MIDDLE EAST AND NORTH AFRICA (MENA) | ENERGY AND EXTRACTIVES GLOBAL PRACTICE | THE WORLD BANK GROUP
Securing Energy for
Development in the
West Bank and Gaza
Securing Energy for
Development in the
West Bank and Gaza
Acknowledgments
The report was prepared under the guidance of Vivien Company (TEDCO), Southern Electricity Distribution
Foster (Global Lead, GEEDR, co-task team leader) Company (SELCO), Palestinian Investment Fund
and Roger Coma-Cunill (Senior Energy Specialist, (PIF), Palestinian Central Bureau of Statistics (PCBS),
GEE05, co-task team leader). and Palestinian private sector. The study also
benefited from discussions with and inputs from
The report was authored by Sara Badiei (Energy the Israeli Electric Corporation (IEC), Coordinator
Specialist, GEE05), Vivien Foster and Roger Coma- of Government Activities in the Territories (COGAT),
Cunill. Several sections of the report were led Israeli Public Utilities Authority (PUA), Israeli Ministry of
by the following team members: Samuel Kwesi Foreign Affairs and Ministry of Energy. The study also
Ewuah Oguah (Energy Specialist, GEESO), the received inputs from the Jordanian Ministry of Energy.
planning model analysis; Joeri Frederik de Wit
(Energy Economist, GEESO), the demand forecast The team would like to thank Marina Wes (current
analysis; Alain Bourguignon, the renewable energy, Country Director West Bank and Gaza, MNC04),
transmission and distribution, and energy efficiency Steen Jorgensen (former Country Director West Bank
analysis; Amit Mor and Shimon Seroussi (Eco-Energy, and Gaza, MNC04), Erik Fernstrom (MENA Energy
consultants), the gas analysis and energy sector Practice Manager, GEE05), Bjorn Philipp (Program
financial model; Peter Griffin (consultant), the macro- Leader, MNC04) and Mark Eugene Ahern (Program
economic model analysis; Joern Huenteler (Energy Leader, MNC04) for their continuous guidance and
Specialist, GEE05) provided valuable inputs on the support as well as peer reviewers Victor Loksha
Jordan and Egypt energy sectors; Jonathan Walters (Senior Energy Economist, GEEES), Rahul Kitchlu
(Castalia, consultant) provided political economy (Senior Energy Specialist, GEE01), Kwawu Mensan
and institutional guidance throughout the project; Gaba (Global Lead, GEEDR), Bjorn Philipp, as well as
Carlos Alberto Lopez Quiroga (Senior Oil and Gas Rima Tadros and Thomas Berdal from the Norwegian
Specialist, GEEX2) provided advise on hydrocarbons; Representative office.
and Khalida Seif El Din Al-Qutob (Program Assistant,
MNCGZ) contributed with valuable logistical and The financial support by the Norwegian Government
administration support. and the Energy Sector Management Assistance
Program (ESMAP) is gratefully acknowledged.
The study would not have been possible without the ESMAP—a global knowledge and technical
continuous collaboration and consistent feedback assistance program administered by the World
from the Palestinian Energy and Natural Resources Bank—assists low- and middle-income countries to
Authority (PENRA), Palestinian Electricity Regulatory increase their know-how and institutional capacity
Council (PERC), the Palestinian Ministry of Finance to achieve environmentally sustainable energy
(MoF), Palestinian Electricity Transmission Company solutions for poverty reduction and economic growth.
Ltd. (PETL), Palestinian Energy and Environmental ESMAP is funded by Australia, Austria, Denmark, the
Research Center (PEC), Jerusalem District Electricity European Commission, Finland, France, Germany,
Company (JDECO), Gaza Electricity Distribution Iceland, Japan, Lithuania, the Netherlands, Norway,
Company (GEDCO), Northern Electricity Distribution Sweden, Switzerland, the United Kingdom, and the
Company (NEDCO), Hebron Electricity Distribution World Bank Group.
Company (HEPCO), Tubas Electricity Distribution
Table of Contents
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
What Is the Current Energy Supply Situation in the West Bank and Gaza? . . . . . . . . . . . . . . . . . . . . . . . . . . 5
What Options Exist for Improving Energy Security in the West Bank and Gaza? . . . . . . . . . . . . . . . . . . . . . . 8
How Can the West Bank and Gaza Choose among the Options? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
What Measures Need to Be Taken by Government? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
What Are the Costs and Benefits of Achieving Energy Security? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PART I - The West Bank and Gaza Energy Sector Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Chapter 1: The West Bank and Gaza Electricity Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Chapter 2: Electricity Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Chapter 3: Importing Electricity from Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Chapter 4: Importing Natural Gas for Domestic Power Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Chapter 5: Importing Electricity from Jordan and Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Chapter 6: Developing Domestic Renewable Power Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Chapter 7: Developing Transmission Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Chapter 8: Integrating Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
PART II - Decision Making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Chapter 9: Introduction and methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Chapter 10: Analysis and Results for the West Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93
Chapter 11: Analysis and Results for Gaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
PART III - Conclusions and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Chapter 12: A Four-Phase Road Map to Improved Energy Security in the West Bank and Gaza . . . . . . . . 128
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Appendix A: The Palestinian Electricity Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Appendix B: Electricity Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Appendix C: Importing Electricity from Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Appendix D: Importing Natural Gas for Domestic Power Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Appendix E: Importing Electricity from Jordan and Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Appendix F: Developing Domestic Renewable Power Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Appendix G: Developing Transmission Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Appendix H: Robust Planning Methodology and Detailed Technical Results . . . . . . . . . . . . . . . . . . . . . . . 173
Appendix I: Financial Sector Model Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Securing Energy for Development in the West Bank and Gaza | 1
2 | Securing Energy for Development in the West Bank and Gaza
Abbreviations
bcm billion cubic meters
CAPEX capital expenditure (Note: CAPEX, capex, and CapEx are all used by the WB
and various other organizations. CAPEX is used here for internal consistency.
It is used commonly, although not consistently, by the WB.
CCGT combined cycle gas turbine
COGAT Coordinator of Government Activities in the Territories Unit (Israeli entity)
CSP concentrated solar power
DISCO distribution company
GDP gross domestic product
GEDCO Gaza Electricity Distribution Company
GPP Gaza Power Plant
GWh gigawatt hour
IEC Israeli Electric Corporation
IPP independent power producer
HEPCO Hebron Electricity Distribution Company
JDECO Jerusalem District Electricity Company
kV kilovolt
kW kilowatt
kWh kilowatt hour
LNG liquified natural gas
LPG liquid petroleum gas
MVC municipality and village council
MW megawatt
MWh megawatt hour
NEDCO Northern Electricity Distribution Company
NEPCO National Electric Power Company (Jordan)
NIS new Israeli shekel (Israeli currency unit)
PCBS Palestinian Central Bureau of Statics
PEC Palestinian Energy and Environmental Research Center
PENRA Palestinian Energy and Natural Resources Authority
PERC Palestinian Electricity Regulatory Council
PETL Palestinian Electricity Transmission Company
PPA power purchase agreement
PUA Public Utility Authority (Israeli)
PV photovoltaic
RE renewable energy
SELCO Southern Electricity Distribution Company
tcf trillion cubic feet
TEDCO Tubas Electricity Distribution Company
TOU time of use
VRE variable renewable energy
Securing Energy for Development in the West Bank and Gaza | 3
Executive
Summary
4 | Securing Energy for Development in the West Bank and Gaza
What Is the Current Energy
Supply Situation in the West
Bank and Gaza?
Energy security challenges are already severe Figure 1: Main Sources of Electricity in
in Gaza and are emerging in the West Bank. The the West Bank and Gaza, 2015
power supply meets only half the demand in Gaza,
leading to rolling blackouts of eight hours on and 6,000
eight hours off. Although the West Bank generally
enjoys 24-hour power supply, shortages have 5,000
emerged during peak winter and summer months.
Energy (GWh)
4,000
With demand projected to grow at an average annual
rate of about 3.5 percent in the foreseeable future— 3,000
slightly higher in Gaza and lower in the West Bank—
shortages are likely to become worse unless new 2,000
supply options are found.
1,000
The West Bank and Gaza rely primarily on Israeli 0
West Bank Gaza Combined
imports to meet electricity needs. In 2015, about 90
percent of their electricity was supplied by the Israeli
From Israel From Egypt
Electric Corporation (IEC) (figure 1). The situation
differs significantly between the West Bank, where From Jordan Gaza Power Plant
IEC imports represent 99 percent of consumption,
and Gaza, where they represent 64 percent. Modest Source: Palestinian Central Bureau of Statics. 2015. “Quantity of Electricity
amounts of electricity are imported from Jordan Imported (MWh) in the West Bank by Source and Month, 2015” and “Quantity
of Electricity Imported and Purchased (MWh) in Gaza Strip by Source and
into the West Bank and from Egypt into Gaza. The Month, 2015”, Ramallah City. http://www.pcbs.gov.ps/site/886/Default.aspx
Palestinian Authority has set targets to develop 130
megawatts (MW) of renewable energy by 2020, but
only 18 MW had been developed as of June, 2017. of renewable technologies such as rooftop solar
photovoltaic (PV), with shorter implementation time,
The only large-scale generation capacity in the should be prioritized.
territories is the troubled Gaza Power Plant (GPP).
The 140 MW diesel-fired plant was developed as The electricity sector in West Bank and Gaza has
an “independent power project” (IPP) and has been undergone several institutional reforms, which
operating since 2004 on a 20-year power-purchase still require further consolidation. In 1995, the
agreement (PPA) involving significant take-or-pay sector was reorganized to cluster most of the former
capacity charges. Due to the high cost of diesel municipal service providers into six local distribution
fuel, the plant is so expensive to operate — NIS utilities. The Electricity Law of 2009 created the
1.05–1.65 (US$0.29–0.46) per kilowatt hour — that Palestinian Electricity Regulatory Council (PERC), with
it can typically be run only at half capacity. It has also responsibility for tariff setting and monitoring, as well
suffered repeated damages during armed conflicts, as the Palestinian Electricity Transmission Company
which affected its fuel storage capacity. The best Ltd (PETL), a new transmission operator and
prospect is to convert the plant to natural gas, which wholesale single buyer. While there is no Palestinian
would reduce operating costs to about a third of transmission infrastructure at present, PETL will take
current levels. In parallel, considering the expected charge of four high-voltage substations, three of
long lead time of such a conversion, the development which have been built, to manage the flow of high
Securing Energy for Development in the West Bank and Gaza | 5
voltage power from Israel into the West Bank, which utilities has been improving, full cost recovery has not
previously took place through a myriad of low voltage yet been achieved. In 2015, Distribution Companies
connection points. (DISCOs) recovered revenue for only 64 percent of
the electricity they purchased in the West Bank
The electricity sector has yet to establish a track (table 1), and 50 percent in Gaza. Third, even when
record as a creditworthy buyer for wholesale revenues are collected, they are sometimes diverted
power. There are three layers to this problem. First, by municipal governments to cover other subnational
despite important efforts by PERC, electricity is not expenditures rather than being channeled to the
priced at cost-recovery levels throughout the West purchase of power. Thus, implicit subsidies to the
Bank and Gaza. The gap between tariffs and costs electricity sector have been estimated at close to 1
is particularly large in Gaza, where tariffs have not percent of gross domestic product (GDP) in the West
been adjusted during the past decade. Second, Bank and 4–5 percent of GDP in Gaza.
while the operational performance of the distribution
TABLE 1: OVERVIEW OF WEST BANK AND GAZA ELECTRICITY DISTRIBUTION
COMPANIES, 20151
GEDCO TOTAL JDECO NEDCO HEPCO SELCO TEDCO
WEST
BANK1
Scale
Customers 231,500 436,389 256,314 90,265 45,660 25,650 18,500
Purchased electricity (NIS millions) 795 1,398 871 250 164 71 42
Billed electricity (NIS millions) 518 1,509 949 245 193 76 46
Net annual income/loss (NIS millions) n.a. -76 -82 9 9 -15 3
Performance
Losses: Technical and nontechnical 26% 22% 24% 17% 20% 28% 16%
Collection ratio 65% 89% 91% 98% 81% 71% 76%
Overhead costs (ie, Operations and 8% 17% 22% 5% 10% 21% 17%
maintenance) as percentage of purchased
electricity
Source: Information provided by the Gaza Electricity Distribution Company (GEDCO), Jerusalem District Electricity Company (JDECO), Northern Electricity
Distribution Company (NEDCO), Hebron Electricity Power Company (HEPCO), Southern Electricity Distribution Company (SELCO), Tubas Electricity
Distribution Company (TEDCO).
6 | Securing Energy for Development in the West Bank and Gaza
Figure 2: Electricity Sector Debt to IEC, 2008–2015
2,500
Debt to IEC (NIS millions)
2,000
1,500
1,000
500
0
2008
2009
2010
2011
12/12/17
1/13/17
10/13/17
11/13/17
12/13/17
1/14/17
2/14/17
3/14/17
4/14/17
5/14/17
6/14/17
7/14/17
8/14/17
9/14/17
10/14/17
11/14/17
12/14/17
1/15/17
2/15/17
3/15/17
4/15/17
5/15/17
6/15/17
7/15/17
8/15/17
9/15/17
10/15/17
11/15/17
All other DISCOs JDECO Total
Source: Information provided by ECO Energy.
Note: IEC = Israeli Electric Corporation; DISCO = Distribution Company; JDECO = Jerusalem District Electricity Company.
The poor record of paying for power imported from accumulated debt owed to IEC exceeded NIS 2
Israel has led to the so-called net lending crisis billion (US$500 million) (figure 2). An agreement
and a large accumulation of outstanding debt. The was reached in September 2016 that allowed for
power purchased from IEC is only partially paid for by the settlement of past accumulated debt and laid
the DISCOs, with the unpaid portion being partially the vision for a future power market with imports
covered through net lending (a fiscal mechanism channeled through the new high-voltage substations
whereby money is deducted from clearance revenues and tariffs set according to a new, long-term power-
that would otherwise be transferred from Israel to purchase agreement. According to this vision, PETL
the Palestinian Authority) and partially accumulated would act as the single buyer, purchasing power from
as outstanding debt. By September 2016, the IEC and selling it to the DISCOs.
Securing Energy for Development in the West Bank and Gaza | 7
What Options Exist for
Improving Energy Security in
the West Bank and Gaza?
Looking forward, the West Bank and Gaza have Nevertheless, historical imports from Egypt into Gaza,
several tangible options for expanding and diversifying which have been managed through the local Egyptian
electricity supply. For example: distribution company rather than the national Egyptian
transmission operator, have proved unreliable due to
Israeli electricity imports continue to be a valid security issues in Sinai. In addition, Gaza has not yet
option, but this route requires a significant scaling established any payment record with Egypt, since
up of interconnection capacity. Israel has a strong the cost of these imports has been covered by third
track record of providing reliable power supply to the party benefactors to date. Finally, neither Jordan nor
West Bank and Gaza. As long as the net lending crisis Egypt has access to the controversial net-lending
can be satisfactorily resolved, there is potential to mechanism that has provided Israel with an informal
increase Israeli power imports to the two economies, payment-security mechanism to at least partially
provided the existing interconnection capacity is offset payment risk from the West Bank and Gaza.
upgraded accordingly. The West Bank and Gaza
combined already represent IEC’s largest and fastest- Thanks to major gas discoveries in the eastern
growing electricity customer. However, IEC is facing Mediterranean, it would be feasible in the medium
high levels of indebtedness and an uncertain operating term to import gas to the West Bank and Gaza
structure. Under the current Israeli power sector for power generation. Israel became a major gas
reform, all new Israeli generation capacity is being producer in 1999 with the discovery of the 10.9
developed by independent power producers, which trillion-cubic-foot (TCF) Tamar field. The imminent
may present an alternative and more commercially development of the 21.9 TCF Leviathan field will
oriented Israeli power supply option for the West make Israel a gas exporter. The Israeli government
Bank and Gaza in the future. has already given approval for a 40-kilometer pipeline
extension from the Ashkelon terminal in Israel into
Increasing power imports from Jordan and Egypt Gaza, which would enable the conversion of GPP to
is a realistic medium-term option, although it is operate on natural gas, as well as for a 15-kilometer
not without challenges. Jordan and Egypt have spur from the Israeli national gas transportation
recently overcome power supply crises caused by a network into Jenin in the north of the West Bank, to
shortage of Egyptian gas and are now heading for allow for the construction of a new 400 MW combined
significant power surpluses. In principle, the existing cycle gas turbine (CCGT) plant.
interconnection capacity of 20 MW from Jordan and
20–30 MW from Egypt could be upgraded to support The Gaza Marine gas field, discovered almost two
higher volumes of imports. Jordanian electricity has decades ago, has yet to be developed. The eventual
been more expensive than Israeli power, due to heavy development of this 1.2 TCF gas field could eliminate
reliance on liquefied natural gas, but is expected to the need for Israeli gas. The investment costs of
become cheaper as Israeli gas enters the Jordanian developing Gaza Marine have been estimated at
market and as the share of renewables increases in US$0.25 billion to US$1.20 billion, depending on the
Jordan. Egyptian power is currently cheaper than extent to which existing gas infrastructure is shared
Israeli power due to the historic low cost of natural with Israel. However, development would require a
gas, while the size of Egypt’s power system is about gas supply contract with a creditworthy buyer, and it
30 times that of West Bank and Gaza’s demand, will take some time before gas demand in the West
making it relatively easy for Egypt to supply the Bank and Gaza builds up to the requisite levels (figure
scale of power needed in West Bank and Gaza. 3). Once developed, Gaza Marine has the potential
8 | Securing Energy for Development in the West Bank and Gaza
Figure 3: Estimated Natural Gas Demand in the West Bank and Gaza until 2030
1.2
Demand (Billion cubic meters)
1.0
0.8
0.6
0.4
0.2
0.0
2022 2023 2024 2025 2026 2027 2028 2029 2030
West Bank Gaza Combined
Source: Information provided by ECO Energy.
to generate US$2.7 billion in fiscal revenues for the solar potential of over 3,000 MW estimated in Area
Palestinian Authority over an estimated 25 years C, which would be suitable for both PV and CSP
of production. technologies. Nevertheless, the significant political
challenges associated with securing Israeli approval
There is substantial potential for solar electricity in for construction in Area C cast some doubt over the
the West Bank, particularly in Area C (table 2). Solar possibility of developing this resource. By contrast,
energy is the only significant renewable resource in extreme land constraints in the Gaza strip limit the
the Palestinian Territories. The technical potential in available solar potential to 160 MW of rooftop solar.
the West Bank is estimated to be around 530 MW of However, even this limited solar capacity could play a
rooftop solar PV, and at least 100 MW of utility scale vital role in increasing energy security and acting as
solar in Areas A and B. This is dwarfed by the vast an electricity safety net.
Securing Energy for Development in the West Bank and Gaza | 9
TABLE 2: SOLAR ENERGY POTENTIAL IN THE WEST BANK AND GAZA
POTENTIAL AVAILABLE RE CAPACITY (MW)
Utility scale PV or CSP
Areas A and B Area C Total
West Bank 103 3,374 3,477
Gaza 0
Combined 3,477
Rooftop solar
Residential Public Commercial Total
West Bank 490 13 31 534
Gaza 136 8 19 163
Combined 626 21 50 697
Source: World Bank estimates.
Notes: For utility scale PV or CSP, according to PETL and the Palestinian Energy and Environmental Research Center (PEC), 0.12 percent of Areas A and B
and 3 percent of Area C are available for solar installations. The land requirement is about 28 square meters per kilowatt peak (includes space for control rooms
and so forth). For rooftop PV, according to the Palestinian Central Bureau of Statistics and PEC, in West Bank and Gaza, there are over 400,000 residential,
2,500 public sector, and 5,000 commercial sector rooftops. The rooftop areas range from 150 to 300 square meters, and 30–50 percent of the rooftops are
available for solar installations. The rooftop space requirement is nine square meters per kilowatt peak. RE = Renewable Energy; MW = Megawatts; PV =
photovoltaic; CSP = concentrated solar power.
Measures to improve energy efficiency can As domestic generation capacity expands,
make a valuable contribution to energy security. transmission infrastructure must develop. At
The National Energy Efficiency Action Plan aims present, there is no significant power transmission
to make savings equivalent to 1 percentage point infrastructure in the West Bank and Gaza. Most
of energy consumption annually through 2020. It power is simply absorbed and distributed from the
focuses primarily on reducing electricity consumption Israeli grid at low voltage. As the Palestinian territories
by improving the energy efficiency of residential increase their domestic generation capacity, there
buildings. A much more ambitious action plan is will be an increasing need to move power from the
under consideration by the Palestinian Energy and point of generation to centers of demand, which
Natural Resources Authority (PENRA) for 2020– may be located some distance away. In Gaza, this
2030. It aims to save 5 percent of the anticipated will call for creating a transmission backbone within
energy consumption during that period. The new the compact urban area. In the West Bank, this could
strategy encompasses use of high-impact, energy- initially be managed by putting (“wheeling”) power
efficient appliances (such as heaters, fridges, and out into the Israeli grid at one location and bringing it
air conditioners); tightening of efficiency standards back into the West Bank at a different location. The
for buildings; and smart grid infrastructure to allow level and structure of associated wheeling charges
consumers to participate in the energy market as will have a significant effect on the cost of power to
demand response. Investments to improve energy end consumers. As the volume of wheeling rises,
efficiency are proven to be much more cost-effective it will become increasingly attractive to develop a
than expanding power generation capacity. Many of domestic transmission backbone in the West Bank.
the measures included in the government’s plans cost However, since the backbone would need to traverse
between US$0.01 and 0.05 per kilowatt hour (kWh), Area C, the issue of securing the necessary
while new generation would cost at least US$0.10 construction permits from Israel would present a
per kWh. significant challenge.
10 | Securing Energy for Development in the West Bank and Gaza
How Can the West Bank
and Gaza Choose among
the Options?
Choosing among the available energy supply not straightforward to predict. These considerations
options involves balancing technical and financial must be carefully balanced to define the best possible
considerations. Meeting electricity needs typically power generation investment plan, and a range of
involves developing a balanced portfolio that alternative scenarios must be considered. (Box 1
represents a reasonable, affordable cost. provides an overview of alternative scenarios that
were considered in a novel Robust Power System
From a technical standpoint, the options must be Planning Model developed uniquely for this study)
sequenced and packaged into an investment plan
that reliably meets demand. The options described in It is important to understand the tariff implications
the previous section vary in production cost, physical of the preferred investment plan and whether it is
production characteristics, availability, and associated affordable to the population. The costs of providing
risks. For example, gas-fired power generation will be a secure electricity service include the cost not
feasible only after gas transportation infrastructure only of power generation but also of the associated
is completed and a gas supply agreement can transmission and distribution infrastructure. Inefficient
commence, while generating solar power from operation could inflate costs. Given fiscal constraints in
PV panels is subject to variability in solar radiation the West Bank and Gaza, domestic power generation
throughout the day and from one day to another. could be developed by the private sector under a
Gas-fired power generation may be vulnerable to power-purchase agreement, leaving public investment
a curtailment of gas supply, while solar power is a for transmission and distribution, for which private
fully indigenous resource. Also, the costs of gas- investment would be difficult to harness. Ultimately,
fired power generation are relatively well understood, these costs must be paid either by the consumer
although they are susceptible to variations in the through retail tariffs or by the government through
price of natural gas, while the costs of generating subsidies. Both sources of funding are constrained,
solar power are declining rapidly along a path that is given the relatively low income of the population and
Box 1: A Robust Power-Systems Planning Model for the West Bank and Gaza
To select from among the energy supply options, a traditional least-cost power-systems planning
model is modified to account for the uncertain nature of the Palestinian context and used to identify
investment plans that are as resilient as possible to alternative states of the world. Five illustrative
planning scenarios for West Bank and Gaza are explored, covering the period through to 2030.
1. ‘Do nothing’ considers how rapidly energy security will deteriorate if no further investments are made.
2. ‘Planned future’ looks at the impact of implementing all investment projects currently in the pipeline.
3. ‘PENRA vision’ explores limiting dependence on any one source of energy to no more than 50 percent.
4. ‘Maximum cooperation’ considers meeting demand growth primarily through increased Israeli imports.
5. ‘Maximum independence’ considers the fullest possible extent of domestic power generation.
Securing Energy for Development in the West Bank and Gaza | 11
Box 2: A Power-Sector Financial Model for the West Bank and Gaza
The planning model (see box 1) feeds into a comprehensive financial model of the West Bank and
Gaza power sector. This sheds light on the financial implications of any investment scenario. The
financial model looks at how the selected generation investment plan translates into an average cost
of power generation, converts this into a wholesale power tariff by incorporating the costs of any future
transmission system, overlays a distribution margin to create a retail tariff, and, finally, assesses the
affordability of this tariff to the population, as well as the fiscal implications of any remaining subsidies.
Figure B2.1 The Power-Sector Financial Model
Poor Government Affordability
households subsidies thresholds
Distribution investments
DISCOs Retail tariff
Distribution operating margin
Wholesale power purchase
(imports plus IPPs)
Transmission investments PETL Bulk supply tariff
Transmission operating margin
Note: IPP = independent power producer, PETL = Palestinian Electricity Transmission Company Ltd, DISCO =
the limited budget of government. An important reality as Jenin and Nablus—having already experienced
check for any power-sector investment plan is to unserved demand in 2016. To avert this outcome, the
examine its impact on retail tariffs, determine whether West Bank must develop several alternative energy
these are affordable, and, if not, determine what the supply options.
potential size of the associated subsidy bill would be.
Due to the diverse features of the power sector in the The development of gas-fired power generation
two territories, the study analyses the West Bank and and renewable energy should be pursued more
the Gaza Strip separately. (For more information on intensively, considering the cost convergence of
the financial model of the electricity sector developed different energy supply options over time (figure 4).
for this study, see box 2.) As of 2017, there is a wide variation in the cost of the
different energy supply options available to the West
WHAT DOES THE WEST BANK’S Bank, and Israeli imports carry a cost advantage over
ENERGY FUTURE LOOK LIKE? any of the alternatives. However, this changes over
time. Gas-fired power generation, once available,
Failure to invest in the West Bank’s power sector proves to be cheaper than Israel imports. While
would lead to deepening shortages over time. Under continuing technological change in renewable energy
the ‘do nothing’ scenario, unserved demand rises brings the cost of utility-scale PV below the cost of
from negligible levels today to reach 9 percent of the Israeli imports before the end of the planning horizon.
forecasted load by 2030, with certain locations—such Rooftop solar and even concentrated solar power
12 | Securing Energy for Development in the West Bank and Gaza
Figure 4: Time Trends for the Levelized Cost of Energy for Different Supply Options
in the West Bank
0.20
Levelized Costs (U.S. dollars / KWh)
0.18
0.16
0.14
0.12
0.10
0.08
0.06
0.04
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Rooftop solar, Commercial solar, CSP-6h, from $6,332/kW
from $2,500/kW from $1,248/kW
CCGT-Gas, from Israel import Jordan import
$6.5/MMBTU
Source: World Bank estimations
Note: kW = kilowatt hour; GPP = Gaza Power Plant; MMBTU = Million British Thermal Units .
start to look a lot more competitive. These evolving investments of between US$0.85 billion and
relative costs of power generation are one important US$2.28 billion.
driver of project selection. 3. Unserved demand: All scenarios that bring new
investment into power generation ensure that all
There are several attractive power-development demand can be reliably met.
scenarios available to the West Bank, all of which 4. Reliance on electricity imports: The degree of
are broadly competitive with Israeli power imports. reliance on Israeli imports ranges from 96 percent
The performance of the five alternative scenarios in the “maximum cooperation” scenario to 36
presented by the planning model can be compared percent in the “maximum independence” scenario.
along several dimensions, with no single scenario Hence, Israel remains a significant source of
dominating on every dimension (table 3). electricity under any eventuality.
5. Reliance on imported fuel: All the scenarios
1. Average cost of power generation: This is a entailing significant development of power
key driver of retail tariffs and varies remarkably generation capacity include reliance on gas
little across the scenarios considered for the imports to meet between 32 and 37 percent of
West Bank, ranging from US$0.098 to US$0.102 electricity needs.
per kWh. This is due to the convergence in the 6. Reliance on domestic renewables: The
cost of different power-generation technologies maximum share that can be reached for domestic
already noted. renewables, even under the most optimistic
2. Capital expenditure: Scenarios contemplating scenario, is 19 percent if production is limited to
continued reliance on Israeli imports require hardly Areas A and B or 30 percent if sites in Area C can
any capital expenditure to be made, whereas be developed.
those involving the development of domestic
power generation capacity would entail private
Securing Energy for Development in the West Bank and Gaza | 13
TABLE 3: COMPARISON OF RESULTS ACROSS PLANNING SCENARIOS FOR THE
WEST BANK
AVERAGE DOMESTIC DOMESTIC
COST OF GENERATION RENEWABLE
POWER CAPEX UNSERVED ELECTRICITY FROM ENERGY
(US$ PER (US$ DEMAND IMPORTS IMPORTED GENERATION
KWH) MILLIONS) IN 2030 IN 2030 FUEL IN 2030 IN 2030
1. Do nothing 0.0979 0 9.0% 90.0% 0% 0.4%
2. Planned future 0.1006 850 0% 64.0% 32.0% 4.0%
3. PENRA vision 0.1016 2,133 0% 45.0% 37.0% 19.0%
4. Maximum cooperation 0.0978 174 1.0% 96.0% 0% 4.0%
5. Maximum independence 0.0988 2,284 0% 36.0% 34.0% 30.0%
Note: CAPEX = capital expenditure; PENRA = Palestinian Energy and Natural Resources Authority.
Figure 5: Results of the PENRA Vision Scenario for the West Bank
PENRA Vision: “Dependency ratio on any one source should not exceed 50% in best conditions, with a possibility of
importing all needs in case of emergency.”
B. West Bank energy supply (GWh)
8,000
7,000
6,000
5,000
4,000
3,000
2.000
1,000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
Note: RE = renewable energy; PV = photovoltaic; CCGT= combined cycle gas turbine; GT = gas turbine, Genset = Generator.
Overall, the PENRA vision scenario looks relatively to sustain the envisaged investments in generation in
attractive (figure 5). It calls for development of gas- the West Bank, as well as the associated transmission
fired power-generation capacity along with aggressive and distribution costs, rises in the medium term to NIS
expansion of solar energy on rooftops and in Areas A and 0.66 (US$0.18) per kWh, well above current levels
B to attain over 500 MW of solar PV capacity by 2030— of NIS 0.55 (US$0.15) per kWh (figure 6). However,
about four to five times the current target. By 2030, this if the operational and commercial efficiency of the
scenario achieves a relatively balanced consumption distribution utilities could be improved over the same
of domestic solar and gas-fired power generation with time, the financial equilibrium tariff could drop toward
Israeli imports. Import capacity is nonetheless kept NIS 0.58 (US$0.16) per kWh by 2030. Essentially,
higher than strictly needed to provide backup in the case addressing the shortcomings of the distribution
of shortfalls in the other sources of energy. utilities can reduce the retail tariff by as much as NIS
0.07 (US$0.02) per kWh. Failure to adjust tariffs as
To implement the PENRA’s vision, electricity tariffs needed would create a financial deficit in the sector
would need to increase significantly in the medium peaking at NIS 600 million (US$165 million) per year
term, but could decline over time if efficiency by 2022 (equivalent to 6 percent of the 2016 public
targets are met. The financial equilibrium tariff needed budget for the West Bank).
14 | Securing Energy for Development in the West Bank and Gaza
Figure 6: Equilibrium Tariff Needed to Finance Preferred Sector Investment Plan for
the West Bank
0.75
Equilibrium tariff (NIS/KWh)
0.70
0.65
0.60
0.55
0.50
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
PENRA vision PENRA vision 2015 average
(no efficiency gains) (with efficiency gains) retail tariff
Note: PENRA = Palestinian Electricity and Natural Resources Authority
Figure 7: Targeted Subsidy Requirement to Offset Affordability Concerns for the
Bottom Income Decile in the West Bank
25
Required Subsidy (NIS millions )
20
15
10
5
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
JEDCO NEDCO HEPCO SELCO TEDCO
These tariffs would present an affordability households to meet their basic electricity needs.
problem only for the poorest households in the Based on the distribution of income in the West Bank,
West Bank, and this could be addressed through only the poorest 10 percent of the population would
a modest targeted subsidy. According to usual struggle to buy 160 kWh per month at the required
practice, electricity service is considered affordable financial equilibrium tariff of NIS 0.66 (US$0.18) per
if households can meet their electricity basic needs kWh. Assuming that these needy households could
without spending more than 5 percent of their monthly be identified using existing social registries, the
budget. In the context of the West Bank and Gaza, cost of a targeted subsidy to safeguard their basic
the retail tariff increases with higher consumption consumption would amount to no more than NIS
in pre-defined blocks. The first block of the tariff 25 million (US$7 million) per year in 2022, declining
schedule, set at 160 kWh per month, broadly allows further as tariffs come down thereafter (figure 7).
Securing Energy for Development in the West Bank and Gaza | 15
WHAT DOES GAZA’S ENERGY FUTURE The cost of the diesel-fired GPP becomes
LOOK LIKE? increasingly unattractive over time relative to
alternative options (figure 8). As of 2017, the GPP is
Failure to invest in Gaza’s power sector would already very expensive compared to alternatives and
make an already dire situation worse. Gaza is this cost is projected to rise along with the international
unable to meet 50 percent of its demand today. If oil price. Israeli electricity can be imported at fraction of
no further power options are developed, the extent the cost of current domestic generation, and Egyptian
of unserved energy would escalate to 63 percent of imports are even cheaper though heavily restricted
demand by 2030. To avert this outcome, Gaza needs in supply and rather unreliable. Conversion of the
to develop additional power supply options, albeit GPP to natural gas would make it competitive with
from a much more limited menu than that available to Israeli and Egyptian imports. While rooftop solar looks
the West Bank. relatively expensive today (though still undercutting
Figure 8: Time Trends of Levelized Cost of Energy for Different Supply Options in Gaza
0.45
Levelized Cost (U.S. Dollar/KWh)
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Rooftop solar, GPP on gas, from GPP on diesel,
from $2,500/kW $6.5/MMBTU from $19.8/MMBTU
CCGT gas, from Israel import Egypt import
$6.5/MMBTU
Note: kWh = kilowatt hour; GPP = Gaza Power Plant; MMBTU = Million British Thermal Units; CCGT = combined cycle gas turbine.
