Energy Sector Challenges For 2030

There is general agreement on the importance of the energy sector to the economy. Improved quality of energy infrastructures increases the growth rate of various industries as well as GDP growth. In Israel, the energy and electric markets are regulated by several government offices: The Ministry of Energy, which is responsible for the overall policy of the energy sector; The Electricity Authority, which is responsible for determining electricity prices; and The Ministry of Environmental Protection. The government is expected to plan and manage an investment policy for the energy sector by setting goals for stable supply of clean, high-quality electricity at a competitive price.

The principles which make the setting of goals effective as a policy tool are:

1. Significant macroeconomic effect of goals on the economy.
2. Simplicity: setting clear, measurable goals which are monitored frequently through easily accessible data, allowing to plan government activity for a long-term duration, to monitor the situation in real time and to adjust policies accordingly, in order to ensure that the goals are met.
3. Operativity: setting goals that relate to the core activity of a specific government agency, which has the capacity to influence the realization of these goals.
4. Broad agreement: Setting meaningful strategic goals which are based on broad agreement, making it possible to maintain their relevancy, stability and durability throughout the designated period, regardless of changes in government.

In order to achieve the primary objective – a steady supply of clean, high-quality electricity to all consumers at a competitive price – the energy sector policy should focus on four key goals: reliability of power supply, quality of service, environmental consideration, and competitive electricity pricing.

These goals are interdependent and any investment or advancement towards attaining one goal affects, and sometimes replaces, investments towards the attainment of other goals. At the present, the state of Israel does not have an operative work plan for the realization of the energy sector goals, nor does it employ a quantitative model which enables consideration of investment alternatives in the energy sector in order to inform decisions regarding transition to renewable energy sources, development and improvement of the existing network, and the appropriate electricity pricing needed to support these changes. Therefore, our recommendations are as follows: to determine the entire set of long-term goals for the energy sector, with a view to 2030; to examine investment alternatives towards realization of these goals, based on a dynamic model of the energy market; to formulate, according to the investment alternative selected, a detailed work plan of measures to be taken towards goal attainment in 2030; and to conduct a sustained policy aimed at meeting yearly and long-term goals, while accommodating the technological changes taking place in the energy sector.