72 / 94
/72/
Background
to the Israeli
energy sector
Since its establishment, and until the last decade, Israel’s energy market was
characterized by scarcity and disparity; increasing consumption; and limited
competition. No large marketable energy sources were at hand and the country’s
primary energy sources were imported fossil fuels. In addition, electricity generation,
transmission and distribution were undertaken solely by Israel Electricity Company
Ltd. (“IEC”), a government-owned integrated monopoly. However, in the last decade
the energy market in Israel has changed profoundly.
Firstly, in 1996 the legislature enacted the Electricity Sector Law, 5756-1996 (the
“Electricity Law”), which introduced various structural changes, and transformed the
Israeli electricity sector from a concession-based sector to a license-based sector.
Such legal framework has enabled independent power producers (“IPPs”), for the first
time in Israel’s history, to own and operate large-scale conventional, solar and pump
storage hydroelectricity facilities.
Secondly, following recent discoveries of offshore natural gas such as the “Tamar”
field (11 TCF), which began commercial production in 2013, and the “Karish” field (1.8
TCF), the “Tanin” field (1.2 TCF) and the “Leviathan” field (22 TCF), which are expected
to be operational within a few years, Israel’s natural gas demand will now be met by
local production and Israel will become an exporter of natural gas.
In addition, Israel’s complex relations with its neighbors rendered it an “energy island”
such that electricity is entirely generated domestically with no grid connections
with any neighboring economies. Therefore, and as described below, the Israeli
energy market is very much under development with diverse capital investment and
acquisition opportunities.
Legal and regulatory framework
Electricity
The Israeli electricity sector is dominated by IEC, which was historically granted with a
concession to generate, transmit and distribute electric power in Israel. In 1996, with
the enactment of the Electricity Law, it was decided to open the electricity sector to
Despite these discoveries, Israel still faces significant challenges as the holders
of the gas licenses require the support of prominent international oil and gas
companies in developing the reservoirs and the necessary infrastructure in order
to link them to Israel’s distribution network.