TABLE 4: COMPARISON OF RESULTS ACROSS PLANNING SCENARIOS FOR
GAZA
DOMESTIC DOMESTIC
AVERAGE GENERATION RENEWABLE
COST OF CAPEX UNSERVED ELECTRICITY FROM ENERGY
POWER (US$ (US$ DEMAND IMPORTS IMPORTED GENERATION
PER KWH) MILLIONS) IN 2030 IN 2030 FUEL IN 2030 IN 2030
1. Do nothing 0.1468 0 63% 26% 11% 0%
2. Planned future 0.1339 1,035 0% 26% 68% 6%
3. PENRA vision 0.1230 1,066 0% 47% 46% 6%
4. Maximum 0.1037 385 0% 93% 0% 6%
cooperation
5. Maximum 0.1515 1,185 2% 9% 83% 6%
independence
Note: CAPEX = capital expenditure; PENRA = Palestinian Energy and Natural Resources Authority.
16 | Securing Energy for Development in the West Bank and Gaza
the GPP), the cost is expected to fall significantly generation is developed to the fullest extent. In
over the planning horizon converging towards Israel marked contrast to the West Bank, the premium
imports. These changing patterns of relative costs are for energy independence in Gaza amounts to a
one key driver of investment planning decisions. substantial 50 percent of costs.
2. Capital expenditure: Scenarios contemplating
The options for Gaza are much more constrained continued reliance on Israeli imports require hardly
than for the West Bank, and the premium associated any capital expenditure to be made, whereas
with energy independence is particularly high. The those involving the development of domestic
key energy policy issue for Gaza is where to strike the power-generation capacity would entail private
balance between Israeli imports and domestic gas- investments of just over US$1 billion.
fired power generation, while intensively developing 3. Unserved demand: All scenarios that bring new
solar rooftop PV. The performance of the five alternative investment into power generation ensure that
scenarios presented by the planning model can be all demand can be reliably met, although some
compared along several dimensions (table 4). chance of unserved demand remains when there
is no diversification from Israeli imports.
1. Average cost of power generation: This is a 4. Reliance on electricity imports: The degree of
key driver of retail tariffs and varies greatly across reliance on Israeli imports ranges from 93 percent
the scenarios considered for Gaza, ranging from in the “maximum cooperation” scenario to only 9
US$0.10 per kWh, if power is entirely sourced from percent in the “maximum independence” scenario.
Israeli imports, to US$0.15 per kWh if domestic 5. Reliance on imported fuel: All the scenarios
Securing Energy for Development in the West Bank and Gaza | 17
entailing significant development of West Bank commissioning of new 161 kilovolt lines to expand
and Gaza power-generation capacity rely on gas import capacity from Israel. Further out, once gas
imports to meet between 46 and 83 percent of becomes available, the GPP comes back into service
electricity needs. In that sense, the “maximum and plays a growing role in meeting energy needs.
independence” scenario essentially only By 2030, the scenario sees an almost 50:50 reliance
replaces dependence on electricity imports with on self-generation through gas and Israeli imports. In
dependence on gas imports. addition, rooftop solar provides a safety net to meet
6. Reliance on domestic renewables: Gaza’s critical needs under emergency conditions.
renewable energy potential is limited to rooftop
solar, and this is unable to meet more than 6 The tariff impact of implementing the PENRA
percent of energy needs under any scenario but vision is substantial, although it can be somewhat
should still be maximized to provide a basic safety offset by operational efficiency gains. Any scenario
net where possible. involving significant investment in domestic power
generation in Gaza entails financial equilibrium
Among the energy diversification options for Gaza, tariffs of the order of NIS 0.91 (US$0.25) per kWh
the PENRA vision is the one offering the lowest cost in the medium term, well above the current levels
premium for energy independence. The differential of NIS 0.52-0.56 (US$0.14-0.15) per kWh (figure
average cost of generation between PENRA’s vision 10). These would eventually decrease to about NIS
and the “maximum cooperation” scenario is NIS 0.07 0.62 (US$0.17) per kWh, but only if the Gaza utility
(US$0.02) per kWh, or about 20 percent, still relatively substantially improves its operational and commercial
high but preferable to the alternatives. The PENRA performance in line with regional best practice; this
vision scenario envisages a phasing out of diesel- can reduce the retail tariff by as much as NIS 0.47
fired power generation in the short run and increased (US$0.13) per kWh by 2030. Failure to adjust tariffs
reliance on Israeli imports (figure 9). This brings a would result in a financial shortfall of around NIS 700
double benefit by bringing power generation costs million (US$200 million) by the mid-2020s (equivalent
down to a third of current levels while at the same time to 12.5 percent of the public budget for 2016).
expanding supply to a point where current outages
can be offset. This achievement is contingent on the
Figure 9: Results of the PENRA Vision Scenario for Gaza
PENRA Vision: “Dependency ratio on any one source should not exceed 50% in best conditions, with a possibility of
importing all needs in case of emergency.”
A. Gaza Supply Capacity B. Gaza energy supply (GWh)
in 2030 (MW)
5,000
4,000
3,000
2,000
1,000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
Note: RE = renewable energy; PV = photovoltaic; CCGT= combined cycle gas turbine; GT = gas turbine, Genset = Generator.
18 | Securing Energy for Development in the West Bank and Gaza
Figure 10: Equilibrium Tariff Needed to Finance Preferred Sector Investment Plan
for Gaza
Equilibrium tariff (NIS/KWh) 1.6
1.4
1.2
1.0
0.8
0.6
0.4
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
PENRA vision PENRA vision 2015 average
(with efficiency gains) (no efficiency gains) retail tariff
Figure 11: Targeted Subsidy Requirement to Offset Affordability Concerns in Gaza
100
Required Subsidy (NIS millions)
90
80
70
60
50
40
30
20
10
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Subsidy to Subsidy to Subsidy to Subsidy to
1st decile 2nd decile 3rd decile 4th decile
Affordability is a much more serious concern in cost of a targeted subsidy to safeguard their basic
Gaza than the West Bank, given higher costs of consumption would amount to approximately NIS
electricity and a more impoverished population. 80 million (US$22 million) per year in 2021. However,
Based on the distribution of income in Gaza, as tariff levels decline toward 2030, they would also
as much as 40 percent of the population would become more affordable, such that by the end of the
struggle to buy 160 kWh per month at the required planning horizon social protection would be needed
financial equilibrium tariff of NIS 0.91 (US$0.25) per for only the poorest 10 percent of the population
kWh. Assuming that these needy households could (figure 11).
be identified using existing social registries, the
Securing Energy for Development in the West Bank and Gaza | 19
What Measures Need to Be
Taken by Government?
To make progress toward greater energy security, First, replace generation from the GPP with
the Palestinian Authority needs to adopt a increasing electricity imports from Israel to provide
sequenced approach to addressing critical policy relief until a conversion to gas can be undertaken.
bottlenecks. The starting point for this roadmap is The cost of diesel-fired generation at the GPP is very
the completion of the power-purchase agreement high, at approximately US$0.30 per kWh, even at
with Israel currently under negotiation and the current low oil prices. This is approximately three times
subsequent energization of PETL’s four high-voltage the cost of power imports from Israel, which provides a
substations in the West Bank. Considering the delays more reliable source of supply. Until the GPP is ready for
in the bilateral negotiations, PETL should seize the the switch to gas-fired generation, which would slash
opportunity to agree on power supply agreements costs to US$0.068 per kWh, it would be desirable to
with Palestinian distribution companies. These substitute domestic diesel-fired power generation with
downstream arrangements need to be in place Israeli power imports, taking advantage of the new 161
before the power-purchase agreement with Israel is kilovolt line that is in an advanced stage of planning.
signed. Once these immediate measures are taken, Even if the capacity charges of US$0.026 per kWh to
the question becomes what needs to be done next to the GPP continue to be paid as per the existing 20-
move toward the vision of improved energy security in year PPA, every reduction of one kWh in diesel-fired
the Palestinian territories. The analysis suggests that power generation would be sufficient to buy two kWh
a certain sequence of measures needs to be taken. of Israeli imports. Such a move would simultaneously
Four distinct phases have been identified (table 5). reduce costs and increase quantity and reliability of
supply, and thereby increase prospects for improved
PHASE 1 cost recovery through tariff revenues.
The first phase, and absolute priority, is to improve Second, accelerate improvements in the operational
the creditworthiness of the sector, without which and commercial performance of Palestinian DISCOs.
none of the alternative supply arrangements could Cost recovery tariffs could be reduced substantially over
be consummated. Progress on all other aspects time if the operational and commercial performance of
of the Palestinian energy sector depend on greater the Palestinian DISCOs improved to reasonable regional
creditworthiness. Without it, the sector cannot sign benchmark levels. For the utilities in the West Bank,
new power-import deals or close power-purchase improved operational performance would take US$0.03
agreements with independent power producers for per kWh off the financial equilibrium tariff, while in Gaza
increased domestic power-generation projects, let improving operational performance is worth as much as
alone import natural gas. None of these ventures US$0.11 per kWh. Achieving further improvements can
can get off the ground unless the Palestinian build on some recent successes with the introduction of
electricity sector strengthens its creditworthiness. prepaid and smart meters that helped to raise revenue
Financial security will bring about energy security, collection rates to 85 percent on average across the
but the reverse is not true. There are several distinct utilities. Moreover, across the board, attention needs to
components that must be tackled if creditworthiness turn toward improving network losses, which remain very
is to be improved. high despite all efforts. It is recommended that a revenue
protection program be established to permanently
measure and bill every kWh sold to the largest DISCO
customers with state-of-the-art technology.
20 | Securing Energy for Development in the West Bank and Gaza
Third, create securitization mechanisms to ensure with Israel and the energization of four high-voltage
that Palestinian DISCO revenues are not diverted substations. The signing of an interim power-
to other municipal projects. Due to the lack of a purchase agreement with Israel to energize the Jenin
subnational financing framework in the Palestinian high-voltage substation, which took place in July
territories, DISCO revenues remain vulnerable to 2017, was the first step toward PETL’s financial and
diversion into municipal budgets. The long-term operational sustainability. PETL is now able to resell
solution, which is to strengthen the basis of subnational the discounted high voltage power to DISCOs at a
public finance, is important for development reasons slight markup, allowing it to obtain revenues. The start
that go well beyond the energy sector. However, it of PETL’s commercial operations enable the company
will likely take some time to achieve. Hence the to gradually move beyond donor dependency, paving
importance of finding interim mechanisms to securitize the way for development of domestic independent
the revenues needed for the DISCOs to meet the power projects. In the meantime, until the full power-
costs of wholesale power purchase. This could take purchase agreement for all four substations is signed
the form of escrow accounts to ring fence electricity with Israel, PETL should make further progress
bill payments with a payment prioritization hierarchy toward its goal of being the single buyer, by ensuring
ensuring payment to wholesale suppliers. The issue that all wholesale power purchases are undertaken
of securitization of revenues is particularly critical in through its intermediation to improve transparency
Gaza, and would be an essential component of any and discipline of the sector.
moves to substitute increased Israeli power imports
for domestic diesel-fired power generation. PHASE 2
Fourth, ensure that all Palestinian DISCOs move While the absolute priority is to improve the
toward cost recovery. Not all Palestinian DISCOs creditworthiness of the electricity sector, there
are charging cost-recovery tariffs. Only two utilities, are several other no-regrets measures that can
JEDCO and NEDCO, make formal tariff submissions advance in parallel during a second phase.
to PERC. The resulting uniform tariff that is applied Even after decisive steps are taken to address
across all Palestinian utilities in the West Bank is creditworthiness, time will be needed for a payment
estimated to under recover costs for all but NEDCO. record to be established and a reputation to be
Moreover, PERC’s practice of not passing through built. During this period of consolidation, it would
collection inefficiencies to the retail tariff, while be helpful to accelerate measures that facilitate the
defensible from the standpoint of consumers, further development of other power supply options that will
weakens the financial solidity of the sector. In addition, become feasible once the issue of creditworthiness
GEDCO in Gaza does not follow PERC tariff guidelines has been adequately addressed.
and has not adjusted its electricity tariff for a decade,
currently charging a retail tariff that is US$0.03–0.05 First, create the infrastructure needed to support
per kWh lower than the wholesale purchase price of the import of natural gas into the Palestinian
electricity, without considering the costs of power territories. All the planning analysis confirms the
distribution. The higher costs of electricity production strategic role that natural-gas-fired power generation
in Gaza combined with the sensitive social context can play in the electricity mix for both the West Bank
suggest that efforts to improve cost recovery in Gaza and Gaza as well as its relatively attractive cost. The
would need to be preceded by the measures noted first step in making this possible is to construct the
to both reduce costs and improve the availability of relatively modest pipeline extensions needed for the
power supply. import of gas from the Israeli system. These will create
the platform to have credible negotiations for gas
Fifth, build the capacity of PETL to play its supply agreements and ultimately the construction
envisaged role in the sector. In the new sector of new gas-fired plants, or the conversion to gas in
architecture, PETL has been assigned a dual role of the case of Gaza. The Gas-for-Gaza Project led by
transmission system operator and single buyer and the Office of the Quartet has focused its efforts on
central bookkeeper of the electricity sector. However, removing key obstacles for the construction of a gas
its start of commercial operations has been delayed pipeline from Israel to the GPP.
pending the closure of a power-purchase agreement
Securing Energy for Development in the West Bank and Gaza | 21
Second, pursue an aggressive program to PHASE 3
promote rooftop solar PV. Unlike utility scale solar
power, rooftop solar PV is highly decentralized In a third phase, it will become possible to make
and is not contingent on progress toward sector progress with the first major wave of Palestinian
creditworthiness and the capacity of PETL. Moreover, independent power projects. These will build on
it has been shown that rooftop solar PV can play a the critical foundational elements tackled under the
valuable role as an electricity safety net to increase first two phases. It makes sense to begin with those
the resilience of the Palestinian electricity system and projects that look to be the most tractable from a
ensure that critical humanitarian needs can be met. technical and political perspective, which suggests
This is particularly true in the case of Gaza, where focusing on developing CCGT capacity and utility-
efforts to pilot rooftop solar programs are already scale solar PV in Areas A and B.
under way.
First, convert the GPP to CCGT gas-fired
Third, complete the domestic transmission technology as the most urgent of the domestic
backbone in Gaza. Domestic transmission constraints power-generation projects. Conversion of the GPP
are already an issue in Gaza, and these will become once a gas pipeline comes on stream would save
more severe as efforts to increase the supply of power between US$45–62 million annually in fuel bills and
bear fruit. It is important to ensure that the modest provide Gaza with a cost-effective domestic source
but needed transmission and distribution upgrades of power generation.
are completed in a timely fashion, and certainly well
ahead of any future expansion of the GPP. Second, progress with the construction of a
new CCGT gas-fired plant, initially in Jenin and
Fourth, improve the enabling environment for eventually in Hebron. Once the gas transportation
independent power projects. While the financial infrastructure is in place, and some improvements
creditworthiness of the sector is the single largest to the sector environment have been achieved, the
impediment to the implementation of independent implementation of the Jenin CCGT plant should be
power projects, there are several simple measures that relatively straightforward. Guarantees may be required
could improve the quality of the enabling environment, to reduce the risk of nonpayment by the off-taker. Two
and which could be handled through secondary important issues need to be addressed in the project
legislation or executive regulations that develop broad design. One is the arrangement for selling any surplus
provisions in the existing sector legislation. These energy back to the Israeli grid. The other is to ensure
include further clarifying the provisions for licensing that the terms of a future gas supply agreement are
new generators and the provisions associated with sufficiently flexible to allow for an eventual switch of
connection to the grid. The roles of PERC and PETL supply to or from the Gaza Marine gas field should
in this process need to be further spelled out. this prove desirable.
Fifth, establish a risk-mitigation mechanism Third, embrace a more ambitious target for utility-
to support the next generation of Palestinian scale solar PV farms in Areas A and B. As noted
independent power projects. Risk mitigation in the planning analysis, it looks feasible to develop
is no substitute for addressing fundamental more than 600 MW of solar PV capacity in the West
creditworthiness issues, and it does not make Bank based on potential just in Areas A and B as
sense to move ahead with risk mitigation until the well as rooftop. This goes far beyond the current
Palestinian Authority has demonstrated a sustained target of 130 MW by 2020. With the improvements
and credible commitment to improving the underlying in the enabling environment in place, as well as the
financial standing of the sector. Nevertheless, risk establishment of risk-mitigation mechanisms, it
mitigation may play a valuable role in getting the next should become feasible to scale up and accelerate
generation of Palestinian independent power projects efforts to develop this solar potential.
off the ground. It would therefore be valuable to work
with donors to develop a suitable mechanism for Fourth, establish suitable wheeling arrangements
risk mitigation, evaluating the relevance of a range of with Israel. As the volume of domestic power
financial instruments such as guarantees, first loss, generation in the West Bank ramps up, there will be
blended finance, and viability gap finance. increasing need to move power away from generation
22 | Securing Energy for Development in the West Bank and Gaza
plants and toward Palestinian load centers. At a dialogue process that over time can help clarify
present, this can be done only by wheeling power the modalities for making use of Area C. A related
out through the Israeli grid and reimporting it into the issue is the need to coordinate Palestinian plans to
West Bank at another location. The analysis suggests ramp up renewable-energy generation with those that
that wheeling charges are relatively costly, particularly also exist on the Israeli side, in order to ensure that
if low-voltage networks are needed. It will therefore be challenges related to grid stability and the integration
important to ensure that the number of substations of intermittent sources can be adequately handled to
in the West Bank increases to keep pace with the the benefit of both sides.
expansion of domestic supply. It would also be
important to have a dialogue with the Israeli regulator, PHASE 4
regarding the charges for wheeling and to explore
possible alternative arrangements (such as power The fourth and final phase would build on earlier
swaps) that may help to contain costs. success to tackle the more challenging, and
potentially transformational, projects needed to
Fifth, engage in dialogue over the use of Area C for complete the Palestinian energy vision. These include
the development of Palestinian power infrastructure the construction of solar generation and transmission
and renewable energy generation. The planning backbone infrastructure in Area C, as well as the
analysis highlights the economic value of Area C, development of the Gaza Marine gas field.
both as a location for grid-based solar generation
and as the conduit for any future Palestinian electricity First, develop a Palestinian transmission backbone
transmission infrastructure. While there is much that in the West Bank. The analysis has shown that as
still needs to be done before the issue of Area C domestic Palestinian power generation ramps up, the
becomes a binding constraint, the political complexity cost of wheeling power through the Israeli grid rapidly
of the issue suggests that it may be helpful to begin become quite significant. A more economic option
Securing Energy for Development in the West Bank and Gaza | 23
in the long term would be to construct a Palestinian for gas. This demand will take time to develop and
transmission backbone. It would need to cut across would be achieved only once significant gas-fired
Area C, which would present significant technical and power generation was on-stream and a solid gas-
political challenges. purchase payment record had been established
in both the West Bank and Gaza. That would be a
Second, develop utility-scale solar PV and CSP suitable juncture to enable signing a bankable deal for
projects in Area C of the West Bank. If a successful the development of the field, allowing the Palestinian
track record of solar farm development can be gas-fired plants to switch gradually from Israeli to
established on the more limited land endowments of Palestinian gas as the new field becomes productive.
Areas A and B, and suitable transmission backbone Given the relatively small volume of Palestinian
infrastructure can be put in place across Area C, the demand, it may make sense to consider the options
West Bank would be ready to benefit from larger for Gaza Marine development that require the least
scale solar development in Area C. This would entail infrastructure development—by making use of
both solar PV and CSP technologies. stranded infrastructure from the Israeli Mari B field—
thereby making the field economic at lower levels of
Third, move ahead with the development of the throughput. The primary value of the Gaza Marine
Gaza Marine gas field. The development of the Gaza field to the Palestinian economy lies not so much
Marine gas field is critically dependent on having a in a supply of gas, which is abundantly available in
creditworthy buyer to sign the gas purchase deal. the region, nor as a source of energy security, since
Given the abundance of gas discoveries in the Palestinian gas would likely be transported through
eastern Mediterranean and the relatively small nature Israeli infrastructure. Rather, the field is an eventual
of the field, development of the field will likely need to source of revenue for the Palestinian Authority,
be underwritten by a significant Palestinian demand estimated at US$2.7 billion over 25 years.
24 | Securing Energy for Development in the West Bank and Gaza
What Are the Costs and
Benefits of Achieving
Energy Security?
The overall investment costs of pursuing energy implementing the proposed investments and
security for the West Bank and Gaza are estimated associated reforms would boost GDP growth by 0.3
to be US$4 billion to US$5 billion (table 6). Of percentage points per year in the West Bank and
this, almost all would take the form of private sector 0.5 percentage points per year in Gaza. Relative to
investment in domestic power-generation capacity, with the counterfactual “do nothing” scenario, the energy
only US$0.3 billion taking the form of public investment subsidy bill would come down by 1.7 percentage
in supporting infrastructure for electricity transmission points of GDP in the West Bank and 5.1 percentage
and distribution as well as gas transportation. Just points of GDP in Gaza. The main macroeconomic
over half would be needed for the West Bank and the benefits would come through freeing up resources
remainder for Gaza. Significant investments would for higher levels of productive investment in
begin in phase 2 of the roadmap, peaking in phase 3, these economies.
and remaining significant in phase 4.
This study shows that it is possible to envisage a
Macroeconomic simulations indicate that the path toward greater energy security for the West
wider development impacts of pursuing these Bank and Gaza, and even if the way is fraught
energy investment pathways would be substantial. with financial, technical, and political challenges,
According to modeling undertaken for this project, inaction is not an option.
TABLE 5: INVESTMENT NEEDS FOR THE PALESTINIAN ELECTRICITY SECTOR,
2017–30 (US$ MILLIONS)
WEST BANK GAZA COMBINED
PUBLIC PRIVATE PUBLIC PRIVATE PUBLIC PRIVATE
Phase 1 - - - - - -
Phase 2 7 800–1,100 135 240–320 142 1,040–1,420
Phase 3 930 900–990 - 1,830–1,920
Phase 4 188 375–500 - 250–1,200 188 620–1,700
Total 195 2,105–2,530 135 1,390–2,510 330 3,495–5,040
Source: World Bank estimates
Securing Energy for Development in the West Bank and Gaza | 25
TABLE 6: OVERVIEW OF THE PROPOSED ROADMAP FOR PALESTINIAN ENERGY SECURITY
PHASE 1: IMPROVE SECTOR PHASE 2: ADVANCE PARALLEL NO REGRETS
CREDITWORTHINESS MEASURES
Substitute Israeli imports for diesel-fired Create infrastructure for import of natural gas
generation in Gaza
P : Gradually ramp down GPP and use the savings P, I : Construct natural gas pipelines for West Bank
to buy additional IEC supply until GPP can be and Gaza paving the way for construction of new/
converted to gas. upgraded power plants.
I : Provide additional power to Gaza through 161kV.
Improve operational and commercial efficiency Improve enabling environment for IPPs
P : Continue improvement of DISCO performance P : Update and improve legislation and licensing
by reducing losses, increasing collection rates and provisions that would help IPPs enter the market
bringing down overhead costs. One mechanism can and also clarify roles and responsibilities of PERC
be through a revenue protection program aiming and PETL in this environment.
to permanently measure and bill every KWh sold
largest DISCO consumers.
Securitize payments of wholesale electricity Promote uptake of rooftop solar PV
P : Strengthen sub national public finance to avoid P : Set aggressive targets for 160MW of rooftop PV
diversion of electricity bill collections to municipal in Gaza and 530MW in West Bank.
budgets and set up escrow accounts both in Gaza
and West Bank to ring fence collections.
Adjust tariffs to better reflect cost recovery Develop transmission backbone in Gaza
P : Reexamine the retail tariffs and increase rates to P : Upgrade T&D network to allow increase in
allow better cost recovery by DISCOs. power supply and reduction in losses.
Build the capacity of PETL to play its role Design a risk mitigation mechanism for IPPs
P : PETL to streamline billing to and payments from P, D : After creditworthiness issues from Phase
DISCOs while in parallel pushing to energize the I have been improved, develop financial risk
new substations and sign the PPA with IEC. mitigation instruments such as guarantee
I : Sign bulk supply PPA and energize new mechanisms.
substations.
I: Israeli measures
P: Palestinian measures D: Donor community measures
26 | Securing Energy for Development in the West Bank and Gaza
PHASE 3: IMPLEMENT FIRST WAVE OF IPPS PHASE 4: IMPLEMENT TRANSFORMATIONAL
PROJECTS
Convert GPP to CCGT gas-fired technology Develop grid-scale solar PV/CSP farms in Area C
P : Complete conversion and upgrade of GPP P : Begin development of renewables in Area C
ensuring flexible gas supply agreement to allow only after a successful track record of renewable
switch to Gaza Marine. development in Areas A and B.
I : Enter into gas supply agreement for GPP. I : Provide permits for construction in Area C.
Construct new CCGT plant at Jenin, then Hebron Develop transmission backbone in the West Bank
P : Complete JPP and HPP construction with P : Begin development of a transmission backbone,
flexible gas supply agreement to allow switch to considering also the possibility of negotiating
Gaza Marine. Build additional substations to keep a swap mechanism that eliminates the need for
pace with increased domestic generation. wheeling or building of infrastructure.
I : Enter into gas supply agreement for JPP and I : Provide permits for construction in Area C
HPP. and/or provide swap alternatives to building a
backbone.
Increase renewable energy targets Develop Gaza Marine Gas Field
P : Increase renewable energy targets to 600MW in P : Develop Gaza Marine with least amount of
West Bank and 160MW in Gaza by 2030 (includes infrastructure development to keep costs low.
rooftop solar) but only after the right enabling I : Allow permission to use existing Israeli
environment has been established from Phase I. infrastructure for evacuation of Gaza Marine.
Establish wheeling arrangements with IEC
P, I : Negotiate lower wheeling tariffs and/or swap
arrangements until a transmission backbone is built
Engage in dialogue over use of Area C
P, I : Coordinate on Area C access and permitting
issues as well as grid stability and regional
integration for supply expansion and transmission
infrastructure.
Note: IPP = independent power producer; GPP = Gaza Power Plant; CCGT = combined cycle gas turbine; PV = photovoltaic; CSP = concentrated solar
power; IEC = Israeli Electric Corporation; DISCO = Distribution Company; PERC = Palestinian Electricity Regulatory Council; PETL = Palestinian Electricity
Transmission Company Ltd; JPP = Jenin Power Plant; HPP = Hebron Power Plant; T&D = Transmission and Distribution; PPA = power-purchase agreement.
Securing Energy for Development in the West Bank and Gaza | 27
ENDNOTES
1. Total West Bank is made up of JDECO, NEDCO, HEPCO, SELCO and TEDCO which are the 5 DISCOs in the West Bank. GEDCO is the only DISCO in Gaza.
28 | Securing Energy for Development in the West Bank and Gaza
PART I
The West Bank
and Gaza Energy
Sector Context
Securing Energy for Development in the West Bank and Gaza | 31
CHAPTER 1
The West Bank and Gaza
Electricity Sector
SECTOR OVERVIEW AND which will allow for the import of electricity from
CHALLENGES Israel through a small number of high-voltage lines.
For Gaza, an additional 161 kV interconnector with
The Palestinian territories face significant energy Israel is planned. Refer to part 1, chapter 7 for more
security challenges, already severe in Gaza, and detail on the Palestinian transmission and distribution
emerging in the West Bank. Limited power supply system. See appendix A, map A.1 and map A.2 for
is rationed through rolling blackouts, which are the existing electricity supply options.
increasing in duration in Gaza and in frequency in
the West Bank. In Gaza, the available power supply The Palestinian Authority does not have control over
meets only half the demand, and the rationing of most of its territory, adding layers of complexity to the
power results in 8 hours of power supply followed by 8 implementation of infrastructure projects. The Oslo II
hours of power cuts. During peak summer and winter Accord divided the West Bank in three administrative
load conditions, the power schedule is reduced to divisions: Areas A, B, and C. The distinct areas
3–4 hours per day. Although the West Bank generally were given different statuses, according to their
enjoys 24 hours of power supply, in recent years governance, pending a final status accord. Area
it has also begun experiencing power shortages
during peak winter and summer months. Electricity
shortages in both the West Bank and Gaza are often Figure 1.1: Main Sources of Electricity in
met with mass protests and demonstrations. the West Bank and Gaza, 2015
The West Bank and Gaza rely primarily on electricity
imports from Israel, particularly in the West Bank. 6,000
Imports of electricity from the Israeli Electric
Corporation (IEC) account for 99 percent of electricity 5,000
supply in the West Bank and 64 percent in Gaza, but
Energy (GWh)
4,000
they have recently been constrained as the existing
power lines are becoming overloaded (see figure 3,000
I-1.1). Up to now, Israeli power has been provided
2,000
through over 270 low and medium-voltage connection
points between Israel and the West Bank, with a 1,000
total contracted capacity of 890 megawatts (MW).
In Gaza, 10 connection points with Israel provide 0
West Bank Gaza Combined
120 MW of capacity. Due to the low and medium-
voltage connection points, Palestinian consumers From Israel From Egypt
have historically paid higher Israeli tariff rates of NIS From Jordan Gaza Power Plant
0.33–0.37 (US$0.09–0.10) per kilowatt hour (kWh),
and cannot benefit from the lower tariff rates available
to higher voltage customers. Furthermore, the Source: Palestinian Central Bureau of Statics (PCBS), 2015, “Quantity of
Electricity Imported (GWh) in the West Bank by Source and Month, 2015”
proliferation of connection points has made it difficult and “Quantity of Electricity Imported and Purchased (GWh) in Gaza Strip by
to monitor electricity flows across the territories. In Source and Month, 2015,” Ramallah City. http://www.pcbs.gov.ps/site/886/
Default.aspx.
the West Bank, four new 161 kilovolt (kV) substations
have recently been constructed with donor support,
32 | Securing Energy for Development in the West Bank and Gaza
A constitutes around 18 percent of the West Bank power. While there are plans to upgrade the Jordanian
and is administered exclusively by the Palestinian interconnector to allow more imports, similar to the
Authority. Area B makes up around 22 percent and case of Egypt, the question of payment remains the
is administered by both the Palestinian Authority and main concern.
Israel. Area C, which contains Israeli settlements,
makes up the remaining 60 percent of the West Bank The Gaza Power Plant (GPP) provides the only
and is administered by Israel (see map G.3 in appendix significant domestic generation capacity in the
G). A key Israeli actor in the Palestinian power sector Palestinian energy portfolio, and it has been plagued
is the Coordinator of Government Activities in the with difficulties. GPP is owned by the Gaza Power
Territories Unit (COGAT), which operates under the Generation Company, which is in turn owned
Israeli Ministry of Defense and is responsible, among by the Greek- Lebanese construction company
other issues, for dealing with energy and electricity Consolidated Contractors Company. The plant
supply issues in Area C.1 COGAT’s authorization entered into commercial operation on March 15, 2004,
is required for regional electricity projects, such as under a 20-year Power Purchase Agreement (PPA)
interconnectors with neighboring counties, as well as contract, which requires that the Palestinian Authority
any power generation or transmission infrastructure cover take-or-pay capacity charges of NIS 0.096
to be built within the West Bank. COGAT plays an (US$0.026) for the full 140 MW capacity of the plant.
important role in the monitoring and maintenance of This capacity charge is paid to the owners of GPP
distribution infrastructure and provides assistance in regardless of the level of the plant’s actual production
dealing with failures. and output. In addition, the Palestinian Authority
must cover the cost of fuel, which, depending on
In addition to the Israeli supply, modest volumes of the level of fuel taxes and exemptions applied, can
power are imported from Jordan to the West Bank range from NIS 0.74 to NIS 1.3 (US$0.20–0.40) per
and from Egypt to Gaza. Egypt’s Al Kanal Electricity kWh for the diesel fuel alone. Although the plant has a
Company can supply up to 30 MW of electricity rated capacity of 140 MW, it normally operates at less
through three-medium voltage 33 kV connections than 50 percent of its capability due to the inability of
points at the southern end of the Gaza strip (see map the Palestinian institutions to pay the high costs of
A.2 in appendix A). The power lines from Egypt are diesel fuel. As international donor support to the West
frequently out of service, delivering significantly less Bank and Gaza has declined in recent years, budget
than the 30 MW capacity. Furthermore, the available constraints have resulted in the Palestinian Authority
electricity is of poor quality and subject to frequent reducing the exemption on fuel taxes to Gaza, more
voltage and frequency deviations that damage than doubling the cost of fuel for GPP. The plant has
expensive and sensitive equipment at hospitals such also suffered repeated damage during armed conflict,
as magnetic resonance imaging (MRI) machines and affecting its fuel storage capacity. Considering both
computed tomography (CT) scans. The majority of the capacity charges and the fuel costs, GPP is very
the power from Egypt is paid for through the Arab expensive to run at approximately NIS 1.05–1.65
League as a donation relieving the obligation of (US$0.30–0.45) per kWh, to more than three times
payment on Gaza and the Palestinian Authority. As the IEC power import tariff. GPP is already designed
a result, there is no track record of payment between to operate on natural gas, which would significantly
the Egyptian power utility that supplies electricity bring down its cost of power production. This will
to Gaza and the local distribution company Gaza become possible once the planned gas pipeline
Electricity Distribution Company (GEDCO). As for project linking Gaza to gas terminals at Ashkelon in
the West Bank, Jordan’s National Electric Power Israel is completed.
