thousand kWh annual in 2018 and 2019 to 5.7 thousand kWh in 2020 and 5.5 thousand kWh annual per capita in 2021, 5.1 thousand kWh in 2022 and plunged to 4.6 thousand kWh in 2023. Total electricity generation per capita in Israel was 7.8 thousand kWh annual in 2018 and 8.0 thousand kWh annual in 2019, then decreasing to 7.9 thousand kWh annual in 2020 and 2021 and slightly increasing to 8.0 thousand kWh in 2022. The 2023 electricity generation per capita was about the same at 8.0 thousand kWh.
The transmission and distribution segments continued to be controlled by the IEC. Following the adoption of the Electricity Reform, in 2019 the grid control department was split into a separate company named Noga and received operation license in June 2020. Distribution segment has about 10% share licensed to the Kibbutzim agricultural communities and the rest controlled by IEC; more players are entering this segment as virtual providers upon the implementation of the market reform. Notably, in 2021 it was announced that 22 players would enter the distribution segment under this framework and began operating. It increased to 34 players during 2022, 45 players in 2023 and 50 players by August 2024.
The off-grid electricity market in Israel is essentially small, estimated at only several dozen megawatts deployed in desolate locations, including diesel generators and solar PV collectors. There are four major off grid facilities for self-consumption - the Noble Energy Mediterranean 31.85 MVA offshore generation unit at the Tamar gas field, the Rotem Amfert 16.7 MWp generation unit, the Ben Gurion Airport 12.4 MWp facility and the Nesharim Energy 2014 facility rated 48.3 MWp.
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