Company (NEPCO) can supply up to 20 MW through
a medium-voltage connection. Jerusalem District In the West Bank and Gaza, renewable energy
Electric Company (JDECO) currently purchases generation is still in its infancy. The Palestinian cabinet
power from NEPCO by arbitraging time-of-use (TOU) adopted a renewable energy strategy in 2012 that set
prices between IEC and NEPCO. NEPCO prices are a target of 130 MW for domestic renewable generation
on average NIS 0.11–0.15 (US$0.03–0.04) per kWh by 2020, of which only 18 MW has been installed as
higher than IEC prices, except at certain times of day of 2017. The renewable energy laws, which laid out
during specific seasons. Refer to part 1, chapter 5.2 the rules and regulations for entering the Palestinian
for more details on the cost of Jordanian versus Israeli renewable energy market, were released only in
Securing Energy for Development in the West Bank and Gaza | 33
mid-2015. In terms of utility-scale solar photovoltaic An unfinished power sector reform, which started over
(PV), many private-sector entities have shown great 20 years ago, consolidated the distribution segment
interest and several licenses have been granted. into a handful of local distribution companies. PENRA,
However, by law, projects over 1 MW can sell only to established in 1995, launched key institutional reforms,
the single buyer, Palestinian Electricity Transmission including the consolidation of hundreds of small
Company Ltd. (PETL), which is not currently credit municipality and village councils’ (MVC) electricity
worthy and lacks any kind of payment record. This services into six larger distribution companies (DISCOs)
high risk of nonpayment, together with the possibility to benefit from economies of scale. These include
of significant construction delays, is discouraging GEDCO, Hebron Electricity Distribution Company
project developers and financiers alike. Further (HEPCO), JDECO, Northern Electricity Distribution
obstacles, are lack of access to prime land in Area Company (NEDCO), Southern Electricity Distribution
C as well as the lack of transmission infrastructure Company (SELCO) and Tubas Electricity Distribution
to evacuate the power. In terms of rooftop solar, the Company (TEDCO). Despite considerable progress,
Palestinian Solar Initiative, launched in 2012, aimed a significant number of MVCs continue to distribute
to install on-grid residential rooftop solar systems in power independently, rejecting the legal imperative
the West Bank, each with a range of 1-5 kW, for a to integrate electricity services and merge with the
total installed capacity target of 5 MW by 2015. Under DISCOs. Together, these independent MVCs represent
the plan, households purchase the solar systems up to 30 percent of total power sales in the West Bank.
themselves through “green loans” and sell energy In the long run, the goal is to further consolidate all
back to the grid in return for a feed-in-tariff. Although DISCOs and MVCs in the West Bank into one central
initially attractive, over time the Palestinian Authority DISCO, thereby reducing overhead costs and in turn
reduced the feed-in-tariff rates due to budgetary bringing down the retail sales tariff. See appendix A,
restrictions, making the program progressively less tables A.3 to A.4 for the financial statements provided
attractive to consumers. As of December 2016, the by each DISCO from 2011 to 2015.
Palestinian Energy and Natural Resources Authority
(PENRA) reported that approximately 300 systems JDECO is the longest standing distribution company
were installed under the Palestinian Solar Initiative. in the Palestinian territories and is regulated by both
Refer to part I, chapter 6 for further details on the Israeli and Palestinian authorities due to the nature of
Palestinian renewable energy sector. its service area. In contrast to the other five DISCOs
34 | Securing Energy for Development in the West Bank and Gaza
that were created as part of the recent sector reform, system operator for the Palestinian energy sector.
JDECO is a longstanding utility that has been in Although the Palestinian energy sector does not
existence since 1914. JDECO’s coverage area includes yet have any transmission infrastructure, PETL will
(i) East Jerusalem (30 percent), which falls under Israeli be responsible for maintaining and operating the
control with tariffs and regulations set by the Israeli new substations and acting as the single buyer of
Public Utility Authority (PUA), and (ii) the central West wholesale power purchased from Israel, as well
Bank (70 percent), including Ramallah and Jericho, as from any future Palestinian independent power
which falls under the control of the Palestinian Authority, producers (IPPs). In the absence of transmission
with tariffs and regulations set by the Palestinian infrastructure, the electricity network in the West
Electricity Regulatory Council (PERC). As noted, Bank takes the form of a series of “electricity islands,”
JDECO purchases the bulk of its supply from IEC, all connected to the Israeli grid, rather than one
supplemented by Jordanian imports when demand interconnected Palestinian network. Refer to part I,
peaks or pricing differences prove advantageous. chapter 7 for further discussions on PETL and the
transmission and distribution grids.
The Electricity Law of 2009 created several new
sector institutions and provided the beginnings of a The political division between the West Bank (ruled
legal framework for public-private partnership (PPP) by Fatah) and Gaza (ruled by Hamas) reduces the
in the sector. The new legislation paved the way for ability of PENRA, PETL, and PERC to exercise their
a new sector regulatory entity, as well as the creation jurisdiction in Gaza. In principle, the new institutional
of a separate transmission company. In addition, the structure applies across the Palestinian territories.
law provides a basis for new generation projects to be However, in practice, GEDCO, the Gaza utility,
developed in the West Bank and Gaza on a PPP basis operates independently of this framework. For
by classifying this as a licensed activity. Nevertheless, example, GEDCO does not follow the unified tariff set
few details are provided about the detailed terms by PERC and adopted by all the DISCOs in the West
and conditions of licenses or their classification into Bank. In fact, PERC has no enforcement capability
different categories, and the law is silent about roles in Gaza, as the board and governance structure of
and responsibilities for the grid connection of new GEDCO do not report to the Palestinian Authority.
generation plants. In the absence of broader PPP PENRA does have a branch office on the ground in
framework legislation, these kinds of issues would Gaza, which works very closely with GEDCO and
need to be settled through secondary legislation or with PENRA Ramallah to coordinate activities, but it
supporting regulations. does not have direct control over GEDCO. PENRA in
Gaza supports GEDCO by facilitating materials entry
The establishment of PERC has helped provide a for energy projects in Gaza, organizing provision of
more solid technical basis for the determination of fuel for GPP, and communicating and coordinating
tariffs. It was created in 2009, with support from the with the international community on energy projects
World Bank and the European Union, with a mandate in Gaza.
of regulating and monitoring the energy sector. A
key contribution of PERC has been to adopt a clear Despite some improvements, the electricity sector
tariff-setting methodology and set a unified end- suffers from operational and financial problems due to
user tariff for the Palestinian territories (see appendix high losses and low collection rates. In 2015, DISCOs
A, tables A.1 and A.2, for a breakdown of PERC’s in the West Bank and Gaza billed consumers for 76
tariff structure). In addition, PERC has managed to percent of the power they purchased from suppliers,
significantly improve data collection over the past few with the other 24 percent lost and never billed due
years, allowing the regulator to track key technical, to the poor state of the infrastructure and illegal
financial, and customer service performance connections. Of the electricity billed to consumers,
indicators for each DISCO on a quarterly basis. DISCOs collected 84 percent of invoices, with 16
percent accumulating as outstanding debt from
The new transmission company, PETL was also been consumers to DISCOs. Overall, this means that for
established as part of a move to rationalize power every 100 kWh supplied to the DISCOs from IEC,
import arrangements with Israel. PETL was created only 64 kWh actually generate revenue; although,
in 2013, with support from the World Bank, and has there is significant variation in performance across
a mandate to be the single buyer and transmission companies (see table I-1.1). The net annual income
Securing Energy for Development in the West Bank and Gaza | 35
TABLE I-1.1: OVERVIEW OF PALESTINIAN ELECTRICITY DISTRIBUTION
COMPANIES, 2015
GEDCO TOTAL JDECO NEDCO HEPCO SELCO TEDCO
WEST
BANK
Scale
Customers 231,500 436,389 256,314 90,265 45,660 25,650 18,500
Purchased electricity 795 1,398 871 250 164 71 42
(NIS millions)
Billed electricity (NIS millions) 518 1,509 949 245 193 76 46
Net annual income/loss (NIS millions) n.a. -76 -82 9 9 -15 3
Performance
Losses: technical and 26% 22% 24% 17% 20% 28% 16%
nontechnical
Collection ratio 65% 89% 91% 98% 81% 71% 76%
O&M as percentage of purchased electricity 8% 17% 22% 5% 10% 21% 17%
Note: GEDCO = Gaza Electricity Distribution Company; JDECO = Jerusalem District Electric Company; NEDCO = Northern Electricity Distribution Company;
HEPCO = Hebron Electricity Distribution Company; SELCO = Southern Electricity Distribution Company; TEDCO = Tubas Electricity Distribution Company.
of JDECO has been negative year after year over Bank to establish an escrow account for collection of
the past five years, despite the company’s scale electricity bills. This mechanism, which has already
advantages and relatively high collection rates arising been adopted by over 100 local authority councils,
from the successful implementation of prepaid aims to monitor, streamline, and audit the flow of
meters. However, the company faces challenges electricity payments, preventing diversion of funds.
in terms of high distribution losses and operating
expenditures. On the other hand, NEDCO is by far Current electricity tariffs are low relative to the costs
the most efficient DISCO in the West Bank and Gaza, of service provision, leading to implicit subsidies of
with the lowest losses and overhead costs and the over NIS 600 million (US$166 million). The regulatory
highest collection rates. authority, PERC, has set a uniform tariff of NIS 0.53–
0.56 (US$0.14–0.15) per kWh for the Palestinian
Bill collection rates are particularly low in Gaza and in DISCOs. However, financial analysis of the sector
refugee camps in the West Bank, due to difficult living suggests that the full cost of service provision—given
conditions and a culture of nonpayment. In Gaza, current levels of inefficiency—ranges from about NIS
paying electricity bills is not considered a high priority, 0.66 to NIS 1.42 (US$0.18–0.39) per kWh, depending
particularly given the low quality of service. This is on the DISCO. Even if operating and commercial
understandable given that the population has been efficiency could be improved to more typical levels,
affected by armed conflict every two to three years over tariffs would still need to increase significantly to ensure
the past decade and faces the highest unemployment the financial viability—and hence creditworthiness—
rate in the world at 42 percent. Refugee camps in the of the sector. It is estimated that the shortfall between
West Bank are also challenging in terms of revenue tariffs and costs amounts to implicit subsidies of over
collection, as they combine high levels of per capita NIS 600 million (US$166 million) in 2015.
consumption with very low rates of bill payment.
According to a recent survey, underlying reasons for However, it is important to recognize that there are
nonpayment of electricity bills are the high cost of genuine affordability issues among the poor. A widely
electricity, low income, poor quality of service, and used international benchmark is that electricity remains
perceived exemption due to refugee status. Moreover, affordable when households are able to meet their
the poor security conditions in the camps make it basic needs without spending more than 5 percent of
difficult for DISCO staff to enter and enforce revenue income. Based on current practice in West Bank and
collection or disconnect service. A recent cabinet Gaza, it is estimated that 160 kWh is an adequate
decision enforces all DISCOs and MVCs in the West level of consumption to meet basic household needs.
36 | Securing Energy for Development in the West Bank and Gaza
Given the current income distribution, the lowest As a result, the DISCOs have developed a culture
income decile can only afford to pay a rate of NIS of nonpayment for wholesale electricity supplied
0.43 (US$0.11) per kWh. The mechanism currently by IEC, leaving the Palestinian Authority to step in
used to safeguard affordability is a rising block tariff, through a “net lending” mechanism. Given the weak
with first block of 160 kWh per month currently set state of cost recovery, some DISCOs and MVCs pay
at NIS 0.43 (US$.11) per kWh, matching the lowest only partially for electricity supplied by IEC, which
income decile’s ability to pay. However, given that amounts to 58 percent of the total cost of electricity;
average residential electricity consumption in the others don’t pay at all, preferring to use the collected
West Bank and Gaza is only 200–300 kWh per revenues for financing municipal activities. For years,
month, this means that most consumption benefits the Palestinian Authority has indirectly paid a portion
from this subsidized rate. of the outstanding bills owed by DISCOs and MVCs
to IEC through a mechanism called ‘net lending’.2
In addition to the challenge of collecting revenue from Outstanding payments owed to the IEC are either (i)
customers, the scarcity of subnational fiscal resources deducted from the Palestinian Authority’s clearance
means that power sector revenues get diverted revenues by the Israeli Ministry of Finance and
to municipal budgets. No regular and predictable registered as net lending or (ii) are accumulated as debt
intergovernmental fiscal transfer exists to cover the owed to the IEC. Net lending reduced the Palestinian
recurring expenditures of municipalities or fund basic Authority’s available revenues by an estimated NIS 1
capital investments. Thus, MVCs have developed a (US$0.3) billion in 2012, representing 13.5 percent
practice of diverting revenues from service fees to of the Palestinian Authority’s total revenues. This
meet their expenditures needs, making electricity mechanism sets a precedence in which service
revenues among the more important sources of providers continue to receive electricity from suppliers,
municipal funds. Data for the years 2011–13 show and consumers continue to receive electricity from
that total revenues per capita for village councils service providers even if they do not pay their bills,
(VCs) in charge of electricity distribution can be with an assurance that the Palestinian Authority will
up to four times higher than for those VCs without pay on their behalf, reducing a sense of responsibility
that responsibility. VCs with electricity distribution and accountability. Since Israel considers JDECO an
functions were able to spend over twice as much in Israeli company, the debt owed by JDECO to IEC
per capita operating and development expenditures cannot be paid through the net lending, mechanism
each year in the 2011–13 period than VCs not in making JDECO the second largest contributor, after
charge of electricity distribution. For municipalities, GEDCO, to Palestinian electricity sector debt to Israel.
there is almost a 100 percent difference between
the two groups of municipalities in total revenues A new electricity agreement between government of
per capita in the 2010–12 period. This consideration Israel and the Palestinian Authority has settled past
may be one of the factors discouraging the remaining debt and plans to pave the way for improvements
municipalities from incorporating their electricity in the Palestinian energy sector. The unpaid portion
service under the umbrella of the local DISCOs. of outstanding bills from IEC to Palestinian service
However, even in municipalities that have ceded providers started to accumulate substantially from
electricity service to the Palestinian DISCOs, there 2011 onward (see figure I-1.2). The debt can be
is evidence that some dividend income is still being divided into two portions, the larger share that relates
paid by the DISCOs back to the municipalities. While directly to JDECO and a smaller share owed by the
data on this phenomenon is sparse, it is known that Palestinian Authority relating to the remaining five
at least NIS 5.1 (US$1.4) million were paid to various Palestinian distribution companies and MVCs. In view
municipalities by three Palestinian DISCOs in 2014. of the situation, IEC made payment of past debt a
Breaking this vicious circle will require (i) increasing precondition for energization of the four, new high-
local revenue collection; (ii) improving transparency voltage substations as well as a precondition for the
of payment flows, including interagency arrears; (iii) scale-up of the capacity of the connection points. On
placing sanctions on entities that divert funds for September 13, 2016, the Palestinian Authority and
nonessential or unproductive use; and (iv) providing the Israeli government signed an agreement to settle
financial support to those Local Government Units past electricity sector debt, which stood at NIS 2.03
that do not have the fiscal capacity to ensure basic billion (US$534 million) and created joint committees
service provision. to work on three key issues: (i) energization of the
Securing Energy for Development in the West Bank and Gaza | 37
Figure I-1.2: Electricity Sector Debt to IEC, 2008–2015
2,500
Debt to IEC (NIS millions)
2,000
1,500
1,000
500
0
2008
2009
2010
2011
12/12/17
1/13/17
10/13/17
11/13/17
12/13/17
1/14/17
2/14/17
3/14/17
4/14/17
5/14/17
6/14/17
7/14/17
8/14/17
9/14/17
10/14/17
11/14/17
12/14/17
1/15/17
2/15/17
3/15/17
4/15/17
5/15/17
6/15/17
7/15/17
8/15/17
9/15/17
10/15/17
11/15/17
All other DISCOs JDECO Total
Source: Information provided by Eco Energy.
Note: IEC = Israeli Electric Corporation; DISCO = Distribution Company; JDECO = Jerusalem District Electricity Company.
TABLE I.1.2: MACROECONOMIC IMPACT OF ELECTRICITY SECTOR
UNDERPERFORMANCE
WEST BANK GAZA
2013 2014 2015 2013 2014 2015
Implicit subsidy (US$ millions per annum) 94.8 65.9 72.6 136.0 178.1 125.4
Implicit subsidy (NIS millions per annum) 342.3 235.9 281.5 491.1 637.7 486.5
Implicit subsidy (% of GDP) 1.0 0.6 4.4 5.0
Subsidy rate (% of tariff) 17.5 50.9 65.5 56.7
new high-voltage substations to bring more power to The economic burden associated with the
the West Bank, (ii) signing of a long-term PPA at a subsidization of the electricity sector is several times
lower wholesale tariff rate, and (iii) transfer of over 200 higher in Gaza than in the West Bank. Based on
connection points to PETL in order to have a single computable general equilibrium models developed for
point of transaction (single buyer) between Israeli both the West Bank and Gaza, the magnitude of the
and Palestinian entities. On July 10, 2017, an interim subsidies associated with the electricity sector were
PPA was signed for the energization of the Jenin estimated (table I-1.2). The implicit subsidies due to
substation alone, which was an encouraging step in underpricing, distribution losses, and undercollection
the right direction, until the full negotiations for the of revenues amounted to between NIS 236 and NIS
long term PPA are concluded. Overall, the success 342 million (US$65 million to US$95 million) per year
of the new electricity agreement rests on the ability of for the West Bank, which amount to no more than 1
PETL to pay for 100 percent of the power purchased percent of the West Bank’s GDP for 2013–15. This
from IEC. In turn, DISCOs and end consumers need is equivalent to a 15–20 percent subsidization rate
to follow suit along the value chain. for the retail tariff. In the case of Gaza, the implicit
subsidies are much larger, both in absolute and
relative terms, amounting to NIS 487–638 million
38 | Securing Energy for Development in the West Bank and Gaza
(US$125–175 million) per year, which amounts to as improvement over power imports. It is important to
much as 4–5 percent of Gaza’s GDP in 2013–15. This ensure that contractual terms are sufficiently attractive
is equivalent to a 60 percent subsidization rate of the and adequate supplies of cost-effective fuel are available.
retail tariff. For Gaza, a key priority is the conversion of the current
plant to natural gas to reduce the cost of fuel.
IMPLICATIONS FOR WEST BANK AND
GAZA Palestinian’s power-sector reform process has made
strides but remains incomplete. Significant institutional
The energy sector context carries several important reforms have already been undertaken in the
implications for the future of the Palestinian Palestinian electricity sector, but these are still fragile
electricity sector. and need to be sustained. Institutional strengthening
is needed for all sector institutions, including PERC,
There is scope to diversify Palestinian electricity PETL, and the DISCOs. PETL is expected to be
supply, particularly in the West Bank. The Palestinian commercially operational and financially sustainable
energy sector, particularly in the West Bank, has long following the energization of the Jenin, Nablus,
relied primarily on Israel for power imports, which Hebron, and Ramallah high-voltage substations and
for the most part have been relatively reliable and the signature of a long-term PPA with IEC. In the
cost-effective. Yet energy security could be further meantime, the signing of the interim PPA for the Jenin
enhanced by greater diversification of power sources substation allows PETL to begin operations gradually
in the West Bank, including the development of until the full PPA is signed.
indigenous gas-fired and solar power options.
Distribution utilities are the Achilles’ heel of the
The Gaza Power Plant provides a cautionary tale Palestinian electricity sector. The underperformance
of independent power projects. Nevertheless, the of the DISCOs is the deepest challenge faced in
experience of GPP, which has proved expensive the electricity sector, because the DISCOs are the
and unreliable, demonstrates that indigenous foundation of the payment chain for the sector and
power generation does not necessarily represent an because the difficulties faced are institutional and
Securing Energy for Development in the West Bank and Gaza | 39
political in nature. Without improving the ability of have access to 30 percent more power. This does
the DISCOs to capture customer revenues and not require additional payments by the Palestinian
reliably pay for wholesale power, PETL’s viability will Authority through clearance revenues or net lending.
be compromised, as will the creditworthiness of the Later, once GPP is converted to operating on natural
sector as an off-taker for future independent power gas, which is expected to have a lower cost of
projects in the West Bank and Gaza. production, on par with Israeli imports, then GPP
can be turned on again. However, in the immediate
Addressing subnational financing issues is key to the term, the best solution for Gaza is to ramp down
future of the power sector. Even after the performance GPP operating on diesel.
of the DISCOs is improved, their financial viability will
remain vulnerable to municipal capture of revenues, To ensure bill collection revenue continues to be
until and unless the fundamental challenges of forwarded from GEDCO to the Palestinian Authority,
subnational municipal finance are addressed. Indeed, it is important to set up a separate escrow account
without this, as DISCOs enhance their own efficiency into which collections are deposited and which is
they risk simply becoming an increasingly attractive monitored by an international oversight committee.
source of municipal revenues without solving the There is a legitimate concern that, if GPP is turned off,
fundamental problem of creditworthiness in the sector authorities in Gaza will no longer have any incentive
In Gaza, it is possible to pay for additional IEC supply to forward bill collections to the Palestinian Authority,
by ramping down generation at GPP and using the which will then bear the responsibility of paying for
money to buy double the power from IEC. As shown all IEC supply through clearance revenues. Currently,
in table I-1.3, between 2011 and 2015, GPP was fuel for GPP is procured by the Palestinian Authority
operating an average capacity of 45 MW, while IEC from the money that is forwarded to the Palestinian
imports accounted for 119 MW. Factoring in the Authority by GEDCO from bill collections amounting
capacity charge that is paid for IEC, the unit cost to NIS 20 million to NIS 25 million per month. To
of power from GPP is three times more expensive ensure that this forwarding of bill collections continues
than IEC. If the GPP take-or-pay capacity-charge as GPP ramps down, an escrow account should be
payments continue to be paid, for every 1 MW that set up, separate from Palestinian Authority budgets,
GPP is ramped down, 2 MW can be purchased from into which GEDCO can forward its collections.
IEC for the same cost. If GPP’s take-or-pay capacity- This account should be monitored by a high-level
charge payments are terminated, for every 1 MW international committee that serves to ensure
that GPP is ramped down, 3 MW can be purchased transparency. At NIS 20 million to NIS 25 million per
from IEC for the same cost. This means that if GPP, month, the collections will be enough to pay for 30–
running on diesel, is turned off completely and the 40 percent of the total supply to Gaza, which is on par
money is used to buy power from IEC, Gaza can with the current setup.
40 | Securing Energy for Development in the West Bank and Gaza
TABLE I-1.3: FINANCING ADDITIONAL IEC POWER BY RAMPING DOWN GAZA
POWER PLANT
Status quo: 2011–15 historical average values
IEC GPP
Cost of purchased power (NIS per month) 31,807,885 Cost of capacity charge (NIS per month) 10,097,360
Cost of diesel fuel (NIS per month) 24,430,783
Quantity of purchased power 85,576,569 Quantity of purchased power 32,633,872
(kWh per month) (kWh per month)
Corresponding capacity (MW) 119 Corresponding capacity (MW) 45
Average purchase tariff (NIS per kWh) 0.37 Average purchase tariff (NIS per kWh) 1.06
Cost of fuel per kWh produced 0.75
(NIS per kWh)
Total cost per month (NIS) 66,336,028
Phase 1: Ramp down GPP by 12 MW, ramp up IEC by 25 MW
IEC GPP
Cost of purchased power (NIS per month) 38,498,290 Cost of capacity charge (NIS per month) 10,097,360
Cost of diesel fuel (NIS per month) 17,740,378
Quantity of purchased power 103,576,569 Quantity of purchased power 23,697,039
(kWh per month) (kWh per month)
Corresponding capacity (MW) 144 Corresponding capacity (MW) 33
Average purchase tariff (NIS per kWh) 0.37 Average purchase tariff (NIS per kWh) 1.06
Cost of fuel per kWh produced 0.75
(NIS per kWh)
Total cost per month (NIS) 66,336,028
Phase 2: Ramp down GPP by 25 MW, ramp up IEC by 50 MW
IEC GPP
Cost of purchased power (NIS per month) 45,188,695 Cost of capacity charge (NIS per month) 10,097,360
Cost of diesel fuel (NIS per month) 11,049,973
Quantity of purchased power 121,576,569 Quantity of purchased power 14,760,206
(kWh per month) (kWh per month)
Corresponding capacity (MW) 169 Corresponding capacity (MW) 21
Average purchase tariff (NIS per kWh) 0.37 Average purchase tariff (NIS per kWh) 1.06
Cost of fuel per kWh produced 0.75
(NIS per kWh)
Total cost per month (NIS) 66,336,028
Phase 3: Ramp down GPP by 45 MW, ramp up IEC by 91 MW
IEC GPP
Cost of purchased power (NIS per month) 56,160,959 Cost of capacity charge (NIS per month) 10,097,360
Cost of diesel fuel (NIS per month) 0
Quantity of purchased power 151,096,569 Quantity of purchased power 0
(kWh per month) (kWh per month)
Corresponding capacity (MW) 210 Corresponding Capacity (MW) 0
Average purchase tariff (NIS per kWh) 0.37 Average purchase tariff (NIS per kWh) 1.06
Cost of fuel per kWh produced 0.75
(NIS per kWh)
Total cost per month (NIS) 66,258,319
Note: IEC = Israeli Electric Corporation; GPP = Gaze Power Plant; kWh = kilowatt hour; MW = megawatt.
Securing Energy for Development in the West Bank and Gaza | 41
NOTES
1 For large energy projects in Areas A and B, COGAT has been requesting that their approval be obtained in advance.
2 Net lending refers to the process by which Israel deducts a portion of unpaid electricity bills, owed by Palestinian distributors, to IEC (which supplies over
95 percent of the energy to West Bank and Gaza) from collection revenues that are collected by the Israeli Ministry of Finance on behalf of the Palestinian
Authority. This process essentially forces the Palestinian Authority to indirectly pay for the outstanding bills of distribution companies through collected
revenues meant for the national budget.
42 | Securing Energy for Development in the West Bank and Gaza
CHAPTER 2
Electricity Demand
THE CURRENT CONTEXT While enjoying diversified energy sources, Palestinian
households increasingly rely on electricity. While
Electricity accounts for 27 percent of Palestinian nonresidential energy consumption almost entirely
energy consumption, which is dominated by the takes the form of electricity, Palestinian households
residential sector. From 2001 to 2013, electricity meet their energy needs through a mixture of
demand grew at an average annual rate of 7.2 electricity, liquefied petroleum gas (LPG) and solar
percent. Residential electricity consumption has been water heaters. A long series of household energy
growing slightly below that average, at 5.3 percent, surveys documents a trend of substitution of
with average household electricity consumption electricity for other forms of household energy over
reaching some 250 kilowatt-hours (kWh) per month time, particularly for baking but also for water and
by 2013. This is a modest level of consumption by (to a lesser extent) space heating applications (see
regional standards, at about half the levels found in appendix B, figures B.1 and B.2). Since 2009, there
the Maghreb countries. Nonresidential electricity has also been a notable increase in the uptake of air-
consumption was negligible in the early 2000s, and conditioning units. Based on econometric analysis of
despite steep growth rates of 13.4 percent annually the 2013 household energy survey, air-conditioning
from 2001 to 2013, still accounted for only a small units add over 100 kWh per month to a household’s
percent of total electricity consumption relative to the consumption during the summer months, while
residential sector in 2013 (see figure I-2.1). It is unusual electric water and space heating each add 50 kWh
for the share of nonresidential consumption to be so per month during the winter months (see appendix B,
low, and this illustrates the underdeveloped nature of tables B.1 and B.2).
the economy. It also represents a disadvantage for
the utilities, which typically count on large industries
as anchor customers.
Figure I-2.1: Palestinian Energy Consumption by Sector
20,000 20,000
15,000 15,000
10,000 10,000
5,000 5,000
0 0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Electricity (TJ) LPG (TJ) Solar (TJ)
Source: PCBS, “Energy Balances, 2001–2013.” http://www.pcbs.gov.ps/site/lang__en/886/Default.aspx
Note: LPG = liquefied petroleum gas.
Securing Energy for Development in the West Bank and Gaza | 43
Figure I-2.2: Volatility of Electricity Consumption over Time
20 50%
18
40%
16
14 30%
12
20%
10
8 10%
6 0%
4
10%
2
0 20%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Growth rate of final consumption of electricity (%) Final consumption of electricity (TJ)
Electricity demand patterns in the West Bank and Observed electricity consumption is not a reliable
Gaza have historically been quite volatile, making indicator of existing electricity demand. Effective
it challenging to predict the future. For example, demand for electricity is the amount that would be
electricity consumption grew at 38.2 percent in consumed at current tariffs if all electricity were fully
2012, shrunk by 2.1 percent in the next two years, paid for and there were no restrictions on the available
and increased again by 12.4 percent in 2015 (see supply. Neither of these two conditions holds for the
figure I-2.2). As a result of strong swings in historic West Bank and Gaza. Due to problems of network
demand as well as limited data availability, Palestinian theft and under-collection of bills, a significant share
electricity demand cannot be reliably forecast using of electricity consumption is supplied for free and
standard econometric techniques. There is some therefore likely exceeds what would be consumed if
evidence, however, that electricity demand does tend tariffs were fully enforced. At the same time, severe
to follow GDP growth trends. Indeed, for the Middle supply restrictions and associated rationing—
East and North Africa region as a whole, the elasticity particularly in the Gaza Strip—mean that even paying
of electricity output to real GDP growth, based on consumers cannot access all the power they would
370 country-year observations, finds a regionwide like to buy. As a result, electricity demand is partially
elasticity value of 1.07. suppressed. These two effects pull the base year
demand in opposite directions, and their net impact
A simple and defensible approach is to base electricity needs to be considered.
demand forecasts on real GDP growth forecasts.
The most recent real GDP demand forecasts from Inflated consumption is observable and relatively easy
the Palestinian Central Bureau of Statics (PCBS) to estimate. It can quite readily be estimated from utility
and the International Monetary Fund stand at 2.63 operational data, by calculating the absolute amount of
percent for the West Bank and Gaza as a whole, electricity lost to theft and under-collection, based on
ranging from 2.51 percent in the West Bank to 3.02 the reported rates for nontechnical losses and revenue
percent in Gaza. These become the starting point collection, respectively. Based on the literature, it is
for forecasting electricity demand. However, it is also assumed that this inflated demand would drop by one-
important to consider the current base from which half if tariffs were effectively applied.1 In the West Bank
electricity demand is forecast to grow. and Gaza, with total unpaid consumption amounted
to 903 megawatt hours (MWh) and 558 MWh in 2030,
implying that baseline consumption should be reduced
by half of this amount, that is, 452 MWh and 279
MWh, respectively.
44 | Securing Energy for Development in the West Bank and Gaza
Suppressed demand is unobservable and can be percent in the West Bank and 1.9 percent in Gaza
estimated only indirectly. Utilities can provide some (see tables I-2.1 and I-2.2). A range of plus and minus
indication based on their knowledge of demand 1 percent around these central growth estimates is
patterns. In the West Bank, the Palestinian Energy recommended to capture the uncertainty in electricity
and Natural Resources Authority (PENRA) reports demand growth. A full set of year-by-year demand
that this is 235 MW, or 20 percent of load. For Gaza, forecasts is provided in appendix B, table B.3.
the Gaza Electricity Distribution Company (GEDCO)
reports that this is somewhere between 145 MW and FIGURE I-2.2: FORECAST ELECTRICITY
245 MW, or around 50 percent of the load. This 50 DEMAND GROWTH RATES FOR THE
percent shortfall for Gaza is reasonably consistent WEST BANK AND GAZA
with the results obtained by comparing average AAGR % WEST GAZA WEST BANK
residential and total industrial electricity consumption BANK AND GAZA
in Gaza with that in the less-constrained environment Real GDP growth 2.51 3.02 2.63
of the West Bank. forecast
+ Adjustment for 0.40 1.90 0.90
TABLE I-2.1: ADJUSTING CURRENT suppressed demand
ELECTRICITY CONSUMPTION IN THE = Electricity demand 2.91 4.92 3.53
WEST BANK AND GAZA TO EFFECTIVE forecast
DEMAND Note: AAGR = Average Annual Growth Rate
2013 MWH WEST GAZA WEST BANK
BANK AND GAZA
Current consumption 3,166 1,344 4,510 The contrast in the electricity supply situation in the
- Inflated consumption 452 279 731 West Bank and Gaza is also evident in patterns of
generator ownership among firms and households.
+ Suppressed demand 655 768 1,423
Owning and operating a small backup generator in
= Effective demand 3,370 1,832 5,202
the West Bank and Gaza is expensive and works out
Source: Based on utility data from the Palestinian Energy and Natural to NIS 2.77 (US$0.76) per kWh for a diesel generator,
Resources Authority and Palestinian Electricity Regulatory Council for 2013. and NIS 4.0 (US$1.01) per kWh for a more common
Note: MWh = megawatt hour.
gasoline generator. According to enterprise surveys,
47 percent of firms in Gaza reported owning a
Since estimates for suppressed demand exceed generator, and they depend on it for 42 percent of
those for inflated consumption, the electricity demand their electricity supply. By contrast, only 13 percent of
forecast needs to be adjusted upward. For the West firms in the West Bank reported owning a generator,
Bank and Gaza combined, the amount of suppressed depending on it for only 15 percent of their supply.
demand is found to exceed the magnitude of inflated Throughout the West Bank and Gaza, generator
consumption, indicating that current electricity ownership is strongly linked to the size of the firm,
consumption is lower than it would be in a normal and hence the available capital. Despite the high
environment. In the West Bank, suppressed demand cost, as many as 20 percent of households in Gaza
slightly exceeds inflated consumption by a margin reported owning generators in 2013, compared to
of about 6 percent of registered consumption. In less than 1 percent in the West Bank. Nevertheless,
Gaza, the suppressed demand is substantially larger Northern Electricity Distribution Company (NEDCO),
than the inflated consumption, by a margin of 36 a distribution company in the West Bank, has used
percent of registered consumption. It is unrealistic to large utility-scale generators in the past to meet
assume that suppressed demand can be eliminated summer peak load energy shortages.
overnight; it would take some time for supply to
catch-up. The demand forecast is therefore adjusted Combining all the assumptions and methods
in such a way as to ensure that this consumption discussed so far, the low, central, and high demand
shortfall is gradually eliminated over the period 2016– forecasts for the West Bank and Gaza are provided
30. This entails an extra annual growth rate of 0.9 in table I-2.3.
percent for the West Bank and Gaza as a whole: 0.4
Securing Energy for Development in the West Bank and Gaza | 45
TABLE I-2.3: SUMMARY OF ELECTRICITY SUPPLY FORECAST REQUIRED TO
MEET EFFECTIVE DEMAND BY 2030 (GWH)
CENTRAL CASE LOW CASE HIGH CASE
WEST GAZA WEST WEST GAZA WEST WEST GAZA WEST
BANK BANK BANK BANK BANK BANK
AND AND AND
GAZA GAZA GAZA
2013 consumption 3,166 1,344 4,510 3,166 1,344 4,510 3,166 1,344 4,510
2013 effective demand 3,370 1,832 5,202 3,370 1,832 5,202 3,370 1,832 5,202
2013 supply for effective demand 3,938 2,141 6,079 3,938 2,141 6,079 3,938 2,141 6,079
2014 4,037 2,206 6,239 3,998 2,185 6,179 4,076 2,227 6,300
2015 4,138 2,272 6,403 4,058 2,229 6,279 4,220 2,317 6,529
2016 4,242 2,341 6,572 4,119 2,273 6,382 4,368 2,410 6,766
2017 4,349 2,412 6,745 4,182 2,319 6,485 4,521 2,507 7,011
2018 4,458 2,484 6,922 4,245 2,366 6,591 4,680 2,607 7,266
2019 4,570 2,559 7,104 4,309 2,414 6,699 4,844 2,712 7,529
2020 4,685 2,636 7,291 4,374 2,462 6,808 5,014 2,821 7,803
2021 4,803 2,716 7,482 4,440 2,512 6,919 5,190 2,934 8,086
2022 4,923 2,798 7,679 4,508 2,563 7,031 5,373 3,052 8,379
2023 5,047 2,882 7,881 4,576 2,614 7,146 5,561 3,174 8,683
2024 5,174 2,969 8,088 4,645 2,667 7,262 5,757 3,302 8,999
2025 5,304 3,059 8,301 4,715 2,721 7,381 5,959 3,435 9,325
2026 5,437 3,151 8,519 4,786 2,776 7,501 6,168 3,572 9,664
2027 5,573 3,246 8,743 4,859 2,831 7,623 6,385 3,716 10,014
2028 5,713 3,344 8,973 4,932 2,889 7,747 6,609 3,865 10,378
2029 5,857 3,445 9,209 5,007 2,947 7,874 6,841 4,020 10,755
2030 6,004 3,548 9,451 5,082 3,006 8,002 7,081 4,182 11,145
Source: World Bank elaboration.
Note: GWh = gigawatt hour.
Beyond the general demands of the population and
productive sector, several humanitarian activities
have critical energy needs. Few detailed needs
assessments have been done, but box I-2.1 provides
an important illustration for the water and wastewater
sector in Gaza.
46 | Securing Energy for Development in the West Bank and Gaza
Box I-2.1: Existing and Future Electricity Needs for Gaza’s Water Sector
The electricity needs of essential infrastructure, such as water and sanitation, must be incorporated into
any supply expansion plan. In Gaza, the existing water and wastewater facilities required approximately
34MW of electricity as of 2014. By 2030, this is expected to increase to 127 MW as additional
desalination and wastewater treatment plants come online (details provided in appendix figure B.3).
Supply expansion plans must consider a holistic view that considers the needs of critical infrastructure,
such as water, sanitation, and health services.
Map BI-2.1.1: Gaza Water and Wastewater Infrastructure Plans
IBRD 43944 | SEPTEMBER 2018
Desalination Plants
Wastewater Treatment Plant/Pumping Station
Biet Lahia Terminal Pumping Station
Armistice Demarcation Line, 1949 Energy need=1.3 MW
International Boundary Energy need (2025)=2.4 MW
Gaza Desalination Plant
Capacity=12,000 m3
Energy need=2.5 MW
M edi t erran ean Sea
x
Gaza existing WWTP
Upgrading by KFW capacity=90,000 m3/d
IS RAE L
Energy need=5.2 MW
Deir Abalah Desalination Plant North Gaza WWTP (NGEST)
Capacity=6,000 m3 Final design capacity=60,000 m3/d
Energy need=1.2 MW
G a za Energy need (2025)=4 MW
1st phase capacity=35,000 m3/d
Central Desalination Plant x
Energy need=2.4 MW
Capacity=55 MCM/y
Energy need=35 MW Reuse Scheme (NGEST)
Capacity=110 MCM/y Energy need=4.8 MW
Energy need (2035)=55 MW x
Planned Central Gaza WWTP
x
Final design capacity (2030)=200,000 m3/d
Energy need=11 MW
1st phase capacity=120,000 m3/d
Energy need=6.5 MW
Rafah existing WWTP
Capacity=10,000 m3/d
Energy need=0.6 MW
South Khanyounis WWTP
Final design capacity=44,000 m3/d
ARAB Energy need=3 MW
R EP . O F 1st phase capacity=26,000 m3/d
EG Y P T Energy need=1.8 MW
0 4 8 Kilometers
Source: Gaza Coastal Municipalities Water Utility.
Securing Energy for Development in the West Bank and Gaza | 47
IMPLICATIONS FOR THE WEST BANK Moderate electricity demand growth is anticipated in
AND GAZA the West Bank and Gaza. Because of macroeconomic
challenges as well as constraints faced by the
These patterns of electricity demand have important productive sector, electricity demand is forecast to
implications for energy planning in the West Bank slow from historic levels of 7.2 percent annually to
and Gaza. levels of around 3.5 percent annually.
Palestinian energy planning should recognize the Electricity demand will grow more rapidly in Gaza
inherently uncertain nature of electricity demand. than in the West Bank. Due to higher GDP growth
The challenges in predicting electricity demand forecasts and the need to catch up with higher levels
underscore the importance of not relying on a single of suppressed demand, electricity consumption in
estimate for planning purposes but ensuring that the Gaza is forecast to grow substantially faster than in
wide range of uncertainty of demand is reflected in the West Bank, at 4.9 percent versus 2.9 percent
power system planning. annually. Given the much tighter supply situation in
Gaza, this will represent a challenge going forward.
Electricity demand is strongly influenced by broader
policies on household energy. Given the weight of Current levels of electricity consumption understate
residential electricity demand and recent substitution existing demand. Observed electricity consumption
trends, it is important to recognize that broader does not provide a reliable demand baseline, given
household energy policies will have an important that a significant amount of electricity is supplied
impact on the demand for electricity. Historical policies free of charge, while there is also significant rationing
to promote solar water heaters have been successful due to supply shortages. The dampening impact of
in dampening household electricity demand, but rationing on current consumption is estimated to
usage appears to be in decline. Similarly, government outweigh the inflated consumption resulting from
policy needs to carefully consider the economic case nonpayment, particularly in the case of Gaza.
for using LPG (as opposed to electricity) for space
and water heating, and ensure that incentives are A number of humanitarian activities have critical
adequately aligned. energy needs that need to be better documented.
The example of water and wastewater services in
Gaza was provided as an illustration, but a similar
case could be made for health-care facilities.
48 | Securing Energy for Development in the West Bank and Gaza
NOTES
1 For more on this, see Peter Meier. 2016. Guidelines for Economic Analysis of Energy Projects (forthcoming).
Securing Energy for Development in the West Bank and Gaza | 49
CHAPTER 3
Importing Electricity
from Israel
THE CURRENT CONTEXT The power sector in Israel is regulated by the Public
Utilities Authority (PUA) under a modern regulatory
The Israeli and Palestinian electricity sectors are framework. The PUA was established in 1996 and
closely intertwined. On the one hand, the Palestinian operated originally as an independent regulatory
territories depended on the Israeli Electric Corporation entity reporting to the public and the Knesset. In
(IEC) for 90 percent of electricity supply in 2015, January 2016, however, the PUA’s scope of action
ranging from 64 percent in Gaza to 99 percent was moved under the Ministry of Energy. The
in the West Bank. On the other hand, taken as a PUA sets electricity tariffs based on IEC’s cost of
whole, the West Bank and Gaza are the IEC’s single service, excluding costs considered excessive or
largest customer, accounting for 6 percent of Israeli unnecessary, while providing for allowed returns on
electricity demand in 2015 (see appendix C, table equity according to the risk profile of each activity (see
C.3). Moreover, Palestinian electricity demand has appendix C, table C.6). By law, PUA is prohibited from
been growing historically, at 7.2 percent per annum setting tariffs that create deliberate cross-subsidies
from 2001 to 2013, much faster than Israeli electricity between customer classes. PUA is involved in the
demand, which expands at only 5.2 percent per determination of five categories of tariffs: (i) electricity
annum. This is also reflected in demand forecasts usage tariffs (for end users); (ii) network wheeling
(see tableI-2.3), which project annual demand growth tariffs (for use of the transmission grid); (iii) production
of 3.5 percent for the West Bank and Gaza versus tariffs (for electricity generated by independent
only 2.9 percent for Israel. This means that over time power producers, IPPs); (iv) interconnection tariffs
Palestinian needs will inevitably represent a growing (to access the grid); and (v) system management or
share of the Israeli total, estimated to increase to 11 ancillary services (to cover back-up provided by IEC
percent of Israeli electricity demand by 2030. to other market players). The PUA also assesses the
marginal production costs of different generators as
Israel’s power sector remains largely vertically input to economic dispatch by the system manager’s
integrated and is in the midst of a shift from coal- office, which is still a department within IEC. For the
fired to gas-fired power generation. Due to a lack of largest consumers, time-of-use tariffs are applied,
interconnection with neighboring Arab countries, the differentiating nine different time blocks with different
Israeli power system operates as an island that must cost characteristics. (Full particulars of the regulated
be fully self-sufficient and capable of fully meeting power tariffs determined by PUA can be found in
its own demand in all circumstances. The only slight appendix c, tables C.5 through C.10.)
exception to this are the transmission links with the
West Bank and Gaza, whose power systems in turn Israel’s electricity industry has been undergoing a
have modest interconnections with Jordan for the protracted, and still incomplete, process of sector
West Bank and Egypt for Gaza. As of the end of reform. This began with the 1996 Electricity Sector
2015, Israel had an installed generation capacity of Law and its subsequent amendments. Implementation
17.3 GW and generated 65.4 million MWh. About 45 has proved challenging, with negotiations between
percent of energy came from IEC’s two large coal-fired the government and IEC management ongoing since
plants, while the remainder came almost entirely from 2002. In the meantime, a number of different blueprints
natural gas (see appendix C, tables C.1 and C.2). Use of reform have been put forward. IEC itself envisions
of natural gas for electricity generation has expanded becoming a holding company with subsidiaries for
rapidly during recent years, as a result of major Israeli generation, distribution, transmission, and services,
gas discoveries in the eastern Mediterranean. See with potential privatization of at least 49 percent of the
appendix C, table C.4 for the Israeli demand forecast. generation and distribution subsidiaries. At the same
50 | Securing Energy for Development in the West Bank and Gaza
time, the recommendations of the government’s expected to be commissioned by 2022. As a result,
Yogev Committee in 2014 envisaged divestiture of the market share of IPPs in Israeli power generation
some of IEC’s generation assets to cap market share has climbed steeply, spurred by abundant availability of
at 58 percent, as well as a separate transmission natural gas, already rising from 1 percent in 2009 to 33
system operator and the possibility of limited private- percent in 2016 and projected to rise further to reach
sector entry into the distribution segment. 40 percent by 2020 (see figure I-3.1). The rapid entry
of IPPs during a period of relatively flat demand growth
During the past decade, IEC has experienced severe has helped to reduce generation costs, increase
financial difficulties and accumulated debts of NIS 65 reserve margins, and pave the way for the replacement
billion (US$16.6 billion) as of end 2015. A number of aging coal plants.
of factors contributed to this situation, including the
employee union’s wage demands, the electricity A clear set of regulations governs commercial
regulator’s unwillingness to pass on costs deemed transactions between IPPs and other market
inefficient into consumer tariffs, and substantial participants. To stimulate the first generation of IPPs,
debt service obligations. The specific debt from the the companies were provided with a safety net: IEC
Palestinian Authority, which reached NIS 2 billion would purchase up to 80 percent of their power
(US$0.5 billion) in 2016, while substantial in absolute production at normative tariffs set by PUA. As the
terms is a relatively small share of IEC’s overall debt sector has matured, these financial supports have
burden (no more than 3 percent). been removed so that more recent IPPs operate as
merchant plants. Only transactions between IPPs and
Nevertheless, dramatic changes have already taken IEC (the “essential services provider”) are currently
place as a result of the strong entry of IPPs. Since 2009, subject to price regulations; all other transactions are
IEC has been prohibited from building new generation deemed private and prices can be freely agreed by
plants, and there has been strong entry of gas-fired bilateral negotiation. Sales from IPPs to IEC can take
IPPs that received construction and operation licenses the form of capacity and energy contracts or energy-
from the PUA. Installed IPP capacity increased from only contracts, with the former being subject to closer
some 100 MW in 2009 to some 5,500 MW at May regulation. IPPs are required to provide demand
2017, with further 4,000 MW already licensed and forecasts for their customers and show how these
Figure I-3.1: Market Share of Israeli IPPs Climbs Steeply over Time
0.45
0.40
0.35
0.30
Market Share (%)
0.25
0.20
0.15
0.10
0.05
0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Securing Energy for Development in the West Bank and Gaza | 51
will be reliably met by a combination of their own The West Bank and Gaza could also consider selling
generation and power purchased from other private any future electricity surpluses to Israel. Any future
producers. They also need to provide IEC with day- Palestinian IPP could potentially sell surplus electricity
ahead maintenance and output schedules for each into the Israeli grid, and this would likely be a necessary
30-minute time interval. backstop arrangement if PETL is to sign take-or-pay
contracts with future IPPs. The arrangements for
The next wave of IPPs will include a substantial scaling trading surplus electricity would need to be agreed
up of renewable energy. The Israeli government has to on a case-by-case basis and regulated in a power
introduced technology-specific feed-in tariffs. These purchase agreement.
are designed to support scaling up of renewable
energy from levels of 2 percent in 2015 to reach The West Bank and Gaza may stand to benefit from
targets of 10 percent renewable energy by 2020 time of-use pricing for Israeli electricity. The current
and 17 percent by 2030. This will lead to a second renegotiation of the Palestinian Power Purchase
wave of policy- driven IPPs for renewable energy, and Agreement with IEC, in the context of the switch to
will raise technical challenges for the Israeli system high-voltage electricity imports, offers the opportunity
to accommodate a much higher share of variable to benefit from the time-of-use tariff structures that
renewable energy. have been developed by the PUA in Israel. This
offers potential advantages, given that the Palestinian
IMPLICATIONS FOR THE WEST BANK and Israeli daily and annual peaks do not coincide.
AND GAZA Historically, only Jerusalem District Electric Company
has been charged based on time-of-use, while
These recent developments in the Israeli electricity other Palestinian imports have rather been charged
sector have significant implications for the future based on the (less attractive) bulk supply tariff (see
energy plans of the West Bank and Gaza. appendix C, table C.9). On the retail side, Palestinian
distribution companies could also benefit from selling
The West Bank and Gaza will represent a growing electricity to their consumers on a time-of-use basis,
share of IEC’s client base. As Palestinian electricity which would encourage demand-side management
demand growth outpaces that in Israel, and as and energy efficiency.
IEC’s share of the Israeli power market continues
to decline, the Palestinian Single Buyer PETL may The West Bank and Gaza may need to purchase
represent an increasingly large share of IEC’s client ancillary services from Israel. The current renegotiation
base, further intertwining the economic prospects of of the Palestinian Power Purchase Agreement with
these two companies. This means that Palestinian IEC will also need to consider the future role for
energy planning decisions, as well as the financial management (or ancillary) services from IEC. This
viability of the Palestinian electricity sector, will have is particularly relevant in the context of the planned
an increasingly large impact on IEC. construction of new Palestinian IPPs in the West
Bank based on gas-fired and renewable energy
The West Bank and Gaza will have the option of technologies. As such new plants come on stream,
buying power from Israeli IPPs. With the growth of the the West Bank will continue to require backup
Israeli IPP sector, the Palestinian single buyer would services (such as reserves and system balancing) that
also increasingly have opportunities to purchase are most efficiently provided by IEC, and for which
power directly from IPPs on negotiated commercial PUA has already established regulatory tariffs (see
terms outside of the context of any intergovernmental appendix C, table C.10).
framework. Given the relatively rapid pace of
Palestinian demand growth, this may make it Palestinian renewable energy plans need to be
an increasingly attractive market for Israeli IPPs. coordinated with the Israeli system. Given that the
Nonetheless, this option may be difficult to pursue Israeli power system is already contemplating a
until the Palestinian electricity sector reestablishes substantial scaling up of variable renewable energy
a strong payment record with IEC. Moreover, a generation, additional scaling up on the Palestinian
commercial power import agreement would likely also system would need to be carefully coordinated
entail harder enforcement of payment discipline, given with the Israeli system operator to ensure that the
that parallel fiscal channels would not be available. additional variability is appropriately managed.
52 | Securing Energy for Development in the West Bank and Gaza
CHAPTER 4
Importing Natural Gas for
Domestic Power Generation
THE CURRENT CONTEXT demand of 1 billion cubic meters (bcm) per year by
2030. Development of gas-fired power generation
The discovery of sizable gas resources in the eastern capacity is one of the main options available to
Mediterranean has the potential to be game changing support diversification away from Israeli power
for the region. Discoveries have been made in the imports (although in itself that does nothing to
Levant Basin, a geological structure that straddles diversify dependency away from Israel, if the gas is
the territorial waters of Cyprus, Israel, the Palestinian imported from Israel). In the West Bank, plans are
territories, Lebanon, and Syria, and more recently, already under way to commission a 400-megawatt
in Egypt’s Nile Delta Basin. Currently net energy (MW) gas-fired combined-cycle power plant in the
importers,1 these countries are now faced with the northern region of Jenin and potential subsequent
prospect of long-term energy self-sufficiency and addition of a second plant of a similar scale in the
even energy exporting status, with the prospect of southern region of Hebron. The associated natural
a new revenue stream for their economies. In 2010, gas demand is estimated to start at 0.24 bcm per
the United States Geological Survey estimated that year in the early 2020s and climb to 0.71 bcm per
there could be up to an additional 122 trillion cubic year by 2030. In Gaza, the priority may be conversion
feet of undiscovered natural gas resources in the of the Gaza Power Plant (GPP) from fuel to gas and
Levant Basin. As a result, the eastern Mediterranean restoration of its full production capacity. This gas
is now the focus of much interest on the part of conversion could save the Palestinian Authority as
major upstream investors. However, in the short to much as NIS 164–226 million (US$45–62 million) per
medium term, the development and monetization of year in its current fuel bills (depending on the price of
these resources present stakeholders with a set of oil).2 This would create a gas demand of 0.21 bcm per
challenges over and above the standard technical year by the mid-2020s, potentially climbing to 0.33
difficulties relating to the development of these bcm per year by 2030 if further capacity expansion
resources. The challenges originate in the region’s takes place. Demand for natural gas in the industrial
complex political make-up and include the downturn sector is not expected to be economically viable due
of international gas prices, rapidly falling costs of solar to the absence of major industries in the Palestinian
energy as an abundant alternative to gas, as well as territories (see appendix D, table D.1).3 Therefore,
the underdeveloped nature of their energy and gas referring to table I-4.1, the maximum estimated gas
utilization policies. demand for the Palestinian territories would begin at
around 0.34 bcm per year in the early 2020s and climb
The West Bank and Gaza plan to use natural gas to to a maximum of 1.04 bcm per year by 2030. (Further
support development of domestic gas-fired power- details of the assumptions behind this forecast can be
generation capacity, leading to modest estimated found in appendix D, tables D.2 and D.3).
Securing Energy for Development in the West Bank and Gaza | 53
TABLE I-4.1: ESTIMATED NATURAL GAS DEMAND IN THE PALESTINIAN
TERRITORIES UNTIL 2030
YEAR WEST BANK GAZA WEST BANK AND GAZA
2022 0.24 0.11 0.34
2023 0.24 0.11 0.34
2024 0.47 0.21 0.69
2025 0.47 0.21 0.69
2026 0.47 0.33 0.80
2027 0.47 0.33 0.80
2028 0.71 0.33 1.04
2029 0.71 0.33 1.04
2030 0.71 0.33 1.04
Source: Information provided by Delek Drilling.
Israel has become a major natural gas producer due The commissioning of Leviathan is expected in
to substantial offshore discoveries that began in 1999. December 2019. The FID decision was delayed for
Since then, some 36 trillion cubic feet (tcf) of natural three years due to domestic professional and public
gas were discovered offshore Israel (equivalent to regulatory debates, including an antitrust case brought
over 1,000 bcm). About 94 percent of this resource is against Noble Energy and Delek, the companies that
concentrated in just two huge fields: Tamar with 10.9 hold major equity stakes in both the Tamar and the
tcf and Leviathan with 21.9 tcf. To backup domestic Leviathan fields. The case was eventually resolved
gas production, Israel connected in 2013 a Floating in 2016 with the High Court authorization of the
Storage Regasification Unit (FSRU) to the domestic gas government-led Natural Gas Framework. According
pipe grid. The FSRU, located 10 kilometers offshore to this framework, Noble Energy has agreed to
from the Israeli city of Haedera, enables imports of partially divest its interests in the Tamar field and
modest quantities of liquified natural gas (LNG) at Delek has agreed to divest all of its interests in the
prices that ranged during the period of 2016 to April Tamar field. In addition, the two companies had to sell
2017 at NIS 18–26 (US$5–7) per million British thermal their Karish and Tanin assets, which were purchased
units (MMBTU), excluding the FSRU leasing cost. in 2016 by Energian Energy of Greece. It should be
noted, however, that geological reports suggest that
Tamar is the only offshore gas field active today and current discoveries represent only about half of the
supplies the entirety of Israeli gas needs at prices potential available in Israeli waters, providing the
ranging from NIS 17–24 (US$4.7–6.5) per MMBTU. basis for ongoing exploration efforts. In this regard,
The reliance of Israel on one gas source creates a the Israeli government published in late 2016 its
major national security risk, since the entire gas first offshore exploration round, tendering 24 blocks
supply is exposed to technical and security risks. in its exclusive economic zone (each of 400 square
Hence, there is an urgent need for Israel to diversify kilometers). Proposal are expected by July 2017.
its gas supply sources by developing additional Table I-4.2 provides an overview of current Israeli
fields. Tamar’s gas production is also constrained by natural gas discoveries and proven reserves.
a serious bottleneck in the submarine pipeline that
connects it to shore, since the capacity of the pipeline
is lower than the demand for gas in peak hours. In
February 2017, the developers of the larger Leviathan
field finally reached a final investment decision (FID)
for the NIS 14.6 billion (US$4 billion) development of
the field. (For further details of recent Israeli prices for
natural gas, see appendix D, table D.4.)
54 | Securing Energy for Development in the West Bank and Gaza
TABLE I-4.2: NATURAL GAS DISCOVERIES AND PROVEN RESERVES IN ISRAELI
WATERS
FIELD DATE OF DISCOVERY OPERATOR RESERVE (TCF)
Noa 1999 Noble Energy 0.3*
Mary Band 2000 Noble Energy 1.0*
Or 2000 Isramco 0.1
Dalit 2009 Noble Energy 0.5
Tamar 2009 Noble Energy 10.9
Leviathan 2010 Noble Energy 21.9
Tanin 2011 Noble Energy 1.2
Dolphin 2011 Noble Energy 0.1
Shimshon 2012 Isramco 0.5
Karish 2013 Noble Energy 1.8
Total 38.2
Note: tcf = trillion cubic feet.
* These fields have already been depleted.
Israeli gas demand for both power generation create transparency in the market. According to the
and industry has been growing rapidly. Since the Natural Gas Framework for policy that was approved
discovery of domestic natural gas reserves, Israel in 2016, gas export prices cannot be lower than
has been actively promoting a switch in its power- average domestic prices. The regulatory regime for
generation mix from oil-fired to gas-fired, resulting gas in Israel has been subject to considerable political
in annual savings to the economy estimated at NIS contention but appears to have now stabilized.
11 billion (US$3 billion) annually, as well as important
air quality benefits. Natural gas is also being taken Once Leviathan comes on stream, there is the
up for industrial use. All this is bringing important possibility that Israel will become a significant natural
fiscal proceeds to the Israeli economy, estimated to gas exporter. Once under production, the Leviathan
amount to NIS 220 billion (US$60 billion) over the next field will substantially exceed projected domestic gas
25 years. As a result, gas demand has already growth demand, allowing Israel to become an exporter. In
from negligible levels in the early 2000s to 8.3 bcm 2013, the Zemach Committee established that 15
per year by 2015 and is projected to expand further, tcf of Israeli reserves could be allocated for export
reaching 18 bcm per year by 2030. purposes, as the balance was more than adequate
to cover domestic needs for the next 30 years. Gas
Israel has a regulatory regime in place to govern export quotas could increase, however, as additional
its natural gas sector. Israel’s Natural Gas Authority gas reserves are established.
was created in 2002 and has jurisdiction over both
economic and technical (safety) regulation of the Israel started to export gas to Jordan in 2017
sector. The Natural Gas Authority aims to create by supplying 1.8 bcm from the Tamar field. The
conditions suitable for private-sector development destination was two of the Jordanian Arab Potash
of the gas sector through promoting competition plants that are located at the southern Dead Sea.
wherever possible, while regulating monopoly Moreover, in September 2016 Nobel Energy (on
segments of the industry. Israel operates an open behalf of the Leviathan partners) signed a final binding
third-party access regime for its gas transportation 45 bcm take-or-pay contract with the Jordanian
network, with regulated tariffs for the national state-owned electric utility National Electric Power
transportation company, Israeli Natural Gas Lines Company (NEPCO) for the supply of 3 bcm per
(INGL), as well as the local distributors. The prices annum for 15 years. It is expected that additional
of the natural gas itself, however, are not subject to Jordanian independent power producer (IPPs) and
regulation but rather determined through negotiation industrial consumers may sign gas import contracts
between the parties, although negotiated prices and with Leviathan in the near future.4
resulting profitability must be publicly disclosed to
Securing Energy for Development in the West Bank and Gaza | 55
Israeli gas may also be exported to Egypt. An openness to supply gas to the Palestinian territories
arrangement to export 5 bcm per year to the Egyptian under commercial agreements, and a letter of intent
industrial sector is under discussion with Dolphinus for Noble Energy to supply gas to the future Jenin
Holdings, possibly by reversing the flow of the idle gas-fired power plant was signed in 2014 but later
EMG pipeline that previously supplied gas from cancelled in 2015. Further discussions are reportedly
Egypt to Israel, or by utilizing the Arab Pipeline, under way. Meanwhile, the Israeli authorities
once gas from Leviathan reaches Jordan (expected have indicated the feasibility of interconnecting
at December 2019 or early 2020). In addition, two the Palestinian territories with the Israeli gas
separate memoranda of understanding (MOUs) were transportation infrastructure.
signed in 2014, to supply 4.5 bcm per year and 7 bcm
per year for 15 years, with Egyptian idle LNG export The West Bank could relatively easily be supplied
facilities of Union Fenosa Gas and ENI in Dumyat and with natural gas from Israel by constructing short
British Gas (currently Royal Dutch Shell) at Idku. It is spurs from the nearby Israeli gas-transportation
doubtful, however, whether these MOUs will evolve to network. In the northern West Bank (see map I-4.1),
binding contracts, as market conditions have changed the construction of only 15 kilometers of pipeline
significantly since 2014. The major hindering factors from Afula (Israel) to the Jenin Industrial Zone, near
are the steep decrease in oil and LNG prices, on the the border with Israel, could supply high-pressure
one hand, and the very large discoveries of additional gas to the planned 400 MW Combined Cycle
gas fields in Egypt, with the leading discovery of Zohr Gas Turbine (CCGT) plant in Jenin. This work has
field by ENI in 2015, on the other. received the required authorizations from the Israeli
Civil Administration and is straightforward from a
Israel’s gas fields could provide an immediate source technical standpoint. It could be conducted by INGL,
of gas for the West Bank and Gaza. Palestinian gas the Israeli high-pressure gas transmission company,
demand, estimated to rise toward 1 bcm per year by up to the border with the West Bank, at which point
2030, is tiny in relation to Israeli gas reserves already in another company will need to build the pipeline all
excess of 1,000 bcm. Israel has already indicated its the way to the plant. The gas could flow through this
Map I-4.1: Natural Gas Supply Options to the West Bank
IBRD 43945 | SEPTEMBER 2018
Power plant
CNG compression station
CNG storage and pressure Jenin
reduction station Jenin Industrial
Zone
Development Options
Tubas
15 km pipeline from Afula Tulkarm
to Jenin IPP/industrial zone
20 km pipeline form Kiryat Gat Nablus
to a prospective power station Qalqilyah
(CCGT) in Tarkumiye region
Pipeline from Jordan Salfit
to Jenin IPP/industrial zone
Mediterranean W es t B a n k
Low pressure pipelines from the JORDAN
Jerusalem Natural GasS ea
Company to:
Ramallah Ramallah
Bethlehem Jericho
Jerusalem
I S R AE L
Bethlehem
Dead Sea
Tarqumiya
Armistice Demarcation Lines, 1949
Hebron
No-man’s Land Areas,
Armistice G aza Line, 1949
Demarcation
Administrative Boundary
International Boundaries
Schematic map; not to scale
56 | Securing Energy for Development in the West Bank and Gaza
Map I-4.2: Natural Gas Supply Options to Gaza
IBRD 43946 | SEPTEMBER 2018
Feed
pipe
Tama lines from Ashdod
r Field
Israeli EEZ Tamar Platform
Mary B Platform Ashkelon
(field depleted)
Noa North (developed)
Noa South Gaza
Gaza
Marine Gaza IPP
Export to the
West Bank/Israel
Palestinian
EEZ
Egyptian EEZ ISRAEL
idl
e) GAZA
e(
lin
Rafah
ipe
Gp
EM
Armistice Demarcation Line, 1949
International Boundary
ARAB REP.
El-Arish OF EGYPT Schematic map; not to scale
Gas fields Development Options
Gas treatment facility Ashkelon to Gaza pipeline (onshore)
Offshore treatment platform Ashkelon to Gaza pipeline (offshore)
Power plant Gas treatment at Mary B / Tamar platforms
CNG compression station Submarine pipeline to Ashkelon, treatment facility in Ashkelon
Existing Pipelines Utilization of EMG pipelines for gas transportation to Ashkelon,
treatment facility in Ashkelon
Tamar / Mary B / Israeli grid
Gaza Marine to El-Arish (pipeline + treatment facility at
El-Arish - Ashkelon EMG pipeline (idle) El-Arish), export to Egypt and/or pipeline to Gaza
Utilization of EMG pipeline for gas transportation to
Gaza and Israel
Treatment facility in Gaza (near Gaza IPP power station) and
export of excess gas via Israel to the West Bank
pipeline within five years prior to the commissioning from the Jordanian grid to Jenin, over hilly terrain, and
of the Jenin gas-fired combined cycle power plant could be expected to cost more than US$100 million.
by 2022. The pipeline could deliver gas from Israeli It would also need to cross the Jordan River, which
sources (such as Tamar, Leviathan, or Karish-Tanin) is the border between Jordan and the West Bank,
or eventually others. A similar arrangement could be that is currently held by Israel. Given that a pipeline
envisaged in the southern West Bank. This would from Israel to Jordan is already planned to support
involve the construction of a high-pressure pipeline the export of Israeli gas, the same infrastructure could
from Kiryat Gat to the Tarkumiya area, west of Hebron, potentially be used to transport gas from Jordan into
to supply gas for a proposed future second gas-fired the West Bank using the same spur from the INGL
plant for the West Bank. This option is not expected network already noted.
to materialize before the end of the 2020s.
It is also relatively straightforward (from a technical
An additional option that has sometimes been raised point of view) to supply Gaza with Israeli gas through
is the construction of a dedicated gas pipeline from a short dedicated pipeline from the Israeli production
Jordan to the northern West Bank. This could be terminal in nearby Ashkelon. There are two main
used to supply gas from the Arab gas pipeline or options for the supply of Israeli natural gas to Gaza.
imported LNG from Jordan (map I-4.1). While this The first option is the supply of Israeli gas through a
option is technically feasible, its economic viability high-pressure 18-kilometer pipeline from Ashkelon in
can be called into question. Such a dedicated pipeline Israel to GPP that is located to the south of Gaza City.
would need to be a relatively long 80-kilometer spur Technically it is a relatively simple project (8-kilometer
Securing Energy for Development in the West Bank and Gaza | 57
TABLE I-4.3: ALTERNATIVE OPTIONS FOR DEVELOPING THE GAZA MARINE GAS
FIELD
OPTION 1 OPTION 2 OPTION 3
Anchor client Israel and West Bank and Egypt and West Bank and West Bank and Gaza
Gaza (possibly also Jordan) Gaza
Gas transportation 45-kilometer (km) offshore 70-km offshore pipeline 25-km offshore pipeline to
infrastructure pipeline to Ashkelon (Israel) to El Arish (Egypt) Mari B and Tamar Platforms
Gas treatment New gas treatment facility in Supply to Gaza Use existing offshore gas
infrastructure Ashkelon (Israel) or Egyptian market treatment facility (Israel)
or feed-gas to LNG
liquefaction plants in
Egypt
Project duration 3–4 years 3–4 years 2 years
Investment costs US$1.2 billion–1.5 billion US$1.2 billion–1.5 billion US$0.3 billion–0.4 billion
Required 2.0 bcm per year 2.0 bcm per year 0.2-0.3 bcm per year (rising in
throughput a flexible manner
with demand)
Supply to Gaza 23-km pipeline from 65-km pipeline from El 23-km pipeline from Ashkelon
Ashkelon (Israel) to GPP Arish (Egypt) to GPP (Israel) to GPP
Supply to West Via injection into INGL gas None Via injection into INGL gas
Bank transportation network transportation network
Note: bcm = billion cubic meters; GPP = Gaza Power Plant; LNG = liquified natural gas.
58 | Securing Energy for Development in the West Bank and Gaza
pipeline from Ashkelon to Erez, the Gaza crossing, would also allow transportation of Palestinian gas into
and an additional 10 kilometers to the station). The the West Bank through the Israeli gas transportation
European Union is currently sponsoring a technical network, as already described.
study to support the Gas to Gaza initiative led by the
Quartet. The second option is the supply of Egyptian The development of the Gaza Marine field would
gas via a 60-kilometer pipeline from El Arish to GPP. bring significant fiscal revenues to the Palestinian
In addition to the Israeli discoveries, a much smaller Authority. Based on a typical 60 percent public sector
Palestinian gas field has been discovered offshore profit-sharing arrangement, it is estimated that Gaza
from Gaza. The so-called Gaza Marine field is located Marine could bring fiscal proceeds of almost NIS
36 kilometers offshore from Gaza in relatively shallow 10 billion (US$2.7 billion) over its 25-year life. These
waters, and has estimated reserves of 1.2 tcf. In would be phased as follows: NIS 146 million (US$40
November 1999, a 25-year contract for gas exploration million) per year in the first 3 years of operation; NIS
and development of the field was signed between 310 million (US$85 million) per annum in the rest of
British Gas Group, the Consolidated Construction the first decade of operation; and NIS 475 million
Company, and the Palestinian Investment Fund, a (US$130 million) per annum in the next 15 years of
sovereign wealth vehicle that reinvests in Palestinian operation. Out of these revenues, royalties set at
projects. The Palestinian Authority has recently 12.5 percent of sales would amount to 26 percent
renegotiated the terms of the concession agreement of overall fiscal proceeds, with the remainder being
with British Gas to grant a 15-year extension and taxes.5 In 2005, the Palestinian Authority signed an
increase the Palestinian Investment Fund equity share agreement in principle to sell the natural gas to the
from 10.0 percent to 17.5 percent and limit British government of Egypt via the terminal at El Arish, but
Gas rights to Gaza Marine only. this deal did not receive Israeli approval. From 2006
to 2008, negotiations took place with Israeli Electric
The development of the Gaza Marine field is highly Corporation regarding possible sale of the gas to
contingent on securing export markets, since the Israel via the terminal at Ashkelon. Due to the failure to
Palestinian market is too small to justify the necessary reach a purchase agreement, the private companies
investment. It has been estimated that the Gaza Marine pulled out, and the development of the Gaza Marine
field would need to be developed with a throughput of field has subsequently been on hold.
2 bcm per year in order to provide adequate returns
to the necessary investment of NIS 3.6–4.4 billion IMPLICATIONS FOR THE WEST BANK
(US$1.0–1.2 billion). This is about twice the maximum AND GAZA
levels of demand that could be reached in the West
Bank and Gaza by 2030. Hence, the development of These recent developments in the natural gas sector
the field is contingent on securing a suitable export have significant implications for the future energy
agreement, either to Israel (and possibly Jordan) or to plans of the West Bank and Gaza.
Egypt. The first option of export to Israel would entail
construction of an offshore pipeline to Ashkelon in The development of gas-fired power-generation
Israel, where a new gas treatment plant could also be plants in the Palestinian territories should not be
located. The second option of export to Egypt would contingent on development of Gaza Marine. Given
be based on an offshore pipeline to El Arish in Egypt the relatively small initial levels of Palestinian gas
and use of the gas as feedstock in the Egyptian LNG demand, their relatively slow ramp-up, and the
export terminal at Idku. A third possible option would unproven creditworthiness of the West Bank and
be to develop the Gaza Marine field at a lower level of Gaza as a purchaser of natural gas, it does not look
throughput more compatible with domestic demand. practical to base development of Palestinian gas-
This could be viable if existing Israeli infrastructure fired power generation on development of Palestinian
could be shared with the Tamar field and the soon to gas resources. Instead, the well-established Israeli
be depleted Mari B field, which are located relatively gas market with its abundant reserves provides a
nearby, reducing development costs to NIS 910 more practical immediate source of gas for the West
million (US$250 million). The main features of the Bank and Gaza, with the ability to supply at relatively
three options are summarized in table I-4.3. In all small volumes, providing flexibility for demand growth
three cases, a part of the gas could be brought back (although the Palestinian credit worthiness issue still
by pipeline into Gaza, as noted. The two Israel options needs to be addressed).
Securing Energy for Development in the West Bank and Gaza | 59
There may be strategic value in developing gas previously shown an interest in Palestinian gas, the
transportation links between Israel and the Palestinian recent agreement of import arrangements with Israel
territories. Whether gas is ultimately sourced from may limit the scope for this. Given the uncertainties
Israeli or Palestinian sources, connecting the West surrounding all the potential export possibilities, the
Bank and Gaza to the Israeli gas transportation option of developing Gaza Marine at a slower pace
infrastructure looks to be a necessary prerequisite for that could be entirely absorbed by the Palestinian
accessing any gas supplies. Fortunately, the required market could prove to be a practical solution for
investments to connect the West Bank and Gaza getting the project off the ground. However, it may
to the Israeli high-pressure gas grid are relatively be more feasible to get this project off the ground
small. These costs are estimated at some NIS 55 once some gas-fired generation capacity has been
million (US$15 million) to connect the prospective built in the West Bank and Gaza, the required gas
Jenin IPP in the northern West Bank, and some transportation infrastructure is in place, and a track
NIS 73 million (US$20 million) to connect Gaza IPP. record of payment has been established based on
These connections have already been established experience with Israeli gas imports.
as technically and economically viable and seem
to have some political support from both the Israeli Any gas-import agreement with Israel should not
government and the Palestinian Authority. foreclose the eventual development of Gaza Marine.
If the ultimate goal is to anchor the development of
The main economic benefit of the Gaza Marine project Gaza Marine from an established base of Palestinian
to the West Bank and Gaza lies in its contribution to gas consumption, it would be important to ensure
fiscal balance rather than to energy security. In view that any gas import agreements with Israel provide
of the preceding considerations, it is clear that Gaza adequate flexibility for an eventual transition from
Marine gas is not critical to the development of gas- Israeli to Palestinian gas supplies. However, it is likely
fired generation capabilities in the Palestinian territories. that this flexibility will come at a cost premium relative
Nor does it necessarily guarantee greater energy to a longer term rigid take-or-pay arrangement for the
independence to the West Bank and Gaza, given supply of gas.
that Palestinian gas would in any case need to travel
through Israeli infrastructure to reach the West Bank or Development of gas-fired power in the West Bank
Gaza. It follows, therefore, that the main advantage of and Gaza may in future become uneconomic. Given
developing Gaza Marine may lie in its contribution to the rapid pace of development of solar photovoltaics,
public finances rather than to energy security. concentrated solar power, and energy storage
technologies, it should not be precluded that gas-
There may be merit in considering the smaller scale fired power will become uneconomic in the West
development options for Gaza Marine. It is unclear Bank and Gaza, or simply less desirable given the
whether export arrangements of Gaza Marine gas energy security advantages for solar energy. Solar
to either Israel, Jordan, or Egypt would prove to be energy supply to the West Bank and Gaza could be
feasible. Israel itself is on the brink of having a large from Palestinian territory and/or from Jordan (which
gas surplus, once the Leviathan field comes on is scaling up solar energy very rapidly) and/or from
stream. Egypt, on the other hand, has become a Egypt (which is planning to scale up solar).
significant importer of LNG (rather than an exporter
as previously envisaged), although this may change
with the discovery of the Zohr field. While Jordan has
60 | Securing Energy for Development in the West Bank and Gaza
NOTES
1 With the partial exception of Egypt, which has oscillated between being a net importer and a net exporter.
2 The exact magnitude of the savings is sensitive to the oil price and is estimated at current oil prices of US$50 per barrel and prevailing gas prices for
independent power producers in Israel. The savings could increase to NIS 226 million (US$62 million) per annum in case oil prices increase to US$100
per barrel.
3 The existing factories could be converted to natural gas supplied in compressed natural gas form (by road tankers). But their modest consumption of
diesel and liquified petroleum gas and current oil prices do not make it a viable option.
4 It should be noted that no existing IPP in Jordan purchases its own fuel; all supplied with fuel by NEPCO, at NEPCO’s own risk.
5 These results derive from the following simplistic assumptions: Gaza Marine development via the Tamar Platform scheme; development costs of $250
million; gas treatment and variable costs of $1 per MMBTU and gas price of $5 per MMBTU. Gas production quantities would be 0.5 BCM per year in
the first 3 years of operation, 1 BCM per year in the next 7 years of operation, and 1.5 BCM per year in the next 15 years of operation.
Securing Energy for Development in the West Bank and Gaza | 61
CHAPTER 5
Importing Electricity from
Jordan and Egypt
CURRENT CONTEXT The upgrade of the existing connection inside Jericho
from 33 kV to 132 kV would further increase power
In addition to its power imports from Israel, the West supply in the West Bank and diversify Palestinian
Bank and Gaza also have the possibility to consider electricity sources. This project is backed by
further increasing the current modest imports from Palestinian Energy and Natural Resources Authority
Jordan and Egypt. The validity of these options and JDECO, and its execution would be highly
depends to a considerable extent on the domestic desirable. Other options, such as a 400 kV connection
power sector situation in each of these neighboring to the Jordanian Samra 400 kV substation, have been
countries, as well as the relative costs of their power assessed in the past but are more costly and more
export tariffs compared with Israel and domestic complex. The Jordanian substation has sufficient
Palestinian options. Expanding imports from either of space for extensions by two 400 kV line bays, and
these countries would also entail significant upgrades there is also the possibility of extending the Samra
to cross-border transmission infrastructure, which is Thermal Power Plant in Jordan, to supply additional
currently quite modest, and would require various energy if required.2
levels of political and governmental approvals to allow
permitting for construction. For both countries, the Since Palestinian power demand is not integrated
lack of payment security from Palestinian buyers is into Jordanian power sector expansion plans, only
also a concern, as the risk of nonpayment is deemed surplus Jordanian power is available for export. Given
high, and unlike Israel, neither Egypt nor Jordan has the relatively small size of the Jordanian system,
access to the controversial net lending mechanism total power demand in the West Bank currently
to recover their costs. Finally, although Jordan is represents about one-third of Jordanian demand.
typically considered as a supplier to the West Bank The quantities available for export are determined on
and Egypt to Gaza, since Egypt and Jordan are an hourly basis by the available capacity in Jordan
fully connected it is—at least in principle—possible as well as the evolving Jordanian load. Nevertheless,
to envisage Jordanian power flowing to Gaza via Jordan’s National Electric Power Company has been
Egypt or Egyptian power flowing to the West Bank responding positively to requests for firm power
via Jordan. export from Jordan to the West Bank. In a recent visit
to Amman, the Palestinian minister of energy agreed
JORDAN with the Jordanian counterparts to accelerate efforts
to upgrade the existing connection inside Jericho
In 2008, the West Bank started importing 20 from 33 kV to 132 kV.3
megawatts (MW) of power from the Jordanian grid
through a 33 kilovolt (kV) feeder to Jericho. The Jordan’s successful transformation of its energy
Palestinian strategy was to reduce its dependence sector has increased its capability to export power
on Israeli electricity supply and access the Arab to the West Bank. As recently as 2010-2015, Jordan
network in a moment when Israeli electricity supply faced an electricity supply crisis due to a shortage
to the Gaza Strip was being reduced.1 The Jericho of natural gas in Egypt that led to the curtailment
area was disconnected from the Israeli power grid of Egyptian fuel and power imports, and forced the
and connected to the Jordanian grid. Since then, the country to switch its plants over to Heavy Fuel Oil
Jerusalem District Electricity Company (JDECO) has with serious financial consequences. This situation
been managing a separate electricity supply system has largely been turned around by the installation
for the customers in the Jericho area. of an FSRU at Aqaba allowing the import of LNG so
62 | Securing Energy for Development in the West Bank and Gaza
that thermal plants could revert to running on natural purchases power from Israeli Electric Corporation
gas. The recent signature of a Gas Sales Agreement (IEC) on a time-of-use basis, with different costs
GSA) with the US-based Noble Energy for gas from based on the time of day and season. At the same
Israel’s Tamar and Leviathan fields, will allow Jordan time, JDECO arbitrages IEC costs against Jordan
to displace part of its LNG imports with natural gas time-of-use rates, which are made up of a capacity
reducing the cost of power generation. While Jordan charge component and a day-versus-night tariff rate.
was also interested in exploring imports of Palestinian Typically, during fall and spring, when Palestinian
gas from Gaza Marine, it remains unclear when such loads are smaller, JDECO buys exclusively from IEC,
gas may become available. As a result of these whose rates are much lower than Jordan’s. However,
measures, Jordan has restored its reserve margin during summer and winter, when Palestinian loads
to the prudent 10-15 percent range. In addition, the are high and IEC tariffs increase (see figure I-5.1),
country has 1,300 MW of renewable energy in the JDECO may purchase power from Jordan, as tariffs
pipeline, which due to their variable nature are not rates are within 10–15 percent difference. It should
counting towards the reserve margin. Hence, Jordan be noted that the Palestinian Authority pays back
is likely to enjoy electricity surpluses in the medium to JDECO the difference in price between IEC and
term and would be well positioned to increase Jordanian tariff rates, as JDECO is obliged to follow
electricity exports to the West Bank. PERC’s unified tariff, which is set using the IEC price
only. A fundamental reason for the cost differential
A key issue driving the decision of how much to rely between Israeli and Jordanian power lies in the fact
on Jordanian imports is their relative cost. Historically, that Israeli power generation is increasingly based on
the cost of electricity imports from Jordan to the West relatively low-cost domestic gas, while that in Jordan
Bank, through JDECO, have been based on a special it is based on significantly more expensive imports of
import tariff averaging NIS 0.51–0.55 (US$0.14–0.15) LNG. This differential will come down as Jordan starts
per kilowatt hour (kWh), which is significantly more to rely on Israeli imports of natural gas, although it is
expensive than the Israeli import tariff averaging unlikely to disappear entirely.
NIS 0.33–0.40 (US$0.09–0.11) per kWh. JDECO
Figure I-5.1: IEC Time-of-Use High Voltage Tariff versus Jordan Average Annual
Tariff
WINTER TRANSITION SUMMER
100
80
Tariff (Agorots per KWH)
60
40
20
0
Off-peak Shoulder Peak Off-peak Shoulder Peak Off-peak Shoulder Peak
High Voltage Jordan 2015 average tariff
Source: Information provided by Israeli Electric Corporation and Palestinian Electricity Regulatory Council.
Note: TOU = time-of-use.
*IEC time-of-use high voltage tariff set as of September 13, 2015.
**Jordan 2015 annual average tariff.
Securing Energy for Development in the West Bank and Gaza | 63
Increasing energy imports from Jordan is key to Increasing connection capacity from Egypt into Gaza
diversifying energy sources through regional trade. is a technically feasible option. It would have minimal
Jordan is willing to act as a transit country for Palestinian impact on the Egyptian power system, because
trade with third parties and already has a well- current exports represent only 0.1 percent of total
established wheeling tariff and associated regulations. current consumption in Egypt. (Indeed, total electricity
Strengthening connection with the Jordanian grid demand in the West Bank and Gaza is no more than
would allow access to Egyptian power supply as well 2–3 percent of Egyptian demand.) The construction of
as the eight-country Arab regional grid comprised of a 220-kV transmission line from Egypt into Gaza has
Egypt, Iraq, Jordan, Syria, Turkey, Libya, Lebanon, and been considered in the past. The Islamic Development
the West Bank and Gaza. In terms of natural gas, as Bank had agreed to finance two 22-kV feeders from
noted, an approximately60-kilometer branch from the Egypt to Gaza, which would have increased the import
Arab Gas Pipeline from Jordan into the West Bank capacity to 60 MW, but the project was put on hold.
would allow export of gas for the Palestinian energy
sector. This would require agreement from the four Egypt has successfully turned around its recent
nations (Egypt, Jordan, Lebanon, and Syria) that are power supply crisis and is heading for a substantial
members of the Arab Gas Pipeline. electricity surplus. A shortage of domestic gas supply
led to a serious power supply crisis in Egypt during
EGYPT the summer of 2014, resulting in rolling blackouts
and social unrest. Since then, the government has
Gaza imports 20–30 MW of power from Egypt to taken decisive measures to expand electricity supply
the Gaza Strip during a limited number of hours per through contracting emergency plants, establishing
day. This restricted service is frequently interrupted three new floating LNG import terminals at Ain
due to lack of maintenance of the lines and security Sokhna to compensate for the shortage of domestic
concerns in the Sinai Peninsula. In addition, the gas, and contracting the development of over 18
electricity supplied is of poor quality, with voltage and gigawatts (GW) of new thermal generation capacity,
frequency deviations causing damage to sensitive most notably through a large bilateral deal with
electronic equipment, such as magnetic resonance Siemens of Germany for the development of a new
imaging machines at hospitals. Egypt provides 14 generation of efficient CCGT plants. As a result,
percent of Gaza’s energy supply through three feeder Egypt’s fossil-fuel generation capacity is expected
lines from the Al Arish power plant in Northern Sinai to double between 2015 and 2021, even as some
at an average tariff of NIS 0.27 (US$0.07) per kWh, 4 GW of new renewable energy capacity also come
almost 40 percent lower than the Israeli import price. online. Demand is unlikely to keep up with this rapid
Unlike all other cross-border electricity transactions growth, so that, in the absence of major capacity
with Egypt, which have the Egyptian Electricity retirements, the average capacity utilization of fossil
Transportation Company as the contractual party, power plants will fall from 54 percent in 2015 to 41
the export of power to Gaza is managed through an percent in 2021 (see table I-5.1 and appendix E, table
agreement with the local Canal Distribution Company E.1 for additional detail). As a result, Egypt is moving
in Sinai. The total monthly cost of Egyptian power from a 5 GW power deficit in 2014 to potentially a
imports is NIS 3.7 million (US$1 million), which is substantial power surplus by 2021, opening up the
entirely paid by the League of Arab States. possibility of significantly expanding power exports
and other domestic uses of electricity.
TABLE I-5.1: PROJECTED FOSSIL FUEL SUPPLY SITUATION IN THE EGYPTIAN
POWER MARKET
UNIT 2015 2016 2017 2018 2019 2020 2021
Capacity utilization factor % 54 55 52 44 40 41 41
Marginal economic cost US$ per kWh 0.04 0.03 0.04 0.05 0.05 0.06 0.06
Electricity supply ‘000s GWh 161.9 171.7 178.6 188.6 199.1 210.2 223.2
Generation capacity GW 21.3 22.3 25.9 33.6 39.6 41.2 44.8
Note: kWh = kilowatt hour; GWh = gigawatt hour; GW = gigawatt.
64 | Securing Energy for Development in the West Bank and Gaza
Map I-5.1: Zohr Gas Discovery and Surrounding Infrastructure
0 50 100 Kilometers
IBRD 43947 | SEPTEMBER 2018
Medit err a ne a n Se a
Total (100%)
Total (100%)
ENI (100%) Leviathan
Aphrodite
Zohr Tamar
BP (100%) BP (100%) ENI (100%)
ENI (100%)
Petro Celtic (50%)
Edison (50%)
West
Bank
Gaza
ELNG Damietta LNG
ISRAEL
AR AB R E P. OF EG YPT
Offshore Fields Offshore Blocks
Zohr Gas Licensed Armistice Demarcation Lines, 1949
Other Gas, Gas/Condensate Relinquished International Boundaries
Oil, Oil & Gas
Field Grouping Source: Wood Mackenzie; Deutsche Bank.
Egypt’s declining domestic gas production received a reform agenda has helped to restore private-sector
boost from the discovery of the Zohr field in 2015. Th-s confidence and underpinned the current development
offshore deep water field could hold a potential of 30 of the Zohr field. Due to its strategic location close to the
trillion cubic feet (tcf) of lean gas, making it the largest boundary of Egyptian, Cypriot, and Israeli water, and the
gas discovery in Egypt and one of the largest globally availability of stranded LNG export facilities in Egypt, the
over the past decade. Assuming that 75 percent of the Zohr field also has the potential to become a gas hub for
gas can be recovered, the field would add around 22 tcf, LNG export from the region (see map I-5.1).
or 34 percent to Egypt’s natural gas reserves, equivalent
to about 12 years of current natural gas consumption. The cost of Egyptian electricity imports compares
ENI’s announced development plan envisages the start favorably with those of Israel. Domestic electricity
of production by the end of 2017, just two years after tariffs in Egypt, at an average level of NIS 0.08
the discovery, with a progressive ramp up to a volume of (US$0.02) per kWh, compare favorably with Israel,
about 2.7 billion cubic feet of gas per day by 2019. This although they are distorted by significant subsidies,
discovery promises to reverse the fortunes of Egypt’s gas both to the power sector and the upstream fuels
sector, which had been in long-term decline, switching sector, which are currently in the process of being
from exporting to importing status in 2015. This was unraveled. The current cost recovery benchmark tariff
due to an unfavorable energy-pricing regime, mounting is in the order of NIS 0.15 (US$0.04) per kWh. Historic
arrears to international oil and gas companies, and social exports to Gaza have also been priced at a favorable
unrest following the Arab Spring. An ambitious policy rate of NIS 0.27 (US$0.07) per kWh.
Securing Energy for Development in the West Bank and Gaza | 65
IMPLICATIONS FOR THE WEST BANK From a technical standpoint, the relative sizes of the
AND GAZA different power systems also facilitate reliance on
Egypt. Another important difference lies in the scale
These recent developments in the electricity sectors of the two neighbors’ power sectors. The Egyptian
of neighboring Jordan and Egypt have significant sector is more than 10 times larger than the Jordanian
implications for the future energy plans of the West one—Palestinian electricity demand represents more
Bank and Gaza. than 30 percent of Jordanian demand but less than
3 percent of Egyptian demand. This has important
Jordan and Egypt have recently overcome major, implications for energy planning. Any significant
related power supply crises and are well on their way increase in imports from Jordan would eventually
to having significant power surpluses. The recent suggest the need for closer coordination between
electricity supply crisis in Egypt, due to declining the two countries on energy planning. Imports from
availability of domestic gas, triggered a second crisis Egypt could be substantially increased without any
in Jordan, as Egyptian imports to that country had to real impact on the Egyptian system.
be curtailed. Both countries have acted decisively to
address their respective crises and are emerging with From a political and security standpoint, however,
significantly expanded power-generation capacity power imports from Jordan may be more feasible
and greatly enhanced energy security. Both countries than those from Egypt. Despite the technical and
are beginning to face the prospect of electricity economic advantages of Egyptian power, cross-
surpluses, a modest surplus in Jordan of the order border power cooperation with Jordan is significantly
of 100s of MW and a much more substantial surplus more advanced for political reasons. For a number of
in Egypt of the order of 1,000s of MW. As a result, reasons, ranging from political upheaval and security
both countries will have power available for export concerns in the Sinai to the recent curtailment of
during the coming years, which would greatly help in power exports to Jordan, Egypt’s reputation as a
the diversification efforts of the West Bank and Gaza. reliable source of electricity has been prejudiced. At
the same time, political relations between Egypt and
From an economic standpoint, power imports from Gaza have been increasingly strained. On the other
Egypt look more attractive than those from Jordan. hand, political relations with Jordan remain strong and
The characteristics of potential power imports from constructive dialogue has already been established.
Jordan and Egypt look quite different. Egyptian
power looks to be lower cost than Israeli power, Further upgrading of electricity imports from Jordan
while Jordanian power looks to be higher cost than will require approvals from Israel over access to Area
Israeli power. Since all three countries are heavily C. Any expansion of or addition to the current cross-
dependent on natural gas, this difference largely boils border power line to Jordan traverses Area C of the
down to the cost of gas. In Egypt, domestic gas has West Bank and as a result will require Israeli approval,
historically been low cost, as the gas reserves are in even for the upgrade of the existing lines.
shallow waters. In Israel, gas prices are higher as the
gas reserves are in deeper waters. In Jordan, gas
prices are the highest, as they do not have domestic
gas supply and rely on more expensive LNG imports.
66 | Securing Energy for Development in the West Bank and Gaza
NOTES
1 This is described in “Palestinians Plug Jericho into Jordan’s Power Grid,” Reuters, February 15, 2008, http://www.reuters.com/article/us-palestinians-
israel-electricity/palestinians-plug-jericho-into-jordans-power-grid-idUSL2563001520080225.
2 For more on this see Palestinian Energy Authority and Norconsult. 2008. Interconnection of the Electrical Networks of Egypt—Gaza Strip and Jordan-
West Ban. Sandvika, Norway: Norconsult.
3 More information can be found in World Bank. 2016. “Aide Memoire.” Washington, DC: World Bank.
Securing Energy for Development in the West Bank and Gaza | 67
CHAPTER 6
Developing Domestic
Renewable Power Generation
THE CURRENT CONTEXT dropped more than 80 percent since 2010.1 1 In
addition, neighboring Jordan has received bids as
Renewable energy represents the only truly low as NIS 0.22 (US$0.06) per kilowatt hour (kWh),
independent form of power supply that does not rely which is almost half the price of Israeli Electric
on imports of electricity or fuel. Currently, over 96 Corporation (IEC) imports. Nevertheless, care should
percent of Palestinian energy supply is dependent be taken in comparing simplistic unit costs between
on Israel in terms of either direct electricity imports firm sources of energy, like IEC imports, and variable
or fuel imports for the Gaza Power Plant (GPP). In sources, like solar generation. In addition, the political
the future, there are plans to increase domestic gas- and economic climate in Jordan are significantly
fired generation capacity. However, unless the Gaza better than in the West Bank and Gaza, making it
Marine field is developed—which is difficult, given a more conducive environment for investment and
the complex geopolitical context—the fuel for these private-sector involvement. Nevertheless, the West
power plants would also have to be imported from Bank and Gaza are located in a region rich with the
Israel. Even if Gaza Marine were to be developed, the sun’s energy. With 3,000 sunshine hours per year and
import of the fuel would likely still entail reliance on global horizontal irradiance over 2,000 kilowatt-hours
Israeli gas transportation infrastructure. Renewable per meter squared, the West Bank and Gaza rank
energy, particularly solar, is the only source that can among the world’s top locations for construction of
be independently produced on Palestinian soil. solar systems. Solar energy represents one of the few
untapped supply options for the West Bank and Gaza,
As the cost of solar energy continues to decline, in a context where negotiations with neighboring
the option looks increasingly attractive for the West countries on increasing power supply options have
Bank and Gaza. As shown in figure I-6.1, the cost proven difficult to advance.
of rooftop photovoltaics and utility-scale solar have
Figure I-6.1: Recent and Projected Declines in the Unit Cost of Renewable Energy
800
700
Capital cost (US$ per KW)
600
500
400
300
200
100
0
Rooftop Solar Utility Scale PV CSP Wind Biomass
2010 2016 2030
68 | Securing Energy for Development in the West Bank and Gaza
TABLE I-6.1: PROGRESS TOWARD THE ACHIEVEMENT OF PENRA’S
RENEWABLE ENERGY TARGETS
PENRA’S RENEWABLE ENERGY TARGETS (SET IN 2012)
2020 TARGET (MW) ACHIEVED BY 2017 (MW)
Rooftop Solar 25 1.5
Utility-scale PV and CSP 40 16
Wind 44 0
Biogas (animal and landfill) 21 0.5
Total 130 18
Note: PENRA = Palestinian Energy and Natural Resources Authority; MW = megawatt; PV = photovoltaic; CSP = concentrated
solar power.
Nevertheless, it is proving challenging to kickstart and C). However, obtaining construction permits in
renewable energy investment in the Palestinian Area C is extremely difficult, with only 3.5 percent
context. The Palestinian Energy and Natural Resources of construction permits submitted by Palestinians
Authority’s (PENRA’s) renewable energy targets, set in to the Israeli Civil Administration to build in Area C
2012, aim to generate 130 megawatts (MW) of power having been approved in 2015. Again, due to land
supply from domestic renewable resources by 2020. constraints—less severe for the West Bank than Gaza
As of March 2017, less than 15 percent of that target but nonetheless real—the total renewable potential of
had been achieved (see table I-6.1). After a slow Areas A and B amounts to just 707 MW, of which over
start, interest in renewables has noticeably increased 75 percent is in the form of rooftop solar. The larger
in the past three to four years, following the cabinet prevalence of houses in the West Bank, as well as the
adoption of the renewable energy strategy in 2012 larger population, makes the rooftop potential much
and the promulgation of the Palestinian Renewable larger than for Gaza. Third, as much as 98 percent
Energy Laws released in 2015. This young sector has of renewable energy potential in the West Bank and
faced two main challenges to date. They include an Gaza takes the form of solar, due to limited suitability
inability to secure a power purchase agreement with for wind or availability of biomass.
a bankable off-taker, and there is a lack of available
transmission infrastructure for power evacuation. Wind faces land limitations similar to utility-scale PV
Investors are deterred by the context that, given and needs to be firmed up due to its intermittent
the current circumstances, could result in significant nature. Because of safety concerns, wind farms cannot
construction delays and high risk of payment default. be built in densely populated urban centers. In Gaza,
this means wind production is not possible. In addition,
If these obstacles were addressed, the potential for wind speeds are not sufficient in Gaza. In the West
renewable energy development in the West Bank and Bank, the densely populated Area A is not suitable for
Gaza could go far beyond current policy targets. In wind generation. On the other hand, similar to utility-
fact, based on a survey of the available potential, the scale PV, Area C is not accessible for construction.
existing renewable energy target could be increased The limited sites in the West Bank with the right height,
by more than 30 times, as highlighted in table I-6.2, orientation, and wind speed are located close to the
for a total of 4,246 MW. (See appendix F, tables F.1 Israeli border, which presents a security concern to
through F.5 for full calculations and assumptions). the Israeli side. Also, the intermittency of wind would
However, there are a number of important points to have to be firmed up with additional power supply likely
note. First, about 96 percent of the identified potential having to come from Israel.
is in the West Bank. Only 165 MW of potential have
been identified for Gaza, and this is almost exclusively Biogas plants are dispatchable and do not face land
in the form of rooftop solar, due to extreme land restrictions but are limited in terms of scalability.
constraints and vertical patterns of urbanization. Small, distributed biogas digesters can be located
Second, about 83 percent of the potential identified close to their associated farms. The larger biogas
for the West Bank is located in Area C (see appendix power plants for landfills can be built on site. Power
G, map G.3 for map and explanation of areas A, B from biogas plants is dispatchable because gas
Securing Energy for Development in the West Bank and Gaza | 69
TABLE I-6.2: OVERVIEW OF RENEWABLE ENERGY POTENTIAL IN THE WEST
BANK AND GAZA
POTENTIAL AVAILABLE RENEWABLE ENERGY CAPACITY (MW)
Utility-scale PV or CSPa
Areas A and B Area C Total
West Bank 103 3,374 3,477
Gaza 0 0
Rooftop solarb
Residential Public Commercial Total
West Bank 490 13 31 534
Gaza 136 8 19 163
Windc and biomassd
Wind Areas A, B, C Biomass (animals) Biomass (landfill) Total
West Bank 45 7 18 70
Gaza 0 2 0 2
Total
West Bank 4,081
Gaza 165
West Bank and Gaza 4,246
Note: MW = megawatt; PV = photovoltaic; CSP = concentrated solar power.
a Assumptions: According to PETL and PEC, 0.12 percent of Area A and B and 3 percent of Area C are available for solar installations. The land requirement
is ~28 square meters (m2) per kilowatt peak (kWp), including space for control rooms and so forth.
b Assumptions: According to the Palestinian Central Bureau of Statics and the Palestinian Energy and Environmental Research Center, in the West Bank and
Gaza there are over 400,000 residential, 2,500 public-sector, and 5,000 commercial sector rooftops. The rooftop areas range from 150–300 m2, and between
30–50 percent of the rooftops are available for solar installations. The rooftop space requirement is 9 m2 per KWp.
c Assumptions: In hilly regions of the West Bank, wind speeds are 4–8 meters per second for regions above 1,000 meters. The land requirement is ~210 to
330 m2 per KWp.
d Assumptions: Three landfills in the West Bank (Jenin, Ramallah, and Hebron) each take in 800 tons of waste per day and produce 41,800 m3 of biogas,
which can be converted to 251 megawatt hours (MWh) per day. For animal waste, assuming approximately 172 animal digesters making a total of 750 MWh
per day.
output is constant, and an operator can choose figures represent the U.S. solar market and could be
when to generate power. This eliminates the need for higher in the West Bank and Gaza to compensate
firming up arrangements through backup generation. for the higher risk environment. In addition, cost
Biogas generation will decline over time but can be comparisons between PV and concentrated solar
considered relatively constant until 2030. Although power (CSP) technologies are complicated by the
biogas is an excellent supply option, it is limited in fact that CSP provides some degree of storage and
scale and cannot be scaled up. hence greater flexibility of use.
By 2030, rooftop solar and utility-scale photovoltaic There is considerable potential to use rooftop solar as
(PV) are expected to have the lowest combined capital an electricity safety net for institutions fulfilling critical
expenditure as well as fixed and variable operating humanitarian roles, particularly in Gaza. Box I-6.1
and maintenance costs. The 2016 and forecast 2030 describes how health facilities in Gaza are benefiting
capital costs, as well as fixed and variable operation from a switch away from backup diesel to rooftop
and maintenance costs for these supply options, are solar generation.
shown in table I-6.3.2 2 It should be noted that these
70 | Securing Energy for Development in the West Bank and Gaza
TABLE I-6.3: PROJECTED COST OF ALTERNATIVE RENEWABLE ENERGY
TECHNOLOGIES IN THE WEST BANK AND GAZA BY 2030
ROOFTOP SOLAR UTILITY-SCALE PV CSP WIND BIOMASS
2016
Capital costs (US$ per kW) 2,930 1,600 4,800 1,580 3,984
Fixed O&M (US$ per kW per year) 17 15 63 51 107
Variable O&M (US$ per MWh) 0 0 4 0 5
2030
Capital costs (US$ per kW) 1,500 1,000 3,000 1,290 3,750
Fixed O&M (US$ per kW per year) 10 8 40 49 107
Variable O&M (US$ per MWh) 0 0 4 0 5
Note: MW = megawatt; PV = photovoltaic; CSP = concentrated solar power; kW = kilowatt; MWh = megawatt hour; O&M = Operation and maintenance.
Box I-6.1: Contribution of Rooftop Solar to meet Critical Energy Needs in
Gaza’s Health Facilities
The United Nations (UN) has been delivering emergency fuel supply to a subset of critical health and
water and sewage facilities in Gaza since 2013. The available power supply to Gaza is only enough to
meet half the demand, and the available power is constantly fluctuating due to frequent unit and line
outages. Between 2015 and 2016, Gaza Power Plant (GPP) was off-line on average 23 days per year,
and a subset of Egyptian and Israeli import lines were down for an average of 6 and 4 days, respectively,
per month. As a result, since December 2013, the UN has coordinated emergency donations of fuel
supplies for generators of critical infrastructure in Gaza to ensure the population continues to have
access to health, water, and sanitation facilities. As of April 2017, the UN supplies this emergency fuel
to 186 facilities, of which 32 are in the health sector, 124 in water and sanitation, and 30 in solid waste
management. The UN Office for the Coordination of Humanitarian Affairs (OCHA) takes on the role of
coordination and prioritization of fuel needs with sectors in Gaza, while UN Relief and Works Agency
(UNRWA) takes charge of purchase, delivery and distribution of fuel.
As the power situation in Gaza deteriorates, the need for additional emergency fuel donations for critical
infrastructure increases, while donors are backing away from providing additional funding. In the best-
case scenario, where GPP is running at 60 MW, health facilities need 450,000 liters of fuel per month,
water and sewage facilities need 200,000 liters per month, and solid waste collection needs 150,000
liters per month. In total, this costs over NIS 22 million (US$6 million) per year, which includes a UN tax
exemption on the cost of fuel, without which the cost would be much higher. If GPP is not running, health
facilities need 650,000 liters of fuel per month, WASH facilities need 400,000 liters per month, and solid
waste collection needs 200,000 liters per month. In total, this costs NIS 37 million (US$10 million) per
year. Traditionally, Islamic Development Bank, Qatar, Turkey, and Japan have been the biggest donors
of funds for emergency fuel supplies to Gaza. However, as the situation continues to deteriorate, donors
are finding it increasingly difficult to contribute to such an expensive and unsustainable solution.
Securing Energy for Development in the West Bank and Gaza | 71
Box I-6.1: Contribution of Rooftop Solar to meet Critical Energy Needs in
Gaza’s Health Facilities (continued)
Many donors are considering donation of rooftop solar systems for critical departments in hospitals
as an alternative to providing fuel for generators. Since the 2014 war in Gaza, which saw extensive
damage to GPP and the Egyptian and Israeli import lines, the efforts to harness the abundant energy
of the sun, through distributed rooftop solar systems, have increased 10-fold in the Gaza Strip.a This
is especially true for critical infrastructure such as hospitals, where donors are substituting the need to
provide emergency fuels for generators with installation of sustainable solar systems for critical units or
departments at a fraction of the cost. As of May 2017, approximately 306 kW of rooftop solar systems
have been, or are being installed on health facilities in Gaza at a total cost of approximately NIS 5.5
million (US$1.5 million). Table F.6 in appendix F contains a full breakdown of the completed and ongoing
installations, including the names of health facilities benefiting from the projects and the names of donors
providing the funding.
There is significant additional need for installation of rooftop solar systems in Gaza, and more donors
should consider this approach as an alternative to providing fuel donations. Rooftops of hospitals
in Gaza are large, flat surfaces ideal for solar installations. Although the area will not be enough to
supply solar energy to the entire hospital, the existing rooftop space should be maximized through
solar installations before spending extremely high sums on diesel fuel for generators. According to the
Ministry of Health (MoH) and the World Health Organization (WHO), an additional 1 MW of rooftop solar
systems can be installed across 34 critical units within 10 MoH hospitals in Gaza, with a total expected
cost of approximately NIS 14.5 million (US$4 million). Table F.7 in appendix F provides a full breakdown
of the hospitals and critical units in need of solar systems. A similar analysis should be carried out for the
WASH sector in Gaza, where a subset of energy needs could also be met through solar energy.
a
According to PENRA Gaza, between 2012 and 2014, only 310 kilowatt peak (kWp) of large-scale rooftop solar systems were installed. However,
post-2014, over 3,500 kWp have been or are being installed
IMPLICATIONS FOR THE WEST BANK
AND GAZA The financial credibility of PETL is ultimately premised
on the creditworthiness of the distribution companies
These recent developments in the renewable energy (DISCOs). Ultimately, PETL is largely a financial middle
market have significant implications for the future man between generators and distributors. Providing
energy plans of the West Bank and Gaza. credit enhancements for PETL cannot be seen as
a reliable solution until the real underlying financial
The Palestinian Electricity Transmission Company issues are resolved at the level of the DISCOs and
(PETL) is the key enabler of renewable energy municipality and village councils. That involves tackling
development, particularly in the West Bank. pricing and operational performance at the utility level,
PETL plays two critical roles in renewable energy as well as strengthening municipal finances to avoid
development: off-taker of power and provider of the diversion of revenues from the electricity sector
transmission infrastructure. At present, PETL has into municipal budgets. As such, a cabinet decision
no track record in either of these roles. It is therefore has enforced DISCOs and municipality and village
pressing for PETL to become financially sustainable councils to establish escrow accounts that ring-fence
and establish a track record as a reputable off-taker. the electricity bill payments to ensure they are used
It is also important to ensure that PETL has the only for the payment of suppliers.
capability to meet the transmission requirements of
renewable energy generation and/or to negotiate
appropriate transmission arrangements with IEC.
72 | Securing Energy for Development in the West Bank and Gaza
Land availability is a major constraint for developing the West Bank is made up of vast empty spaces.
utility-scale solar energy production. Due to the The lack of access to Area C is a significant lost
small size and high population density of Gaza, the opportunity for independence, diversification, and
potential for utility-scale solar is negligible. In the West energy security for the Palestinian energy sector.
Bank, Areas A and B, which make up 40 percent of
the total land area, contain all Palestinian towns and Rooftop solar systems increase resilience and energy
industries, leaving little space for land-intensive solar security in a context prone to armed conflict. Of all
generation, but providing more rooftop space for PV supply options under consideration, rooftop solar
than in Gaza. According to PETL and the Palestinian holds the greatest potential, as it is least tied to the
Energy and Environmental Research Center, based geopolitics of the region. Land restrictions are not
on currently submitted projects, approximately 0.12 a factor and construction permits are not required.
percent of Areas A and B are available and suitable There is no need to enter into long-term power
for solar production, with maximum potential capacity purchase agreements with an off-taker or to evacuate
of 103 MW. Area C, which is sparsely developed, has the power generated through a transmission grid. In
much larger tracts of desert land potentially suitable terms of construction time, it is the fastest and easiest
for solar generation. However, this is outside the to build, and since there is no need for imported
control of the Palestinian Authority, and permits for fuels, the system reduces import dependency. Due to
construction are rarely granted there. their small distributed nature, rooftop solar systems
are the most secure power supply option in case of
Access to Area C would have a huge impact on armed conflict, as experience has shown that large
the ability to develop domestic renewable energy centralized generation systems have repeatedly
generation for the West Bank. If just 3 percent of become damaged during past conflicts. In that sense,
the land in Area C was used for utility-scale solar rooftop solar can be regarded as an electricity safety
production, over 3,000 MW could be built. Area C, net that allows the most basic needs to be met under
which makes up 60 percent of the total land area of a wide range of possible scenarios
Securing Energy for Development in the West Bank and Gaza | 73
NOTES
1 See the National Renewable Energy Laboratory (NREL) 2016 annual technology baseline. Note that these figures represent the U.S. solar sector. In the
West Bank and Gaza, costs could be higher to compensate for the high-risk environment.
2 National Renewable Energy Laboratory (NREL) 2016 annual technology baseline.
74 | Securing Energy for Development in the West Bank and Gaza
CHAPTER 7
Developing Transmission
Infrastructure
THE CURRENT CONTEXT Expansion plans for Gaza are still in the discussion
phase and include (i) a high-voltage 161 kV power
The West Bank and Gaza are highly dependent on line from IEC with import capacity of 100–150 MW
energy imports from neighboring countries. The and (ii) and upgrade of GPP to operate on natural
West Bank has over 250 low- and medium-voltage gas coupled, with expansion of the capacity up to
connection points with Israel, and 1 connection 560 MW. All expansion plans, for the West Bank and
point with Jordan, which provide 99 percent and especially for Gaza are heavily tied to the political
1 percent of total energy supply to the West Bank, economy of the context and concerns over risk
respectively. Gaza has 10 connection points with of nonpayment.
Israel, 3 with Egypt, and 1 with the Gaza Power Plant
(GPP), which provide 64 percent, 13 percent, and 23 In the West Bank, the energization of the new high-
percent of Gaza’s energy supply, respectively. Map voltage substations under the Palestinian Electricity
G.1 in appendix G is a geographical representation Transmission Company’s (PETL’s) management
of the connection points. All connection points in will start a process of consolidation of the existing
Gaza, and most in the West Bank, are fully saturated, connection points. This would streamline operations
which leads to power cuts during peak winter and by reducing the large number of direct bilateral low-
summer loads. As the electricity demand continues to and medium-voltage connection points between
grow, the situation is bound to deteriorate unless the Palestinian distribution companies (DISCOs) and
capacity of import lines is expanded. municipalities and village councils (MVCs). Instead,
IEC would sell power to PETL at higher voltage
To increase diversification of supply and relieve the through the substations, and PETL would in turn sell
pressure on the saturated interconnections, additional the power to DISCOs and MVCs. This would increase
infrastructure needs to be built. Plans for improved billing transparency and allow PETL to improve the
power supply for the West Bank are more advanced sector’s bookkeeping by having better control of the
than for Gaza. According to the Palestinian Energy billing and payment cycles. Power transmission at
Authority’s draft Energy Sector Strategy 2017– higher voltages would also reduce losses, enabling
2022, expansion plans for the West Bank include PETL and DISCOs to bill for a larger portion of the
the following: purchased power, thereby improving cost recovery. In
addition, IEC’s bulk supply tariff at higher voltage is at
1. Four new high voltage substations (see map least 10 percent lower than at the low- and medium-
G.2 in appendix G for location and service area voltage levels. Finally, the substations would allow
of new substations) providing an additional 550 desperately needed additional power to be supplied
megawatts (MW) of import capacity from Israeli to the West Bank, which would be instrumental in
Electric Corporation (IEC) with expected in-service avoiding civil unrest and mass protests observed
dates ranging from 2017 to 2019 during past winter and summer peak load conditions,
2. Jenin Power Plant (JPP), providing additional which stemmed from power cuts due to shortages in
capacity of 200–450 MW with expected service power supply.
date of 2020
3. Hebron Power Plant, providing additional capacity
of 120 MW with planned service date of 2022.
Securing Energy for Development in the West Bank and Gaza | 75
The West Bank does not have its own transmission the Israeli transmission network is used and highest
backbone to evacuate domestic generation. Currently, if both the transmission and distribution network are
Palestinian load centers are passive absorbers of used. (See appendix C, table C.7 for definition of
electricity. Their power comes from several low- and TOU periods). Table I-7.2 provides a breakdown of
medium-voltage distribution networks managed by the consumption patterns in the West Bank, showing
Palestinian DISCOs. These Palestinian distribution that the shoulder hours in spring and fall make up the
networks are in turn fed by Israeli high-voltage largest percentage of consumption, at 26 percent,
transmission networks that act as electron highways and on-peak hours in winter or summer make up the
routing large volumes of power over large distances smallest percentage of consumption, at 3 percent
from point of generation to point of distribution. each. Average wheeling costs, shown in table I-7.3,
are derived by cross multiplying the costs in table
As the West Bank develops its own domestic power- I-7.1 with the consumption patterns in table I-7.2.
generation capacity, one option for moving generated Table I-7.3 shows that, for every kilowatt hour (kWh)
power to its load centers is to wheel through the of Palestinian energy that needs to be moved through
Israeli grid. Wheeling is a mechanism by which power the Israeli grid, the Palestinian side would need to
generated in the West Bank is evacuated out into pay between NIS 0.018–0.050 (US$0.005–0.013)
the Israeli network and injected back into the West per kWh, equivalent to a 5–10 percent mark-up over
Bank at a different location closer to the Palestinian the IEC import tariff. In addition to these relatively
load centers. Wheeling charges are set by the Israeli high wheeling costs, the Israeli transmission network
regulator, Public Utility Authority (PUA), with a full acts as the gatekeeper for the flow of Palestinian
breakdown provided in table I-7.1. This figure shows electricity, which diminishes the control and flexibility
that the time-of-use (TOU) costs are lowest if only of Palestinian operators.
76 | Securing Energy for Development in the West Bank and Gaza
TABLE I-7.1: ISRAELI ELECTRIC CORPORATION WHEELING TARIFFS
NIS AGOROT PER KWH, AS OF SEPTEMBER 13, 2015
SEASON TOU BLOCK TRANSMISSION TRANSMISSION AND DISTRIBUTION
TARIFF * DISTRIBUTION TARIFF***
TARIFF**
Off peak 0.89 3.46 2.55
Winter
Shoulder 1.10 3.89 2.78
Peak 2.8 7.22 4.38
Off peak 0.81 3.22 2.41
Spring/Fall
Shoulder 1.36 4.17 2.80
Peak 1.79 4.82 3.01
Off peak 1.42 4.20 2.77
Summer
Shoulder 2.60 6.32 3.68
Peak 6.12 12.13 5.90
Source: Information provided by Israel PUA.
Note: Ultra-high voltage = 400 kV and 161 kV; high voltage = 22 kV and 33 kV.
TOU = time of use.
* Ultra-high voltage producer selling to ultra-high voltage consumer
** Ultra-high voltage producer selling to “far away” high voltage consumer
*** Ultra-high voltage producer selling to “close by” high voltage consumer
TABLE I-7.2: WEST BANK ANNUAL CONSUMPTION BY TIME OF USE
WINTER SPRING/FALL SUMMER
OFF SHOULDER ON PEAK OFF SHOULDER ON PEAK OFF SHOULDER ON PEAK
PEAK PEAK PEAK
3% 16% 9% 11% 26% 20% 3% 7% 5%
Source: IEC load curve for JDECO consumption, 2015
Note: The data comes from IEC and represents only sales to JDECO, which covers approximately 50 percent of the West Bank. The figures here assume
similar consumption patterns in all of the West Bank.
TABLE I-7.3: ANNUAL AVERAGE WHEELING TARIFFS
TRANSMISSION TARIFF TRANSMISSION AND DISTRIBUTION TARIFF
DISTRIBUTION TARIFF
Agorot per kWh 1.8 5.0 3.1
U.S. cents per kWh 0.5 1.3 0.8
Source: World Bank calculations.
Note: kWh = kilowatt hour.
An alternative option is to construct a Palestinian comparison of the financial impacts of wheeling
backbone by connecting the new high-voltage versus building a backbone is provided in Part II.
substations through a high-voltage transmission
line. This would allow generated power to be routed Building a transmission backbone in the West Bank is
directly to Palestinian load centers through this logistically and operationally complex. The land in the
backbone, providing greater flexibility and autonomy West Bank is divided into islands, called Areas A and
to Palestinian operators. Although operationally more B, that are surrounded by Area C (see map in map
favorable, this option faces significant obstacles, as G.3 in appendix G). Areas A and B, which combined
Israeli approval and permits would be required for make up 40 percent of the West Bank, are under
those sizeable sections of the backbone that would Palestinian or joint Palestinian and Israeli civil control,
need to be built cross Area C. A more detailed respectively, so construction permits can be obtained
Securing Energy for Development in the West Bank and Gaza | 77
more easily. Area C is entirely under Israeli control and which power generated in the West Bank is exported
construction permits are extremely difficult to obtain. to Israel and Israel agrees to provide the same
Building a transmission backbone would require quantity of power at a different location back to the
constructing large and contiguous infrastructure West Bank. The details need to be sorted between
traversing Areas A, B, and C, which would likely face the two sides, but this would provide a convenient
significant delays. In addition, neighboring countries middle ground to avoid having to build infrastructure
would have to provide approvals for large connections in Area C or having to pay a constant per kWh charge
to their system, which may affect their own grid to use the Israeli network.
stability. Finally, if the transmission backbone is built,
all sides must work together constantly to create In Gaza, Palestinian Authority concerns over
supply-demand balance in the connected grids, nonpayment have impeded development of additional
which requires excellent cooperation at all times. IEC supply through a 161 kV transmission line from
For this to happen, PETL would need to develop Israel. Additional power supply to Gaza is desperately
the capacity to play the role of a proper transmission needed as the existing import feeder lines have been
system operator. fully saturated for quite some time. Additional power
supply from IEC through a 161 kV transmission line
Many other preconditions need to be met before has been on hold for over a decade, but recently Israeli
it makes sense to consider the development of authorities gave the green light for its construction.
a transmission backbone. Before a transmission Since the Palestinian Authority pays for the entirety
backbone is built, a series of phases must be passed of the power that Gaza receives from IEC through
to create the right environment. First, the substations clearance revenues and the net lending process,
must be energized, which would allow PETL to they are concerned about how the additional power
become operational. Next, PETL must work with from IEC to Gaza will be paid for. This is especially
DISCOs to reduce financial leakages, in order to true given the fact that donor contributions to the
create strong payment discipline along the electricity Palestinian Authority’s budget support have fallen
supply chain. This would improve the creditworthiness from 32 percent of gross domestic product in 2008
of PETL and make it possible for it to sign power to under 6 percent in 2016.
purchase agreements (PPAs) with independent power
producers, thereby increasing domestic generation Building a transmission backbone in Gaza makes
capacity. As domestic generation increases, in the more sense than wheeling domestically generated
initial years, wheeling could be a viable option as power supply through Israel. Given the small size of
PETL becomes financially and operational stable the Gaza Strip, and the fact that there are no land
and capable. Only at this point, once the foundations restriction and permitting issues such as Area C in
for a financially secure energy sector have been the West Bank, if domestic generation is ramped up
laid, would it be time to consider the construction in the future in Gaza, it makes more sense to create
of a transmission backbone to enhance energy a domestic backbone then to export the power into
sector independence. the Israeli grid for wheeling and reinjection. Between
the West Bank and Gaza, the total investment
A swap mechanism could be an interesting third option costs for building the full domestic transmission and
to consider. In addition to the options of wheeling distribution infrastructure, including the transmission
through the Israeli grid or building a transmission backbone but assuming no wheeling or swaps, are
backbone in the West Bank, the Palestinian Authority given in table I-7.4.
could negotiate a swap mechanism with Israel, in
78 | Securing Energy for Development in the West Bank and Gaza
TABLE I-7.4: SUMMARY OF TRANSMISSION AND DISTRIBUTION INVESTMENT
COSTS (US$ MILLIONS)
GAZA WEST BANK WEST BANK AND GAZA
Transmission backbone 33a 72b 105
Transmission to evacuate renewable energy projects in Area C - 44 c
44
Regional interconnectors 32d 20e 52
Distribution 60 f
52 g
112
Total 124 188 312
a
2 x 161/33 substations, overhead 161 kilovolt (kV) line; 26 kilometers (km).
b
2 x 161/33 substations, overhead 161 kV line; 117 km plus a national control center.
c
3 x 161/33 substations, overhead 161 kV line; 72 km.
d
2 x 161/33 substations, overhead 161 kV line; 20 km.
e
1 x 161/33 substations, overhead 161 kV line; 26 km.
f
For Gaza-North, rehabilitation of the distribution grid (224 km) and extension of the grid (200 km). For Gaza- South, rehabilitation of the distribution grid (74.7
km) and extension of the grid (200 km).
g
For West Bank-North, adaptation of the distribution grid to support new connection points (200 km) and extensions around JPP (100 km). For West Bank-
Central, adaptation of the distribution grid to support new connection points (200 km) and extensions for supporting Area C and extension of connection
with Jordan (100 km plus 100 km). For West Bank-South, adaptation of the distribution grid to support new connection points and extensions to support the
development of gas for West Bank-South.
IMPLICATIONS FOR THE WEST BANK sales to, and collections from, electricity distributors
AND GAZA in the West Bank. Progress can be achieved on draft
PSAs while the main PPA is still being negotiated.
The development of transmission infrastructure in the Once the PPA is signed, the PSAs can be completed
West Bank and Gaza have the following implications with final clauses, saving a significant amount of time.
for the Palestinian energy sector. Second, a billing and collection system must be
set up for PETL, allowing it to receive invoices from
PETL must start operating on a commercial basis and IEC, send bills to distributors, collect payments from
take ownership for fixing the gaps in the revenue cycle distributors, and pay back IEC for the purchased
as its first priority. Financial independence will lead to electricity. USAID is currently supporting PETL to
energy independence, but the reverse is not possible. design the software and mechanism for billing and
Supplier concerns over nonpayment undermine any collections. In addition, PETL is working with IEC to
potential for upgrade and expansion in the energy ensure that the company receives the bills directly
sector. PETL has two roles: that of a single buyer instead of through the Palestinian distributors.
and bookkeeper and that of a transmission system Finally, PETL should collaborate with the Palestinian
operator. In order to enable the right environment Electricity Regulatory Council in the preparation of its
for building large-scale infrastructure, including sale tariff to the distributors. With these mechanisms
transmission, PETL must excel in its role as the in place, PETL could accelerate its progress toward
single buyer and bookkeeper first before becoming a fulfilling its role and responsibilities under the PPA
transmission system operator, and it can take on this and reducing its reliance on donor assistance for its
role even before the substations are energized or a operational costs. PETL’s staffing plan needs to be
PPA with IEC is signed. adjusted according to the company’s projections on
revenues collected from distributors.
In parallel, while PETL is negotiating with IEC on the
main PPA and the energization of the substations, it As domestic generation develops, Israeli and
can focus on strengthening its operational capacity as Palestinian sides will have to work together to
the energy sector’s bookkeeper. As the negotiations determine how best to evacuate the power. In the
continue, PETL should focus on three issues in the short term, the two sides will need to negotiate
short term. First, PETL should prepare and open favorable wheeling charges or swap mechanisms
negotiations on power service agreements (PSA) with to ensure that power supply expansion keeps pace
the DISCOs and MVCs to set the terms of power with demand growth. In the mid- to longer term, as
Securing Energy for Development in the West Bank and Gaza | 79
the Palestinian energy sector becomes more stable
and bankable, the two sides can work together
to build a long-term vision of establishing a high-
voltage transmission network. Given the inherently
interwoven nature of the Israeli and Palestinian energy
sectors, with or without a Palestinian transmission
network, both sides must cooperate closely to ensure
grid stability.
If the Palestinian energy sector is to become a major
client for wheeling power back through the Israeli
grid, then the tariff structure for wheeling will need
to be carefully considered, or alternatively a swap
mechanism needs to be negotiated. At present, the
wheeling charges that would apply to Palestinian
electricity wheeling back through the Israeli grid
look to be relatively high and represent a significant
surcharge on the import tariff. The cost implications
of using the Israeli grid for wheeling would need to be
carefully understood and negotiated by both sides. A
swap mechanism could be the most ideal solution if
both sides can come to agreeable terms.
80 | Securing Energy for Development in the West Bank and Gaza
CHAPTER 8
Integrating Energy Efficiency
THE CURRENT CONTEXT because this energy type has the largest share in
the Palestinian final energy mix (see table I-8.1).1 The
The Palestinian energy system is characterized by the Palestinian Energy and Natural Resources Authority
complete dependence on imported energy products (PENRA), with the support of the French Development
and the predominance of electricity in final energy Agency (Agence Française de Développement, AFD)
consumption. Diesel and gasoline are used primarily and the World Bank, has been actively spurring the
in the transport sector, while all other sources of implementation of the three-phased NEEAP for 2012–
energy—including electricity—are primarily used by 20. Phase I has been successfully achieved and Phase
the residential sector (figure I-8.1). II is being implemented satisfactorily. PENRA’s Energy
Efficiency Unit has so far undertaken 250 energy audits
The Palestinian National Energy Efficiency Action Plan across different sectors of the Palestinian economy,
(NEEAP) aims to reduce 384 gigawatt hours (GWh) of which have triggered the investments required to
total energy demand by 2020, representing around unlock the untapped energy efficiency potential. Phase
1 percent reduction per year (compared to 2010 III is expected to start in 2018.2
levels). The action plan is mainly focused on electricity,
Figure I-8.1: Final Energy Consumption per Sector in the Palestinian Territories
20,000
15,000
TJ
10,000 Commercial and public services
Residential
5,000
Transport
Industry
0
Solar Wood LPG Gasoline Diesel Electricity
energy and
charcoal
Source: World Bank own elaboration based on PCBS data.
Note: LPG = liquid petroleum gas.
Securing Energy for Development in the West Bank and Gaza | 81
TABLE I-8.1: ENERGY EFFICIENCY TARGETS UNDER NEEAP 2012–2020 (GWH)
SECTOR TARGETS
PHASE I (2012–14) PHASE II (2015–17) PHASE III (2018–20) 2020
Industrial 5 6 8 19
Buildings 38 130 195 363
Water pumping - 1 1 2
Total (GWh) 43 137 204 384
Source: Information provided by Palestinian National Energy Efficiency Action Plan (NEEAP) and Palestinian Energy and Natural Resources Authority.
Note: GWh = gigawatt hour.
To further promote energy-efficiency investments, 2020, to expand and consolidate its achievements.
PENRA has drafted the ambitious National Energy This phase focuses on energy audits for the industrial
Efficiency Action Plan for 2020–2030 with the support and commercial sectors and financial incentives. The
of the World Bank (figure I-8.2) . The proposed target deployment of smart-meters and related information
is to reduce 5 percent of the forecast consumption systems will allow consumers to have real-time and
during the 10-year period, a total savings of 5,000 accurate information on consumption and associated
GWh. This represents a large increase from the 384 costs. Consumption data will be collected, stored,
GWh savings of the current NEEAP 2012–2020. The and analyzed to provide useful guidance to replace
future action plan is also divided in three phases. inefficient products and improve industrial processes
(sub-metering and energy audits are the key tools to
Phase I (2021–30) focuses on efficient appliances and be used). This phase will also pave the way to Phase
industrial equipment (see figure I-8.3). This phase is III to ensure that smart-home appliances will be fully
designed as a follow-on of the current NEEAP 2012– interoperable with metering systems.
Figure I-8.2.: Draft NEEAP 2020–2030 Implementation Strategy
Phase III: Smart home,
grid, city
Phase II: Energy market structuring, energy
conservation, DS management
Phase I: EE appliances, residential sector, smart metering
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
82 | Securing Energy for Development in the West Bank and Gaza
Figure I-8.3: Energy Efficiency Potential in the Residential Sector
TV set, video, computing
Air conditioner
Electric room heater
Water heating and tank
Water heating
Tumble dryer
Washing two feeds
Washing machine (*)
Dishwasher two feeds
Dishwasher (*)
Fridge
Microwave
Electric stove
Lighting LED
Lighting CFL
Lighting
0,000 0,500 1,000 1,500 2,000 2,500
Kilowatt hours per day per day
Energy consumption for one standard household
Source: World Bank own elaboration based on Palestinian Central Bureau of Statics data for households energy 2015.
Phase II (2024–30) will focus on energy market Phase III (2027–30) will focus on smart-homes, smart-
structuring and thermal insulation of buildings. The buildings, and smart-grids. The simultaneous use of
opening of the national electricity market to competition market-based services and smart-appliances would
could be considered in this phase. From an energy enable consumers to become active energy players.
efficiency perspective, this reform would make new For instance, consumer’s behavior could adjust to
market-based services available, such as the possibility changes in electricity prices. Demand response
to remunerate clients reducing their consumption actions to shift consumer’s electricity usage during
on demand. The rollout of smart-meters and the peak hours in response to time-based rates would
introduction of time-of-use tariffs would contribute to avoid building new generation capacity.
incentivize behavior change and reduce consumption
during peak hours. Due to the large lead times of The proposed energy efficiency actions have relatively
building renovations, thermal insulation of buildings modest investment costs and short payback periods.
should also be a priority activity during this phase. Table I-8.2 summarizes the proposed energy-
Following the design of specific minimum efficiency efficiency actions with the expected savings during
performance standards and building codes integrating the 2020–30 timeframe, their total costs, and the cost-
nearly Zero Energy Building standards (nZEB), these benefit ratio. When this ratio is less than the average
would become mandatory for all public buildings and retail electricity price, i.e., US$0.13 for residential, the
encouraged by financial incentives for the residential corresponding investment may be recovered in less
sector.3 A building renovation strategy would also be than 10 years.
drafted for the residential sector in order to improve
thermal insulation of the existing building stock.
Securing Energy for Development in the West Bank and Gaza | 83
TABLE I-8.2: ENERGY EFFICIENCY POTENTIAL DURING 2020–2030
ENERGY-EFFICIENCY ACTIONS BENEFITS (GWH) TOTAL COSTS COST-BENEFIT
(US$ MILLIONS) (US$-KWH)
Lighting: move to CFL standard 2,612 1.750 0.001
Lighting: move to LED standard 322 2.275 0.007
Introduction of more efficient fridges 127 4.375 0.035
Switch to gas for room heating 246 24.832 0.101
Electronic thermostats 222 10.177 0.046
Labelling and national campaign 1,270 3 0.002
Repairing of SWH 1,576 126 0.080
Smart-metering for all households 1,587 48 0.038
Sub-metering 317 4.812 0.015
Building thermal insulation 720 345 0.479
Labelling program 881 50 0.057
Source: PENRA, Palestinian National Energy Efficiency Action Plan for 2020 – 2030, draft March 2016.
Note: CFL = compact fluorescent light; LED = light-emitting diode.
IMPLICATIONS FOR THE WEST BANK consumption profiles to detect nonefficient usages,
AND GAZA recommend the replacement of appliances, and
so forth. Home displays or equivalent devices
The development of energy-efficiency programs in the (for example, mobile applications) will help the
West Bank and Gaza have the following implications consumers relate their daily behaviors and the
for the Palestinian energy sector. impacts on their consumption. Monthly billing
information is not sufficient to create this link
Managing overall energy demand is a priority, but between usage and energy. The same program
managing peak hour load will become increasingly should help DISCOs improve their quality of
important. Nowadays, electricity is bought from IEC service (detection of failures) and reduce technical
at a high price, but IEC is in charge of managing the and commercial losses. Smart-meters are not
flexibility of the demand. In the future, PETL, acting sufficient to do that. Internal processes have to be
as transmission system operator, could purchase implemented to randomly check the consumption
“blocs” of electricity in bulk at a lower price but would and detect unbalanced low voltage lines.
have the responsibility to make daily forecasts and
balance demand and generation in real time. If PETL 2. The second action is to promote a switch from
has to develop the role of system operator in the electricity to gas (liquid petroleum gas and/or
future, a deep knowledge of energy consumption and natural gas) for room heating. Electricity should
its patterns would be key. be reserved to usages where there are no
replacements (motors, electronics, and so forth).
Among the proposed energy-efficiency actions, two For consumers, the main argument in favor of
may require a complex implementation program: electricity is the low cost of appliances. However,
in the long term, the operational costs are much
1. The first is the generalization of the smart-meters lower for gas. This switch cannot be initiated
for the residential sector. This program aims to without a national strategy for gas so that the
provide information to the consumers so that cost of the required infrastructures (transportation
they will be in a position to better manage their and storage of gas) will be shared among all
consumption. These meters are the visible part of stakeholders. The repair and further penetration
the iceberg. A sophisticated information system of solar water heaters is part of this endeavor,
is simultaneously required from DISCOs to since it would decrease the need to use
prepare energy audits per household, compare nonrenewable energy.
84 | Securing Energy for Development in the West Bank and Gaza
NOTES
1 Electricity represents 33 percent of the final consumption of energy. Savings on diesel, the second energy most commonly used in the Palestinian
territories, should also be considered in future assessments. Electricity is mainly used by the residential sector (more than 60 percent), whereas diesel is
used almost exclusively in the transport sector.
2 The AFD has financed the required energy audit equipment and staff costs. Audits include 60 in the industrial, 120 in the public, 40 in the service, 10 in
the agricultural, and 20 in the residential sectors
3 The concept of nZEB is an attempt to standardize the consumption of energy per square meter per year.
Securing Energy for Development in the West Bank and Gaza | 85
PART I I
Decision Making
CHAPTER 9
Introduction and methodology
Attention now turns to the exploration of possible There are therefore two steps involved in realizing
energy futures for the West Bank and Gaza, with a secure and affordable energy future for the West
the accent on enhanced energy security. However, Bank and Gaza. The first is to conduct a power-
energy security can itself be defined from a number sector planning exercise to evaluate the relative
of perspectives, each of them valid in its own attractiveness of different electricity supply options.
way. First, there is the ability to reliably meet the The second step is to evaluate the feasibility of
entire demand for electricity, by minimizing supply financing the preferred power-sector planning choice.
interruptions and hence loss of load. Second, there
is the resilience of the power system that comes ROBUST PLANNING MODEL
from diversifying sources of power supply, including
alternatives that are relatively robust in the context of As a first step, a robust planning model is developed
different types of shocks. Third, there is the degree that is capable of incorporating the significant
of independence of the power system, in terms of uncertainties of the Palestinian context into a
the extent to which electricity needs can be met from traditional least cost power generation plan. Power-
domestic production versus imports. It should be system planning is normally undertaken using models
noted that only renewable energy provides full energy that select the least-cost sequence of generation
independence, in the sense that domestic generation options needed to meet electricity demand at some
with fossil fuels can be as, if not more, vulnerable to specified level of reliability, based on the assumption
fuel supply interruptions as importing electricity. The that all parameters are known with certainty. This
analysis will consider all three of these dimensions of approach does not appear realistic in the Palestinian
energy security, which can usefully be described as context, where deep uncertainty is the norm. Four
reliability, resilience, and independence. In practice, dimensions of uncertainty are explicitly considered
tradeoffs may exist between them. for each generation option: (i) uncertainty in demand
forecast, (ii) uncertainty in the evolving unit cost
Energy security cannot be considered in isolation of different technologies over time, (iii) uncertainty
from financial affordability. Increasing energy security in how soon particular supply options (that is, gas)
often comes with a cost premium of some sort, as will become available, and (iv) uncertainty due to
additional investments will likely be needed to achieve outages and force majeure, such as conflict. Based
the requisite reserve margin, diversify sources of on stakeholder consultation and expert opinion,
power, and/or expand domestic production. The plausible ranges for the uncertainties were defined.
benefits of energy security also need to be weighed-up
against associated costs and the affordability of these By running the planning exercise many times in different
costs for the power system as a whole. Affordability states of the world, it becomes possible to identify
can be considered from two perspectives. The first the plan that is most robust over the largest number
is whether the retail tariffs needed to implement the of possible futures. The model is run 100 times and
energy security plan are affordable to customers. The each time a different draw is made from the probability
second is whether any government subsidies needed distribution of all the uncertain parameters, resulting in
to support the achievement of the energy security a slightly different optimal least-cost plan (see figure II-
plan are fiscally affordable to government. Both are 9.1). At the end of the process, the 100 resulting plans
evaluated in this analysis. are put side by side and used to construct a robust
plan by starting with the supply option that is most
frequently selected across the 100 least-cost plans,
88 | Securing Energy for Development in the West Bank and Gaza
Figure II-9.1: Illustration of Methodology for Determining the Robust Plan
100 simulations/future outlooks
TABLE II-9.1: OVERVIEW OF ENERGY PLANNING SCENARIOS DEVELOPED WITH
THE ROBUST PLANNING MODEL
SCENARIOS CHARACTERIZATION PURPOSE
Do Nothing Electricity demand continues to grow without This is the baseline against which other
any proactive measures either to increase power planning alternatives can be evaluated.
imports or develop generation capacity.
Planned Future Future increases in electricity demand are met by Evaluate the current thinking of the
projects that are already in the pipeline. Palestinian Authority by analyzing the
impact of (i) planned projects currently
PENRA Vision Future increases in electricity demand are met
in the pipeline and (ii) PENRA’s vision
in such a way that by 2030 no single generation
as stated in the most recent Palestinian
source accounts for more than 50 percent of energy
National Authority Energy Sector
needs, while providing the capacity to import 100
Strategy of 2011–2013, as well as the
percent of energy needs as backup.
draft Strategy for 2017–2022.
Maximum Future increases in electricity demand are met Evaluate alternative futures at
Cooperation primarily by increasing electricity imports. the extreme opposite ends of the
independence spectrum to analyze the
Maximum Future increases in electricity demand are met
tradeoffs.
Independence primarily by developing domestic generation
options.
Note: PENRA = Palestinian Energy and Natural Resources Authority.
and then adding the next most frequently selected, and The robust planning model is used to illustrate a
so on, until demand is fully met. The model provides number of different planning scenarios. The model
a detailed set of information regarding each selected will be used to explore five different types of planning
energy future and can be constrained to meet certain scenarios each for the West Bank and Gaza (table II-
policy objectives. Extensive details on the robust 9.1). It is important to stress that not all of the scenarios
planning model and methodology, uncertainty variables presented by the model are necessarily realistic, and
and plausible ranges, and full model outcomes are some of them are used primarily to illustrate the
provided in appendix 8. implications of pursuing different approaches.
Securing Energy for Development in the West Bank and Gaza | 89
SECTOR FINANCIAL MODEL data submitted by a subset of the utilities—Jerusalem
District Electricity Company and Northern Electricity
A power sector financial model was developed to Distribution Company. This means that while tariffs are
cover the entire Palestinian electricity sector. The model set to cover costs on average, individual utilities may
begins with the Palestinian Electricity Transmission over- or under recover. The financial model instead
Company (PETL) purchasing a “basket” of electricity calculates individual cost recovery tariffs for each utility
from different producers at different wholesale costs each year. Second, PERC bases tariff calculations on
under power purchase agreements, assuming no the assumption of 100 percent revenue collection,
Palestinian public investment in generation (figure II- so as not to pass on commercial inefficiencies to
9.2). The pattern of purchases is determined by the customers. The financial model allows efficiency
output of the robust planning model (see figure II-9.3), improvement targets for 2030 to be built into the
which identifies the quantity and cost of each generation calculations so that performance improves gradually
source. PETL then sells this electricity to distribution and is reflected in tariffs as soon as improvements
companies (DISCOs) at a bulk supply tariff, which will take place. However, during the transition period,
include a mark-up to cover PETL’s own investment collection inefficiencies are passed on to customers.
and overhead costs. DISCOs then sell this electricity
to consumers at a retail tariff, which will include a Considerable efforts were made to collect the
mark-up to cover their own investment and overhead financial and operational data needed for the model.
costs. The tariffs calculated in the financial model are Numerous meetings were held with the Ministry of
equilibrium tariffs designed to offset and compensate Finance, PETL, PERC, and all six DISCOs to support
for losses and low collection rates. This differs from the an extensive data-gathering exercise. The data
regulator’s (Palestinian Electricity Regulatory Council, collected include financial statements of DISCOs, as
or PERC) tariff-setting methodology. well as operational data such as purchase and sales,
losses and collection rates, payment to suppliers
The retail tariff, consistent with financial equilibrium (including through net lending), and more. In the
that is calculated by the model, differs somewhat case of the transmission system operator, PETL—a
from the regulatory tariff set by the regulator, PERC. new institution with limited financial records—the
First, PERC calculates a single unified tariff for all company’s business plan was used to estimate its
Palestinian distributors, based on averaging financial anticipated cost structure.
Figure II-9.2: Flowchart Illustrating the Different Building Blocks of the Electricity
Sector Financial Model
Poor Government Affordability
households subsidies thresholds
Distribution investments
DISCOs Retail tariff
Distribution operating margin
Wholesale power purchase
(imports plus IPPs)
Transmission investments PETL Bulk supply tariff
Transmission operating margin
Note: DISCO = distribution company; IPP = independent power producer; PETL = Palestinian Electricity Transmission Company.
90 | Securing Energy for Development in the West Bank and Gaza
In addition, the consumer perspective was introduced income distribution discussed previously, and the 5
into the financial model by incorporating an affordability percent affordability threshold, the model identifies
limit on retail tariffs for the poorest households. To (i) the maximum cost for the subsistence block of
determine the affordability limits, the financial model consumption so that even the poorest consumers can
draws upon the most recent Palestinian Expenditure afford basic electricity supply, and (ii) the magnitude
and Consumption Survey, from 2011, which provides of subsidies required to make electricity services
detailed information on household budgets, including affordable to different income deciles. Such subsidies
electricity expenditure. The survey was used to could either be channeled through distribution utilities
understand the income distribution in the Palestinian as targeted bill reductions for poor households or
territories, and in particular the budget available to the through social welfare payments. In either case, a
average household in each decile—or 10 percent—of targeting mechanism would be needed to ensure
the income distribution from poorest to richest. that the poorest households can be identified. The
West Bank and Gaza Cash Transfer Program could
According to the international literature, 5 percent of potentially be used as the targeting mechanism, since
budget for a basic level of “subsistence consumption” it contains a database of 115,000 households living
is said to represent an affordability limit. In the under the poverty line in the West Bank and Gaza.
Palestinian context, the subsistence consumption The alternative to targeted subsidies, which is to keep
is set at 160 kilowatt hours (kWh) per month and tariffs low for all consumers, can also be modeled.
corresponds to the first block of the retail tariff While simpler to administer, it evidently entails a much
structure (see appendix A, table A.1). Considering the higher subsidy bill.
Securing Energy for Development in the West Bank and Gaza | 91
Figure II-9.3: Flowchart Illustrating the links between the Robust Planning Model,
Sector Financial Model, and the Transmission Costing Matrix
DISCO
Household financial
budgets statements
Unserved demand survey & annual
Supply reports
options
Robust Total and average Government
Planning cost of power subsidies
Model production
Financial
Demand Bulk supply
Model
forecast tariff charged
Energy produced
per supply type by PETL
Retail tariff
T&D charged by
T&D investment DISCOs
costs
Affordability constraint
Note: DISCO = distribution company; PETL = Palestinian Electricity Transmission Company; T&D = transmission and distribution.
Bringing all the pieces together, the robust planning Finally, the macrofiscal impact of implementing the
model and the sector financial model are designed planned scenarios are also evaluated. Building on a
to work together along with a transmission costing new set of computable general equilibrium models
matrix as illustrated in figure II-9.3. The results of the developed separately for the West Bank and Gaza,
robust planning model are fed into both the financial it is possible to examine the macrofiscal impacts of
model and a transmission costing matrix, which the planning scenarios. The models are augmented
is used to price out the cost of building additional to provide a more detailed characterization of the
transmission and distribution (T&D) infrastructure for energy sector than might normally be the case, and
the generation mix identified by the robust planning the impact of the planning scenario is incorporated
model. The T&D costs are then also fed into the into the model simulation. This makes it possible
financial model, which calculates the equilibrium to examine how the energy investments affect the
tariffs and, comparing to affordability thresholds, also overall growth domestic product growth trajectory, as
identifies subsidies required from the government well as the public finances.
to protect the poorest consumers. If outcomes are
unacceptable, further iterations of the models are run
to, for example, impose upper bounds on the cost
of generation to improve overall affordability. Refer to
appendix 9 for further details on the financial model
methodology. Refer to appendix I, tables I.1–I.6 for
full operational and financial data used in the financial
model for each DISCO.
92 | Securing Energy for Development in the West Bank and Gaza
CHAPTER 10
Analysis and Results
for the West Bank
This chapter presents the results of the integrated are inevitably somewhat subjective and based on a
planning and financial exercise for the West Bank. combination of expert judgment and stakeholder
consultation.
PLANNING MODEL
Domestic gas-fired power generation looks to
The two key drivers of the planning scenarios are compare favorably with Israeli imports, while projected
the relative cost of power supplied through different declines in the cost of renewable energy bring these
technologies and the range of uncertainties that increasingly into parity. The LCOE analysis illustrates
affects each of them. Figure II-10.1 plots the so-called a wide dispersion in costs across different generation
levelized cost of energy (LCOE), defined as total capital technologies, although for most sources there is
and operating costs across the lifetime of a power convergence of costs over time toward the range
project averaged over the total electricity produced. of NIS 0.26–0.47 (US$0.07–0.13) per kilowatt hour
While LCOE is a convenient device for making simple (kWh) by 2030. Israeli imports, currently the dominant
relative cost comparisons, it is important to recognize source of energy, and priced at just under NIS 0.37
that it does not capture all relevant characteristics of (US$0.10) per kWh, set the relevant benchmark. At
each power source, such as its availability for dispatch the beginning of the period, only gas-fired power
and contribution to meeting peak loads. Table II-10.1 generation comes in below the cost of Israel imports.
summarizes the different uncertainty parameters While renewable energy starts out as more expensive
that characterize each of the power supply options, than Israeli power imports, projected steep declines
considering delays in availability, uncertainty of cost, in unit costs bring solar photovoltaic (PV) into parity
as well as probabilities of interruption to supply. These by the year 2022, and the cost differential for rooftop
Figure II-10.1: Time Trends of Levelized Cost of Energy for Different Supply Options
in the West Bank
0.20
0.18
0.16
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
CCGT-Gas, from $6.5/MMBTU Israel import Jordan import
Rooftop solar, from $2,500/kW Commercial solar, from $1,248/kW CSP-6h, from $6,332/kW
Note: CCGT = combined cycle gas turbine; CSP = concentrated solar power; kWh = kilowatt hour; MMBTU = million British thermal unit.
Securing Energy for Development in the West Bank and Gaza | 93
TABLE II-10.1: OVERVIEW OF UNCERTAINTY PARAMETERS FOR THE WEST BANK
NORTH AND SOUTH PLANNING EXERCISE
DIESEL GAS: NORTH GAS: SOUTH ISRAEL JORDAN
Availability range
Earliest 2016 2021 2024 2020 2022
Latest 2016 2035 2035 2030 2035
Volume range
Lowest Unlimited 0.2 bcm 0.2 bcm 850 MW 30 MW
Highest Unlimited 2.0 bcm 2.0 bcm 1400–1800 MW 100–200 MW
Price range
Lowest Known $4.0/MMBTU $4.0/MMBTU Current Indexed to oil
Highest Known $6.5/MMBTU $7.5/MMBTU $0.11/kWh Indexed to oil
Outage duration range
Minimum days 37 37 37 18 29
Maximum days 293 365 365 91 256
Other parameters
Minimum availability 0.30 0.40 0.40 0.80 0.70
Probability of interruption 0.40 0.06 0.10 0.02 0.05
Note: bcm = billion cubic meters; MW = megawatt; MMBTU = million British thermal units.
solar and concentrated solar power is substantially captured. Based on the historical record, Israeli
eroded by 2030. Nevertheless, it is important to power imports come across as the least risky source
underscore that these do not represent firm energy in of electricity and diesel as the riskiest.
the way that Israeli power imports do. Power imports
from Jordan are also expected to decline with time Against this backdrop, the results of five planning
as cheaper Israeli gas begins flowing to Jordan by scenarios are considered. As noted above, these
2020. This will bring the cost of Jordanian power include a Do Nothing counterfactual, where not
closer to Israeli power, although Jordanian power further investments are made in power infrastructure
is expected to continue being offered at a premium while demand continues to grow. This is compared
to Israeli power unless Jordan’s power generation with the impact of the current pipeline of investments,
portfolio moves away from being dominated by gas described as the Planned Future, as well as PENRA
and toward cheaper renewables. Vision for the longer term, which seeks to limit
dependence on any single source of energy to 50
The modeling exercises also strives to capture percent of demand while retaining the ability to import
some of the main features of the uncertain 100 percent of energy needs if required. For the
planning environment. Specific uncertainty ranges purposes of illustration, two additional, more extreme
associated with each of the nonrenewable options scenarios are considered. Maximum Cooperation
are summarized in table II-10.1. With the exception considers the possibility of continuing the West Bank’s
of diesel, there is considerable uncertainty of when historically almost exclusive dependence on Israel
particular capacity expansions would come online, for imported power, while scaling up the associated
how large they would be, and at what price they infrastructure to keep pace with mounting demand.
would be offered. Probabilities of supply interruptions Maximum Independence looks at the fullest extent of
and their effect on availability of power from different domestic power generation that could be developed
sources and potential duration of outages are also in the West Bank under the most optimistic scenario.
94 | Securing Energy for Development in the West Bank and Gaza
Under the Do Nothing scenario, the West Bank Under the Planned Future scenario, a significant
becomes increasingly unable to meet its electricity volume of investment brings about greater supply
demand (figure II-10.2). With the capacity for Israeli diversification with only minimal impacts on costs (figure
electricity imports capped at current levels of 890 II-10.3). The development of the Jenin and Hebron
megawatts (MW), and Jordanian imports capped at gas-fired CCGT plants, as well as the expansion of
20 MW, and in the absence of any new domestic the renewable energy portfolio to reach the 130 MW
generation capacity, the average cost of electricity target, call for capital expenditure of NIS 3.1 billion
remains at current level of NIS 0.36 (US$0.098) (US$850 million) and lead to significant diversification
per kWh. However, the percentage of unserved of the power mix, with domestic production providing
demand rises steeply from small levels in 2016 to 36 percent of energy needs by 2030. Relative to the
reach 9 percent in 2030, and averages 4 percent of Do Nothing scenario, this eliminates supply shortages
total demand over the entire period. The associated while only raising the average cost of electricity very
economic losses are valued at NIS 9.5 billion (US$2.6 slightly to NIS 0.37 (US$0.101) per kWh. However,
billion), equivalent to about 20 percent of the gross in terms of energy independence, little has changed,
domestic product (GDP) of the West Bank in 2015. In since both the electricity and gas—accounting for 96
the northern region of the West Bank, this shortage percent of energy use—are imported from Israel.
has already been felt as power shortages during the
summer of 2016 that resulted in rolling blackouts
culminating in street protests. This clearly represents
an unacceptable trajectory.
Figure II-10.2: Results of “Do Nothing” Scenario for West Bank
Do Nothing: Demand continues to grow while power infrastructure is capped at 890MW of interconnectors
with Israel and 20MW of interconnectors with Jordan
A. West Bank Supply B. West Bank energy supply (GWh)
Capacity in 2030 (MW)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
9.79 0 9% 90% 0% 0.4%
Takeaway: Currently, power supply is not diversified and there will soon be power shortage in the West Bank.
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gas Turbine ; MW = megawatt; PV = photovoltaic; RE = renewable energy.
Securing Energy for Development in the West Bank and Gaza | 95
Figure II-10.3: Results of “Planned Future” Scenario
Planned Future: All PENRA’s currently planned projects come online (four substations (540 MW), Jenin Power
Plant (400 MW), Hebron Power Plant (120 MW)). Renewables target (130 MW
A. West Bank Supply B. West Bank energy supply (GWh)
Capacity in 2030 (MW)
8000
7000
6000
5000
4000
3000
2000
1000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
10.06 850 0% 64% 32% 4%
Takeaway: There is no power shortage but still limited diversification as 96% of power and fuel is imported.
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gas Turbine; MW = megawatt; PV = photovoltaic; RE = renewable energy.
96 | Securing Energy for Development in the West Bank and Gaza
Figure II-10.4: Results of “PENRA Vision” Scenario
Planned Future: All PENRA’s currently planned projects come online (four substations (540 MW), Jenin Power
Plant (400 MW), Hebron Power Plant (120 MW)). Renewables target (130 MW
A. West Bank Supply B. West Bank energy supply (GWh)
Capacity in 2030 (MW)
8000
7000
6000
5000
4000
3000
2000
1000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
10.16 2,133 0% 45% 37% 19%
Takeaway: PENRA can achieve diversification vision w/o Area C but needs large RE scale up in Areas A, B and
rooftop solar.
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gas Turbine ; MW = megawatt; PENRA = Palestinian Energy and Natural Resources
Authority; PV = photovoltaic; RE = renewable energy.
But the only way to meet the full PENRA Vision of A and B—and achieving, as a result, a much higher
diversification is to invest much more heavily in solar degree of diversification. Although these options
PV, fully developing potential in Areas A and B (figure are slightly more expensive on a per unit basis than
II-10.4). While the Planned Future scenario represents Israeli imports, and the necessary capital expenditure
a substantial improvement on Do Nothing, it remains more than doubles to reach NIS 7.7 billion (US$2.1
dependent on Israeli electricity and fuel imports to billion), the overall impact on the average cost of
meet 96 percent of its energy needs. It does not meet generation remains very modest, rising only to NIS
PENRA’s longer term diversification criterion that no 0.372 (US$0.102) per kWh. This scenario shows that
source of electricity should account for more than PENRA’s strategic vision can be achieved without
50 percent of demand. To meet this constraint, the access to Area C, by focusing on developing solar PV
model ramps up the proportion of renewable energy— potential in Areas A and B and on rooftops.
essentially developing much of the potential in Areas
Securing Energy for Development in the West Bank and Gaza | 97
Figure II-10.5: Results of “Maximum Independence” Scenario
Maximum Independence: Same goals as PENRA vision but with unlimited access to Area C
A. West Bank Supply B. West Bank energy supply (GWh)
Capacity in 2030 (MW)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
9.88 2,284 0% 36% 34% 30%
Takeaway: If Area C was available, diversification would be more balanced and average cost of power would
be lower
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gas Turbine ; MW = megawatt; PENRA = Palestinian Energy and Natural Resources Authority;
PV = photovoltaic; RE = renewable energy.
Relaxing the constraint on access to Area C Finally, it is helpful to contrast these increasingly
significantly reduces import dependence and diversified and independent scenarios with one
improves diversification even while slightly reducing of Maximum Cooperation (figure II-10.6). This
costs (figure II-10.5). Even in the PENRA Vision, essentially represents a continuation of the current
more diversified scenario, the West Bank would still strategy whereby the West Bank imports almost
be dependent on Israel for about 80 percent of its all of its electricity needs from Israel, with the Israeli
energy needs through electricity and fuel imports. interconnection capacity allowed to expand in tandem
The next scenario considers what is the Maximum with growing demand and estimated to reach 1,430
Independence that could be achievable in power MW by 2030. At the same time, the relatively modest
generation. This is done by relaxing the constraint current targets for renewable energy are met. This
on access to Area C, so that the model has a much approach largely avoids any major capital expenditure
larger renewable energy potential to draw upon. on the Palestinian side and results in the preservation
Under these conditions, it becomes economical to of the current average cost of NIS 0.36 ($0.098) per
increase the renewable energy share from 19 to 30 kWh. Diversification drops significantly relative to the
percent, even as the average cost of generation falls other scenarios, as 96 percent of electricity would
slightly relative to the PENRA Vision, from NIS 0.372 be imported. The inclusion of this alternative helps to
(US$0.102) to NIS 0.361 (US$0.099), although capital clarify that the cost premium for supply diversification
expenditure requirements climb slightly to reach NIS in the context of the West Bank is relatively small
8 billion (US$2.2 billion). at between NIS 0.004–0.015 (US$0.001–0.004)
per kWh, which represents a markup of less than
5 percent.
98 | Securing Energy for Development in the West Bank and Gaza
No single option performs better than others on all the total capital expenditure, the level of unserved
relevant dimensions, illustrating that tradeoffs must demand in 2030, the continued reliance on electricity
be made. Examining the five scenarios side by side imports or fuel imports for generation, and the share
helps to clarify their relative performance. Table II- of domestically generated renewable energy in the
10.2 compares various dimensions of performance, overall mix.
including the average cost of power generation,
Figure II-10.6: Results of “Maximum Cooperation” Scenario
Maximum Cooperation: All additional power supply comes from IEC with import capacity expanded to 1,430MW
by 2030
A. West Bank Supply B. West Bank energy supply (GWh)
Capacity in 2030 (MW)
8000
7000
6000
5000
4000
3000
2000
1000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
9.78 174 1% 96% 0% 4%
Takeaway: Premium for diversified portfolio is 0.1-0.4 US cents/KWh more expensive than importing all power
from IEC
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gas Turbine; IEC = Israeli Electric Corporation; MW = megawatt; PV = photovoltaic; RE =
renewable energy.
TABLE II-10.2: COMPARISON OF RESULTS ACROSS THE FIVE SCENARIOS
AVERAGE CAPEX 2030 2030 2030 2030
COST OF (US$ UNSERVED ELECTRICITY DOMESTIC DOMESTICALLY
POWER MILLIONS) DEMAND IMPORTS GENERATION GENERATED RE
(U.S. WITH
CENTS IMPORTED
PER KWH) FUEL
1. Do nothing 9.79 0 9% 90% 0% 0.4%
2. Planned future 10.06 850 0% 64% 32% 4%
3. PENRA vision 10.16 2,133 0% 45% 37% 19%
4. Maximum 9.88 2,284 0% 36% 34% 30%
cooperation
5. Maximum 9.78 174 1% 96% 0% 4%
independence
Note: The darker the shade of green the better the performance on that dimension, while the darker the shade of orange the worse the performance on that
dimension.
Note: CAPEX = capital expenditure; kWh = kilowatt hour; RE = renewable energy.
Securing Energy for Development in the West Bank and Gaza | 99
The scenarios with the highest share of domestic Given the potential substantial scale-up in solar
renewable energy look to be the most attractive, but energy, close coordination with the Israeli grid would
they require raising large amounts of capital from the be critical to preserve overall stability. Both the PENRA
private sector. What is clear is that any alternative that Vision and the Maximum Independence scenarios
achieves a significant shift in the level of diversification call for increasing the share of solar PV up to 20 or
and energy independence entails raising private 30 percent. It is important to note that any scale-up
capital in excess of NIS 7.3 billion (US$2 billion) over in generation in the West Bank will raise significant
the next decade. Given that private-sector investment grid stability and integration issues for the Israeli grid,
in the Palestinian power sector is very much in its which is also in the process of ramping up its share
infancy, this is not a minor undertaking, and would of variable renewable energy to meet its own national
require addressing the creditworthiness of the sector, targets. Close collaboration and careful planning would
which is currently the most significant constraint to be a prerequisite for any expansion plan involving an
attractive private capital. enhanced role for renewable energy. Finally, although
the currently Planned Future projects are important
While access to Area C would be desirable, significant for ensuring power-supply expansion keeps pace
diversification can already be achieved based on use with demand growth, and significantly impact the
of Areas A and B alone. The Maximum Independence reliability of supply, their impact on diversification and
scenario is based on unrestricted access to Area C, independence is still relatively small.
which is far from being the current situation and would
pose major political challenges. Nevertheless, in the To put things in perspective, the cost differentials
absence of access to Area C, PENRA’s strategic vision, between alternative scenarios are small and almost
of limiting dependency on any one supply to less than all of them deliver a reliable supply. There is a
50 percent, could still be achieved by maximizing difference of just 4 percent (or $0.004 per kWh) in
renewable energy installations in Areas A and B and the average cost of generation between the highest
on rooftops. This would be a desirable starting point and lowest scenarios. Moreover, all scenarios except
and would still represent a major increase in ambition for Do Nothing essentially provide for a reliable supply
from current targets of 130 MW by 2020 to a target of of electricity.
600 MW by 2030. Given that only 18 MW of solar PV
have been achieved since the target was announced
in 2012, this would be very challenging.
Figure II-10.7: Resilience Stress Test across Scenarios in Terms of Percent Increase
in Unserved Demand for the West Bank
Max Cooperation
Max Independence
PENRA Vision
Planned Future
Do Nothing
0% 5% 10% 15% 20% 25% 30% 35% 40%
War Peace
Note: PENRA = Palestinian Energy and Natural Resources Authority.
100 | Securing Energy for Development in the West Bank and Gaza
Another way to compare the alternative scenarios is distances within the West Bank. Under both scenarios,
through a stress-testing process that examines how distribution infrastructure needs to be expanded and
they perform under extreme conditions. In particular, upgraded to accommodate the additional supply.
the stress test looks at how the percentage of Part I, chapter 7, provides background detail on
unserved energy rises for each scenario when conflict wheeling tariffs and transmission and distribution
conditions are simulated. (T&D) infrastructure capital costs.
The scenarios with a higher share of solar PV look By 2030, approximately 2,400 Gigawatt hours (GWh)
to be the most resilient (figure II-10.7). As might be of domestic generation will need to be wheeled
expected, the scenarios with higher solar PV shares through the IEC grid if PENRA’s planned projects come
have the lowest share of unserved energy, at around online (figure II-10.8). In the following analysis, the
20 percent compared with 25–35 percent for the cost of wheeling is compared to the cost of building
others. This is because they are less susceptible to a transmission backbone for the Planned Future
supply interruption or conflict damage. scenario. It is expected that by 2030 up to 35 percent
of demand will be met by domestic generation, in
TRANSMISSION particular, through renewables and thermal generation,
corresponding to approximately 2,400 GWh per year.
Domestic power generation in the West Bank can be
moved to Palestinian load centers either by wheeling Due to the envisaged scale-up in the volume of
through the Israeli network or by building a Palestinian domestically generated electricity, the recurring cost
transmission backbone. As domestic power of wheeling charges rapidly increase year over year.
generation in the West Bank increases, there is a Figures II-10.9 and II-10.10 show the need for NIS 146
need to evacuate electricity from the locations where million (US$40 million) investment in the Palestinian
it is produced to those where it will be consumed, distribution network to absorb the additional
as cost-effectively as possible. Two options exist. The generation that would come online under the Planned
first is to wheel the power out from the West Bank, Future scenario. In terms of transmission, figure II-10.9
through the Israeli network, and inject it back into the shows the scenario in which IEC’s most expensive
West Bank to the load centers. The second is to build wheeling tariff is used, which, at NIS 0.05 (US$0.013)
an independent Palestinian transmission backbone per kWh, allows the use of both the Israeli transmission
capable of moving power at higher voltages over long and distribution networks. Figure II-10.10 shows the
Figure II-10.8: Domestic Generation, as Proportion of Total Demand, Needing to Be
Wheeled through the Israeli Electric Corporation Grid under the “Planned Future”
Scenario
Demand
8000
RE - other
7000
CCGT + GT
6000
5000
4000
3000
2000
1000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Note: CCGT = combined cycle gas turbine; RE = renewable energy.
Securing Energy for Development in the West Bank and Gaza | 101
Figure II-10.9: Cumulative Transmission and Distribution and Wheeling Costs under
“Planned Future” Scenario if Highest Wheeling Charge Is Used
120
100
Cost (US $millions)
80
60
40
20
0
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
Wheeling Running costs Distribution CAPEX Transmission CAPEX
Note: CAPEX = capital expenditure.
Figure II-10.10: Cumulative Transmission and Distribution and Wheeling Costs Under
“Planned Future” Scenario if Lowest Wheeling Charge Is Used
120
100
Cost (US $millions)
80
60
40
20
0
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
Wheeling Running costs Distribution CAPEX Transmission CAPEX
Note: CAPEX = capital expenditure.
scenario in which IEC’s least expensive wheeling tariff charges will be lower at approximately NIS 40 million
is used, which, at NIS 0.02 (US$0.005) per kWh, (US$11 million) per year.
allows the use of only the Israeli transmission network.
In this case, additional substations would need to be In the Palestinian backbone case, the exact investment
built in the West Bank, beyond the existing four new requirements would reflect the composition of the
high-voltage substations, to ensure that all power selected investment plan (table II-10.3). Investment
evacuated into Israel and received back into the West needs for distribution range from NIS 95 to NIS 190
Bank travel only on the Israeli transmission grid. The million (US$26–52 million); those from transmission
cost for these additional substations is estimated at an range NIS 172 to NIS 500 million (US$47–137 million).
additional NIS 146 million (US$40 million). If the higher The projects with the largest impact on transmission
wheeling tariff is used, by 2030 wheeling charges will investment requirements are the Jenin Power Plant
reach over NIS 110 million (US$30 million) per year. and the development of solar PV in Area C, each at
If the lower wheeling tariff is used, by 2030 wheeling around NIS 164 million (US$45 million).
102 | Securing Energy for Development in the West Bank and Gaza
TABLE II-10.3: BREAKDOWN OF REQUIRED TRANSMISSION AND DISTRIBUTION
INVESTMENTS AS ADDITIONAL SUPPLY COMES ONLINE IF A TRANSMISSION
BACKBONE IS BUILT
(US$) FOUR HIGH- JPP COMES HPP COMES RENEWABLES JORDANIAN TOTAL
VOLTAGE ONLINE ONLINE ALLOWED IN CONNECTOR
SUBSTATIONS AREA C IS EXPANDED
ENERGIZED
West Bank Trans. 0 47 25 44 20 137
West Bank Dist. 26 7 7 7 7 52
Total T&D 26 54 31 51 27 188
Note: JPP = Jenin Power Plant; HPP = Hebron Power Plant.
For the Planned Future scenario, the total required In the short term, PENRA must negotiate lower
investment in T&D would be NIS 409 million (US$112 wheeling tariffs with IEC, and in the mid to long term,
million). The components in figure II-10.11, which PENRA should build a transmission backbone to
contribute to the Planned Future scenario, are the reduce costs—negotiating a swap mechanism could
energization of the four new substations, plus Jenin be an attractive third option. The cost of wheeling
Power Plant and Hebron Power Plant coming online. at the higher tariff breaks even with the cost of the
Combined, these additional supply options will need backbone by 2045 and the cost of wheeling at the
NIS 263 million (US$72 million) for transmission lower tariff breaks even with the cost of the backbone
infrastructure, and NIS 146 million (US$40 million) by 2052. By 2030, the transmission component of the
for distribution infrastructure for a total investment of retail tariff would be NIS 0.004 (US$0.001) per kWh if
NIS 409 million (US$112 million). Regardless, it is not a backbone is built, NIS 0.007 (US$0.002) per kWh
desirable to have variable costs that grow year after if the lower wheeling charge is used, and NIS 0.018
year and the transmission backbone would allow (US$0.005) per kWh if the higher wheeling charge is
a fixed cap on expenditures. It is important to note used (assuming amortization of all CAPEX to 25 years).
that, whereas investments in generation would be This represents 0.7, 1.3, and 3.3 percent of the total
pursued under a public-private partnership model, expected retail tariff in 2030, respectively. Building a
investments in T&D would necessarily take the form transmission backbone is more cost-effective than
of public investment. wheeling the power through Israel. simply because
Figure II-10.11: Cumulative Transmission and Distribution Investment for the
“Planned Future” Scenario if a Transmission Backbone Is Built
120
100
Cost (US $millions)
80
60
40
20
0
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
Wheeling Running costs Distribution CAPEX Transmission CAPEX
Note: CAPEX = capital expenditure.
Securing Energy for Development in the West Bank and Gaza | 103
the costs are fixed and do not grow as domestic has not been in force and retail tariffs have dropped
generation expands. If wheeling is to be used, at least below the weighted average cost of supply, which
in the initial years until a transmission backbone is built, includes IEC imports and generation from GPP)
the wheeling tariff should be extensively negotiated
with IEC to bring down costs. A swap mechanism, in While there has been some improvement in the
which power generated in the West Bank is evacuated operating efficiency of the West Bank DISCOs,
to Israel, and swapped for power from Israel at a later substantial variations remain across companies.
time and injected back into the West Bank, can be an In the West Bank, overall DISCO losses (including
attractive alternative but requires extensive negotiations both technical and nontechnical losses) have been
and collaboration on both sides. falling from around 26 percent in 2011 to 23 percent
in 2015 (figure II-10.13). As of 2015, Southern
FINANCIAL MODEL Electricity Distribution Company (SELCO) had the
highest losses, at 27 percent, followed by Jerusalem
Attention now turns to the financial implications District Electricity Company (JDECO) at 24 percent,
of implementing the planning scenarios described Hebron Electricity Distribution Company (HEPCO) at
above. The key focus of attention is the financial 20 percent, Northern Electricity Distribution Company
equilibrium tariff and how it may need to evolve (NEDCO) at 17 percent, and Tubas Electricity
relative to historic practice. Distribution Company (TEDCO) at 16 percent. The
overall DISCO collection rates have improved from 88
Historically, the retail tariff in the West Bank has included percent in 2011 to 91 percent in 2015. As of 2015,
an average 45 percent markup over the wholesale NEDCO, JDECO, and HEPCO, which combined
cost of IEC power (figure II-10.12). Retail tariffs in the make up over 92 percent of sales, had collection rates
West Bank are determined by the regulator, PERC, above 90 percent. while SELCO and TEDCO had
which allows a markup over the wholesale price of IEC collection rates above 75 percent. For the purposes
power to cover the operating margin of the DISCOs, of financial modeling, two possibilities are considered.
including the significant operational inefficiencies and The first is that the regulator will set ambitious but
overheads. For the period 2011–15, this markup has realistic efficiency targets for the DISCOs that will be
averaged 45 percent over and above the IEC tariff. met by 2030. The second is that there is no significant
(This is in contrast to Gaza, where PERC regulation improvement in DISCO inefficiency.
Figure II-10.12: In the West Bank, Retail Tariffs Have Followed the Cost of Israeli
Electric Corporation Supply
0.8
0.7
Tariff (NIS per kWh)
0.6
0.5 Average sales price
(NIS per KWh)
0.4
Average purchase price*
0.3 (NIS per KWh)
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
Average purchase price* (NIS per KWh) 0.33 0.42 0.44 0.46 0.41
Average sales price (NIS per KWh) 0.54 0.60 0.61 0.63 0.58
Markup 65% 45% 39% 35% 41%
Note: kWh = kilowatt hour
Includes Israeli Electric Corporation and Jordan
104 | Securing Energy for Development in the West Bank and Gaza
Figure II-10.13: Time Trend for Distribution Losses and Revenue Collection Rates in
the West Bank
0.94 0.34
0.92 0.32
Collections rates (%)
0.90 0.30
Losses (%)
0.88 0.28
0.86 0.26
0.84 0.24
0.82 0.22
0.80 0.20
2011 2012 2011 2013
2012 2014
2013 2015
2014 2015
Losses* 0.26 0.24 \0.23 0.22 0.22
Collection rates 0.88 0.88 0.82 0.90 0.91
* Technical and non-technical losses
The financial modeling exercise is pursued for three for higher generation costs. However, by 2027, it is
of the planning scenarios that capture the full range expected that the Planned Future and PENRA Vision
of potential financial implications. In the West Bank, scenarios, which represent diversified portfolios with
the PENRA Vision scenario was the most expensive, large amounts of solar and gas plants, will have lower
entailing an average generation cost of NIS 0.39 costs than the Maximum Cooperation scenario, which
(US$0.102) per kWh, while the Maximum Cooperation represents pure imports from IEC. Despite the declining
scenario was the least expensive, entailing an average costs by 2030, the equilibrium tariff for all scenarios is
generation cost of NIS 0.37 (US$0.098) per kWh. The higher than the 2015 retail tariff.
Planned Future represents the middle ground, with an
average cost of NIS 0.42 (US$0.11) per kWh. If DISCO performance is not improved by 2030,
the equilibrium tariff for the PENRA Vision planning
In the West Bank, the financial equilibrium tariffs do scenario will be NIS 0.07 (US$0.02) per kWh higher
not vary significantly across scenarios, but all show a than otherwise. The equilibrium tariffs represented
declining trend. The equilibrium tariff follows a narrow in figure II-10.14 assume that, by 2030, collection
band for all three scenarios, reflecting the fact that the rates increase from current levels of 91 percent to 97
average cost of generation does not differ significantly percent, distribution grid technical and nontechnical
across different planning scenarios in the West Bank losses decline from current levels of 23 percent to 16
(figure II-10.14). In all cases, the financial equilibrium percent, transmission system losses are 2 percent,
tariff declines significantly by the end of the period, as and DISCO operation and maintenance costs
DISCO efficiencies improve, technology costs drop improve by 2 percent per year. Based on reports
(such as those for PV), and gas becomes available. from the DISCOs, it is assumed that debt is currently
For both the PENRA Vision and particularly for the financed at 3.5 percent, but would need to rise
Planned Future the financial equilibrium tariff rises in the toward 7 percent by 2030. If these improvements are
medium term before an eventual decline, essentially not achieved, the equilibrium tariff in 2030 will be NIS
because operational efficiency has not yet had time to 0.66–0.71 (US$0.17–0.19) per kWh instead of NIS
improve to a point where it can more than compensate 0.58–0.61 (US$0.15–0.16) per kWh (figure II-10.15).
Securing Energy for Development in the West Bank and Gaza | 105
Figure II-10.14: West Bank Equilibrium Tariff Decline as Discos Performances
Improve by 2030
0.8
0.7
0.6
0.5
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Max Cooperation PENRA Vision
Planned Future 2015 average retail tariff
Note: kWh = kilowatt hour.
Figure II-10.15: West Bank Equilibrium Tariff Remains High if DISCO Performances
Fail to Improve by 2030
0.8
0.7
0.6
0.5
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Max cooperation PENRA vision
Planned Future 2015 average retail tariff
Note: kWh = kilowatt hour.
Failure to adjust the unified tariff in the West Bank NIS 0.10–0.35 (US$0.03–0.09) for every kWh they
would result in massive average annual subsidy sell if the tariffs are not increased. JDECO, with the
requirements to keep the DISCOs afloat (figure largest customer base, will require the largest subsidy
II-10.16). If the West Bank pursues the PENRA from the government. NEDCO, which already has the
Vision scenario without making any compensating best operational performance, does not require much
adjustments in retail tariffs, the subsidy required to in the way of subsidies and would be the only DISCO
keep the DISCOs afloat would begin at approximately able to absorb the new generation cost without a raise
NIS 300 (US$82) million in 2018, and increase to in the unified tariff. These calculations assume that all
almost NIS 450 (US$123) million by 2022. In other DISCOs meet efficiency targets by 2030. If they do
words, in 2018, all DISCOs, except NEDCO, will lose not, the required subsidy will be significantly higher.
106 | Securing Energy for Development in the West Bank and Gaza
Figure II-10.16: Subsidy Required to Sustain Financial Equilibrium of Discos in the
Absence of Any Adjustment to the Current Unified Retail Tariff Based on the PENRA
Vision Scenario, Assuming Efficiency Targets Are Achieved
500
400
300
Cost (US $millions)
200
100
0
-100
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
JEDCO HEPCO SELCO TEDCO NEDCO
Note: JEDCO = Jerusalem District Electricity Company; HEPCO = Hebron Electricity Distribution Company; SELCO = Southern Electricity Distribution
Company; TEDCO = Tubas Electricity Distribution Company; NEDCO = Northern Electricity Distribution Company.
Securing Energy for Development in the West Bank and Gaza | 107
Alternatively, if subsidies are targeted purely to the per kWh, so that subsidies need only be channeled
poorest customers who face affordability limits, the to the poorest 10 percent of the population. The
overall subsidy bill drops substantially. According subsidy required to cover the difference between the
to the affordability thresholds in the West Bank, the increased retail tariff and the affordability thresholds
bottom decile of the population can afford to pay up of these families would amount to no more than
to NIS 0.41 (US$0.114) per kWh, while the second NIS 25 million (US$7 million) per year with over 60
decile can afford to pay up to NIS 0.71 (US$0.197) percent going to JDECO consumers (figure II-10.18).
per kWh (figure II-10.17). The analysis suggests that, As DISCO efficiencies improve, required subsidies are
as long as DISCOs meet their efficiency targets, observed to decrease over time.
tariffs should hardly rise beyond NIS 0.7 (US$0.19)
Figure II-10.17: Comparing the First and Second Decile Affordability Thresholds
against Equilibrium Tariff for the PENRA Vision Scenario Assuming Efficiency
Targets Are Reached
0.8
0.6
0.4
0.2
0.0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
PENRA Vision Equilibirum tariff
Figure II-10.18: Subsidy Required to Keep the Bills of the Bottom Decile of
Households within the Corresponding Affordability Limits for the PENRA Vision
Scenario Assuming Efficiency Targets Are Reached
25
20
Subsidy (NIS $millions)
15
10
5
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
JEDCO HEPCO SELCO TEDCO NEDCO
108 | Securing Energy for Development in the West Bank and Gaza
MACRO FISCAL MODEL electricity subsidies that are otherwise projected to
escalate to 0.8 percent of GDP by 2025 under the Do
A combined energy investment and reform package Nothing scenario, to a net positive fiscal position of 0.9
produces tangible macro fiscal benefits. To evaluate percent of GDP by 2025 (table II-10.4). This makes
the fiscal and macroeconomic impact of PENRA’s a substantial contribution to the net government
current projects in the pipeline, a computable operating balance, estimated to be in slight surplus
general equilibrium (CGE) model is designed for the under the Planned Future versus a sizeable deficit
Planned Future scenario. For modeling purposes, under the Do Nothing scenario. The Planned Future
this scenario is characterized by a steep expansion scenario also delivers a significant boost to the growth
in domestic power generation accompanied by a fall rate of the economy, which would be 0.3 percentage
in energy costs. points of GDP higher than otherwise for the entire
decade (table II-10.5). The main sector to benefit from
The CGE model predicts that the Planned Future the energy turnaround is investment, which grows as
scenario ensures electricity subsidies are fully much as 0.7 percentage points of GDP higher than
eliminated and there is a boost in GDP growth and otherwise, partly as a result of the increased fiscal
investment. From a fiscal perspective, the Planned space created by reducing electricity subsidies.
Future scenario entails a dramatic reduction in
TABLE II-10.4: IMPACT OF THE “PLANNED FUTURE” ENERGY SCENARIO ON
GOVERNMENT ACCOUNTS
AS % OF GDP 2016 2025
BASELINE
PLANNED FUTURE DO NOTHING
Revenue 28.0 26.2 27.1
Expenditure 26.6 25.9 28.3
Of which Electricity subsidies 0.1 -0.9 0.8
Operational Balance 1.4 0.3 -1.2
TABLE II-10.5: IMPACT OF THE “PLANNED FUTURE” ENERGY SCENARIO ON
MACROECONOMIC PERFORMANCE
AVERAGE ANNUAL GROWTH 2016–25 PLANNED FUTURE DO NOTHING
GDP at market prices 2.7 2.4
Investment 2.3 1.6
Consumer price index 2.0 1.8
Securing Energy for Development in the West Bank and Gaza | 109
CHAPTER 11
Analysis and Results for Gaza
This chapter presents the results of the integrated Domestic power generation in Gaza is extremely
planning and financial exercise for Gaza. costly, and will continue to be until the Gaza Power
Plant (GPP) can be converted to gas and preferably
PLANNING MODEL to combined cycle technology (figure II-11.1). At
present, the cost of diesel-fired generation at the GPP
The two key drivers of the planning scenarios are is over NIS 1.09 (US$0.30) per kilowatt hour (kWh) and
the relative cost of power supplied through different projected to increase in line with the forecast trajectory
technologies and the range of uncertainties that of the global oil price. The only alternative domestic
affects each of them. Figure II-11.1 plots the so-called source of energy—rooftop solar—is also relatively
levelized cost of energy (LCOE), defined as total capital expensive although projected to become cheaper
and operating costs across the lifetime of a power over time in line with global trends, to reach around
project averaged over the total electricity produced. NIS 0.44 (US$0.12) per kWh by 2030. As of today,
While LCOE is a convenient device for making simple Israeli imports, at around NIS 0.37 (US$0.10) per kWh
relative cost comparisons, it is important to recognize and Egyptian imports, at around NIS 0.27 (US$0.07)
that it does not capture all relevant characteristics of per kWh, are by far the most cost-effective source of
each power source, such as its availability for dispatch energy available. However, eventual conversion of the
and contribution to meeting peak loads. Table II-11.1 GPP to natural gas, as well as possible conversion to
summarizes the different uncertainty parameters more efficiency combined cycle gas turbine (CCGT)
that characterize each of the power supply options, technology, would significantly bring down the costs
considering delays in availability, uncertainty of cost, of domestic generation.
as well as probabilities of interruption to supply.
These are inevitably somewhat subjective and
based on a combination of expert judgment and
stakeholder consultation.
Figure II-11.1: Time Trends of Levelized Cost of Energy for Different Supply Options
in Gaza
0.5
0.4
0.3
0.2
0.1
0.0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
GPP on diesel, from $19.8/MMBTU Israel import Egypt import
Rooftop solar,from $2,500/kW GPP on gas, from $6.5/MMBTU CCGT gas, from $6.5/MMBTU
Note: GPP = Gaza Power Plant; CCGT = combined cycle gas turbine; MMBTU = millions British thermal unit.
110 | Securing Energy for Development in the West Bank and Gaza
TABLE II-11.1: OVERVIEW OF UNCERTAINTY PARAMETERS FOR GAZA PLANNING
EXERCISE
DIESEL GAS ISRAEL EGYPT
Availability range
Earliest 2016 2022 2022 2021
Latest 2016 2035 2035 2035
Volume range
Lowest Unlimited 0.2 bcm 120 MW 10 MW
Highest Unlimited 2.0 bcm 270 MW 70–150 MW
Price range
Lowest Known $4.0 per MMBTU Current $0.08 per kWh
Highest Known $7.5 per MMBTU $0.11 per kWh $0.10 per kWh
Outage duration range
Minimum days 37 37 18 29
Maximum days 365 365 91 182
Other parameters
Minimum availability 0.30 0.30 0.80 0.60
Probability of interruption 0.15 0.15 0.02 0.20
Note: bcm = billion cubic meters; MMBTU = millions British thermal unit; MW = megawatt; kWh = kilowatt hour.
Due to the risky environment in Gaza, some of the any single source of energy to 50 percent of demand
lower cost power options are not necessarily the most while retaining the ability to import 100 percent
secure (table II-11.1). The relative cost of alternative of energy needs if required. For the purposes of
power generation options needs to be considered illustration, two additional—more extreme—scenarios
alongside their relative risk. A key issue to look at is are considered. Maximum Cooperation considers
the probability of a supply interruption at any given the possibility of Gaza following the power supply
time. This indicates that both the diesel supply to the model that has so far characterized the West Bank,
GPP and Egyptian imports have proved to be highly which is full dependence on Israeli imports to the
unreliable sources of electricity in the past. While gas extent of phasing out the GPP completely. Maximum
supplies are not yet available, due to their nature as fuel Independence considers the opposite possibility of
imports, it is envisaged that these could be subject to scaling-up the GPP to the point where it is capable of
similar levels of risk. Electricity imports from Israel, on meeting the full extent of anticipated demand growth.
the other hand, based on the historical record have
proven to be more reliable and are therefore assigned Under the Do Nothing scenario, Gaza’s existing
a lower probability of interruption. acute power shortages only become increasingly
intolerable over time (figure II-11.2). The baseline for
Against this backdrop, the results of the five planning the planning exercise is a scenario in which no further
scenarios are considered. These include a Do power infrastructure is developed to support either
Nothing counterfactual, where no further investments increased domestic generation or expanded imports,
are made in power infrastructure while demand but demand continues to grow in line with forecasts.
continues to grow. This is compared with the impact Gaza is already unable to meet 50 percent of its
of the current pipeline of investments, described as demand, and under the Do Nothing scenario this
the Planned Future, as well as the PENRA Vision for situation continues to deteriorate dramatically, so that
the longer term, which seeks to limit dependence on by 2030 over 60 percent of demand cannot be met,
Securing Energy for Development in the West Bank and Gaza | 111
Figure II-11.2: Results of “Do Nothing” Planning Scenario for Gaza
Do nothing: No additional power supply is brought online, and Gaza is limited to the following existing status: (i) 120 WM
import capacity from IEC, (ii) 30 MW import capacity from Egypt, and (iii) the Gaza Power Plant (GPP) is running on diesel
with 140MW capacity but limited to 60 MW due to fuel shortages.
A. Gaza Supply B. Gaza energy supply (GWh)
Capacity in 2030 (MW)
5,000
4,000
3,000
2,000
1,000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
14.68 0 63% 26% 11% 0%
Takeaway: Under current conditions, unserved demand and power cuts will continue to increase in Gaza until
2030.
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gast Turbine; IEC = Israeli Electric Corporation; MW = megawatt; PV = photovoltaic; RE =
renewable energy.
which represents power cuts longer and more severe Natural Resources Authority’s (PENRA’s) plans to
than those experienced today. At the same time, the energize a new 161 kilovolt (kV) line with the Israeli
cost of the limited power generation available is very Electric Corporation (IEC) and substantially expand
high at almost NIS 0.55 (US$0.15) per kWh—about the capacity of the GPP to 560 megawatt (MW) while
50 percent higher than the equivalent scenario for converting it to gas, this scenario incorporates the
the West Bank—and this is due to the high cost of possibility of developing Gaza’s full potential of 163
running the GPP on diesel. And the GPP does not MW of solar photovoltaic (PV), mainly in the form of
permit the achievement of energy independence. rooftop solar systems. The inclusion of the latter is
Due to the limited capacity and the constraints on not based on cost considerations, as rooftop solar
diesel purchases, Gaza continues to rely on imports remains relatively costly even through to the end of
to meet 26 percent of its energy needs. Overall, this period, but is rather motivated by considerations
the Do Nothing baseline scenario for Gaza paints a of resilience. Solar capacity of this kind could help to
dire picture. Additional power supply is desperately provide an electricity safety net capable of meeting
needed, but the high cost of energy, coupled with the most basic needs during times of geopolitical
consumers’ low ability and willingness to pay, make tension that could potentially affect fuel or electricity
it difficult to bring on additional supply. imports. The implementation of this package would
ensure that unserved demand could be eliminated
Gaza’s situation would improve significantly with the by the early 2020s. However, implementing these
implementation of Planned Future projects, although projects would entail raising over NIS 3.7 billion (US$1
the cost of energy would remain relatively high (figure billion) of private financing, and the cost of electricity
II-11.3). In addition to the Palestinian Energy and would remain relatively high at NIS 0.50 (US$0.134)
112 | Securing Energy for Development in the West Bank and Gaza
Figure II-11.3: Results of “Planned Future” Planning Scenario for Gaza
Planned Future: All PENRA’s current planned projects come online: (i) upgrade of GPP to run on natural gas and expand
capacity up to 560 MW, (ii) and energization of the 161 kV power line to bring an additional 120 MW from IEC. In addition,
we assume 163 MW of renewable energy (of which over 80% is rooftop solar) which is Gaza’s maximum potential capacity.
A. Gaza Supply B. Gaza energy supply (GWh)
Capacity in 2030 (MW)
5000
4000
3000
2000
1000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
13.39 1,035 0% 26% 68% 6%
Takeaway: Planned projects will meet Gaza’s unserved demand by 2030 but 94% of fuel and power will
be imported.
Note: CAPEX = capital expenditure; GWh = gigawatt hour; IEC = Israeli Electric Corporation; GT = Gast Turbine; MW = megawatt; PV = photovoltaic; RE =
renewable energy.
per kWh. Gaza would only be able to meet 6 percent requires capital expenditure in excess of NIS 3.7 billion
of its energy needs on a fully self-sufficient basis (US$1 billion), the average cost of energy is slightly
through solar; however, this is the maximum amount reduced by NIS 0.04 (US$0.011) per kWh to NIS 0.45
feasible in any case. (US$0.12). Furthermore, unserved demand is more
rapidly eliminated even before 2020. Both effects are
Achieving the PENRA Vision for the future, requires due to the greater reliance of Israeli imports.
rebalancing from domestic thermal generation toward
Israeli imports, thereby reducing the average cost of As a comparison to this balanced scenario, two more
energy (figure II-11.4). The next scenario is based on extreme scenarios are also considered here for illustrative
the implementation of the PENRA Vision, according purposes. One explores the option of maximizing
to which no source should contribute more than 50 cooperation on electricity imports with Israel, and the
percent of overall generation, while the import capacity other the option of further developing domestic thermal
should remain large enough to import all needed generation to achieve Maximum Independence.
energy in case of emergency. Renewable energy
potential continues to be tapped. The Planned Future Under a strategy of Maximum Cooperation, Gaza
scenario does not meet PENRA’s strategic vision, achieves the lowest possible power generation costs,
because it relies on the GPP for more than 50 percent comparable to those currently enjoyed by the West
of energy needs. The only viable way to achieve Bank (figure II-11.5). Given the cost and security
the requisite rebalancing is to scale back the GPP’s advantages of Israeli power imports over domestic
capacity and allow the Israeli connection to make up a thermal generation, the Maximum Cooperation
larger proportion of the overall capacity. While this still scenario would call for shutting down the GPP and
Securing Energy for Development in the West Bank and Gaza | 113
Figure II-11.4: Results of “PENRA Vision” Planning Scenario for Gaza
PENRA Vision: “Dependency ratio on any one source should not exceed 50% in best conditions, with a possibility of
importing all needs in case of emergency.”
A. Gaza Supply B. Gaza energy supply (GWh)
Capacity in 2030 (MW)
5000
4000
3000
2000
1000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
12.30 1,066 0% 47% 46% 6%
Takeaway: Better diversification, which will reduce costs, requires IEC imports beyond the planned 161kV line.
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gast Turbine ; MW = megawatt; PV = photovoltaic; RE = renewable energy.
114 | Securing Energy for Development in the West Bank and Gaza
Figure II-11.5: Results of “Maximum Cooperation” Planning Scenario for Gaza
Maximum Cooperation: The Gaza Power Plant (GPP) is shut down and all electricity needs are imported from IEC with
expanded interconnection capacity. The full 163 MW of solar potential is developed as a safety net.
A. Gaza Supply B. Gaza energy supply (GWh)
Capacity in 2030 (MW)
5000
4000
3000
2000
1000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
10.37 385 0% 93% 0% 6%
Takeaway: Cost of power is 3UScents/KWh cheaper than the planned strategy which would help improve cost
recovery.
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gast Turbine; IEC = Israeli Electric Corporation; MW = megawatt; PV = photovoltaic; RE =
renewable energy.
Securing Energy for Development in the West Bank and Gaza | 115
Figure II-11.6: Results of “Maximum Independence” Planning Scenario for Gaza
Maximum independence: Meet all demand growth through further expansion of Gaza Power Plant up to 677 MW, while
retaining existing 120 MW interconnection with IEC, and developing full 163 MW of solar PV potential (80% of rooftop)
A. Gaza Supply B. Gaza energy supply (GWh)
Capacity in 2030 (MW)
5,000
4,000
3,000
2,000
1,000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Egypt/Jordan imports Israel imports CCGT + GT Diesel genset
PV-Area C RE - other Unserved energy Demand
AVG COST CAPEX 2030 2030 2030 DOMESTIC
2030 DOMESTIC
POWER (US (US$ UNSERVED ELECTRICITY GEN-IMPORTED
GEN-RENEWABLES (%)
CENTS/KWH) MILLION) DEMAND (%) IMPORTS (%) FUEL (%)
15.15 1,185 2% 9% 83% 6%
Takeaway: Relying purely on gas plants means, if gas is ever unavailable, diesel must be used, driving up costs
significantly
Note: CAPEX = capital expenditure; GWh = gigawatt hour; GT = Gast Turbine; IEC = Israeli Electric Corporation; MW = megawatt; PV = photovoltaic; RE =
renewable energy.
relying entirely on Israeli power imports. This entails generation are at their highest (figure II-11.6). With
expanding connection capacity with Israel from current Israeli imports capped at current levels of 120 MW,
levels of 120 MW toward 800 MW. The 163 MW of and renewable energy potential constrained to 163
mainly rooftop solar are retained as an electricity safety MW, this scenario entails further expansion of the
net. In terms of operational installed capacity, this level GPP until it is capable of meeting the entire demand.
of rooftop solar development would actually represent This entails significantly higher capital expenditure
more than twice as much energy as what is offered by than any of the other scenarios, at around NIS 4.4
the GPP today, which is constrained to just 60 MW. billion (US$1.2 billion). While unserved demand is
However, in the absence of improved storage capacity, eliminated by 2020, the average cost of generation is
the hours of service available from solar power would also higher than under any other scenario, at NIS 0.55
be more restrictive. The capital expenditure associated (US$0.152) per kWh. The reason for this—despite the
with this option on the Palestinian side is much lower, at relative cost-effectiveness of CCGT technology—is
NIS 1.4 billion (US$0.39 billion). Significant investments that high-cost diesel becomes the backup fuel for
would also be required on the Israeli side to enhance the gas plant anytime it experiences an outage; this
connection capacity, although these should be covered is relatively often given the plant’s operational history.
through the power export tariff. This approach also Finally, this poorly diversified scenario is so heavily
eliminates unserved demand relatively quickly, before dependent on imported fuel that any impression of
2020, and results in relatively low tariffs of NIS 0.38 independence is largely illusory. It is possible that the
(US$0.104) per kWh. performance of this scenario could be improved, if the
GPP were able to run on Gaza Marine gas. However,
Under a strategy of Maximum Independence, a larger even in this case, the gas would likely need to be
scale-up of the GPP is called for, and costs of power transported via Israel or Egypt.
116 | Securing Energy for Development in the West Bank and Gaza
TABLE II-11.2: COMPARISON OF RESULTS ACROSS THE FIVE PLANNING
SCENARIOS FOR GAZA
AVERAGE CAPEX 2030 2030 2030 2030
COST (US$ UNSERVED ELECTRICITY DOMESTIC DOMESTICALLY
POWER MILLIONS) DEMAND IMPORTS GENERATION GENERATED RE
(U.S. WITH
CENTS IMPORTED
PER KWH) FUEL
1. Do nothing 14.68 0 63% 26% 11% 0%
2. Planned future 13.39 1,035 0% 26% 68% 6%
3. PENRA vision 12.30 1,066 0% 47% 46% 6%
4. Maximum
cooperation 10.37 385 0% 93% 0% 6%
5. Maximum
independence 15.15 1,185 2% 9% 83% 6%
Note: The darker the shade of green the better the performance on that dimension, while the darker the shade of orange the worse the performance on that
dimension.
Note: CAPEX = capital expenditure; kWh = kilowatt hour; RE = renewable energy.
Securing Energy for Development in the West Bank and Gaza | 117
Figure II-11.7: Resilience Stress Test across Scenarios in Terms of Percent Increase
in Unserved Demand for Gaza
Max Cooperation
Max Independence
PENRA Vision
Planned Future
Do Nothing
0% 10% 20% 30% 40% 50% 60% 70% 80%
War Peace
Note: PENRA = Palestinian Energy and Natural Resources Authority.
No single option performs better than others on all Energy policy for Gaza therefore boils down to striking
relevant dimensions, illustrating that trade-offs must the right balance between these two limited options.
be made. Examining the five scenarios side by side A simple cost comparison between the two suggests
helps to clarify their relative performance. Table II- a slight advantage for the GPP once converted to gas.
11.2 compares various dimensions of performance, However, the relative ranking of these two options
including the average cost of power generation, changes when risk factors are considered. On the
the total capital expenditure, the level of unserved one hand, Israeli power imports have had a reliable
demand in 2030, the continued reliance on electricity historical track record. On the other hand, the GPP
imports or fuel imports for generation, and the share would never be able to rely on gas entirely sourced
of domestically generated renewable energy in the and transported within the Palestinian territories and
overall mix. would be forced to run on expensive diesel whenever
gas supplies were to fail. Running the GPP on diesel,
The key energy policy issue for Gaza is where to as at present, is a highly unattractive option, which
strike the right balance between Israeli imports should be avoided as much as possible. Indeed,
and domestic gas-fired power generation. The the investment differential between Maximum
first point to note is that the degree of true energy Cooperation and Maximum Independence is as much
independence achievable in Gaza is, due to as NIS 2.9 billion (US$0.8 billion) while the average
geographic circumstances, much lower than for the cost differential is as much as NIS 0.175 (US $0.048).
West Bank. Whereas the West Bank could potentially
meet 20–30 percent of its energy needs from solar The recommendation is, therefore, not only to pursue
energy by 2030 (depending on access to Area the energization of the existing 161 kV line, but also
C), Gaza is only able to meet at most 6 percent of to explore the possibility of additional connection
electricity demand from solar energy by 2030, even capacity with IEC, even as efforts to import gas to
after exploiting the full extent of its renewable energy Gaza continue. Finally, the development of Gaza’s
potential. Moreover, given the low historical reliability limited solar potential looks to be a worthwhile
of Egyptian power imports, Gaza’s only two realistic investment that provides a basic electricity safety net
power supply options are Israeli imports and an more effectively and efficiently than is currently being
expanded GPP suitably converted to fire on gas. achieved with the GPP.
118 | Securing Energy for Development in the West Bank and Gaza
TABLE II-11.3: OVERVIEW OF TRANSMISSION AND DISTRIBUTION INVESTMENT
REQUIREMENTS FOR GAZA
(US$) GPP UPGRADED AND EXPANDED OR EGYPTIAN TOTAL
ADDITIONAL SUPPLY FROM IEC COMES INTERCONNECTOR IS
TO GAZA EXPANDED
WB Trans. 33 32 65
WB Dist. 47 13 60
Total T&D 80 45 125
Figure II-11.8: In Gaza, Retail Sales Tariffs Have Remained Flat as Cost of Power from
Israel and Gaza Power Plant Has Increased
0.8
Tariff (NIS per kWh)
0.7
0.6 Average sales price
(NIS per KWh)
0.5 Average purchase price*
(NIS per KWh)
0.4
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
Average purchase price* (NIS per kWh) 0.41 0.52 0.56 0.73 0.60
Average sales price (NIS per kWh) 0.50 0.52 0.52 0.50 0.49
Markup/discount 23% 1% -7% -47% -22%
Note: kWh = kilowatt hour.
Includes Israeli Electric Corporation and Gaza Power Plant.
Another way to compare the alternative scenarios is the Maximum Independence scenario, and far
through a stress-testing process that examines how outperforming the Maximum Cooperation scenario
they perform under extreme conditions. In particular, that could lead to as much as 50 percent of unserved
the stress test looks at how the percentage of energy during a conflict period.
unserved energy rises for each scenario when conflict
conditions are simulated. TRANSMISSION
The Planned Future and PENRA Vision scenarios The specific situation of Gaza points to the need
are the ones that perform the best under conflict to develop domestic transmission infrastructure as
conditions (figure II-11.7). Under these scenarios the opposed to wheeling via the Israeli network. With
unserved demand during wartime would increase respect to transmission options, Gaza’s situation is
to 24–29 percent, even slightly outperforming quite different to that of the West Bank. Given Gaza’s
Securing Energy for Development in the West Bank and Gaza | 119
Figure II-11.9: Time Trend for Distribution Losses and Collection Efficiency in Gaza
0.74 0.34
0.72 0.32
Collections rates (%)
0.70 0.30
Losses (%)
0.68 0.28
0.66 0.26
0.64 0.24
0.62 0.22
0.60 0.20
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
Losses* 30% 30% 30% 26% 26%
Collection Rates 65% 68% 71% 64% 65%
* Includes technical and nontechnical.
small territory and compact settlement patterns, its FINANCIAL MODEL
absence of land-use restrictions, and the relatively
limited existing connection capacity with Israel, the Attention now turns to the financial implications of
option of wheeling power within Gaza via the Israeli implementing the planning scenarios. The key focus
network does not appear to be relevant. Attention, of attention will be the financial equilibrium tariff and
therefore, focuses on the need to develop domestic how it may need to evolve relative to historic practice.
transmission and distribution infrastructure for power
transportation purposes. The Gaza Electricity Distribution Company (GEDCO)
currently sells power to consumers at a cost lower
Capital expenditure requirements for transmission and than its own average purchase price from IEC and
distribution in Gaza range from NIS 292 million to NIS GPP (figure II-11.8). Gaza’s retail power tariffs have
456 million (US$80 million–125 million) (table II-11.3). been fixed at NIS 0.50 (US$0.14) per kWh for the
Given the need to substantially expand the amount past decade, even as the weighted average cost
of power flowing through the Gaza network to meet of purchasing power both from Israel and GPP has
growing demands, an investment of NIS 120 million risen toward NIS 0.60–0.70 (US$0.17–0.19) per kWh.
(US$33 million) in an internal transmission backbone The implication is that GEDCO is selling power to
and a further NIS 172 million (US$47 million) for customers at a discount over its own power purchase
supporting distribution network enforcements would price, and that’s not even considering the utility’s own
be needed in any case, whether the additional power distribution operating margin.
was coming from IEC, the GPP, or some combination
of the two. Although the planning scenarios did not Moreover, GEDCO’s operating performance is by
end up including increased imports from Egypt, it is far the worst of any of the Palestinian distribution
important to note that the pursuit of this option would utilities (figure II-11.9). While GEDCO’s distribution
entail a different set of investments in transmission and losses (including both technical and nontechnical
distribution, amounting to a total of NIS 164 million losses) have been falling somewhat from around 30
(US$45 million). It is important to note that, whereas percent in 2011 to 26 percent in 2015, they remain
investments in generation would be pursued under high relative to other Palestinian utilities and are more
a public-private partnership model, investments in than twice as high as what would be considered
transmission and distribution would necessarily take good practice internationally. GEDCO’s collection
the form of public investment. ratio, which stands at around 65 percent (despite a
120 | Securing Energy for Development in the West Bank and Gaza
Figure II-11.10: Projected Financial Equilibrium Tariff for GEDCO under Different
Planning Scenarios and Improved Operational Efficiency Assumptions
1.5
1.2
0.9
0.6
0.3
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Max Cooperation PENRA Vision
Planned Future 2015 average retail tariff
sNote: kWh = kilowatt hour.
Figure II-11.11: Projected Financial Equilibrium Tariff for GEDCO under Different
Planning Scenarios and Static Operational Efficiency Assumptions
2.0
1.5
1.0
0.5
0.0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Max Cooperation PENRA Vision
Planned Future 2015 average retail tariff
Note: kWh = kilowatt hour.
recent spurt), is extremely low and represents a huge the Maximum Independence and PENRA Vision
financial drain on the company. This poor performance scenarios were the most expensive, entailing an
is partly explained by high levels of unemployment average generation cost of approximately NIS 0.54
and poverty in Gaza due to the conflict situation, as (US$0.15) per kWh, while the Maximum Cooperation
well as limited willingness to pay from consumers that scenario was the least expensive, entailing an average
are subject to continuous rolling blackouts. generation cost of (NIS 0.36) US$0.10 per kWh. The
Planned Future represents the middle ground, with an
The financial modeling exercise is pursued for three average cost of just over (NIS 0.51) US$0.13 per kWh.
of the planning scenarios that capture the full range
of potential financial implications. In the case of Gaza,
Securing Energy for Development in the West Bank and Gaza | 121
Figure II-11.12: Subsidy Requirement to Maintain Financial Equilibrium of GEDCO
under Planned Investment Scenario if Retail Tariffs Are Not Adjusted under “PENRA
Vision” Scenario
1500
1200
Capital cost (US$ per KW)
900
600
300
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Efficiency targets met Efficiency targets not met
The financial equilibrium tariffs tend to converge across of action. The financial equilibrium tariffs presented in
scenarios by 2030, but there are huge differences figure II-11.11 are based on an important additional
during the earlier years of the transition (figure II- assumption that GEDCO’s financial performance
11.10). While planning scenarios were compared in would improve substantially over time to meet more
terms of their average cost of generation, in practice reasonable standards (if not yet full international best
the cost of generation varies annually throughout the practice). In particular, it is assumed that collections
planning period. In practice, across all scenarios, the can be increased from the current levels of 65 percent
cost of generation declines toward the end of the to 97 percent, while distribution losses fall from the
planning scenario, as GEDCO is able to switch toward current level of 26 percent to 16 percent. In addition,
lower cost technologies, such as CCGT, and benefit transmission losses are set at 2 percent, and there
from declining cost trends for solar PV. The PENRA is an assumption that operations and maintenance
Vision scenario entails a particular cost “hump” in the costs could be trimmed by 2 percent annually. Based
early years, as GEDCO has to increase reliance on on reports from the DISCOs, it is assumed that debt is
diesel to meet demands until the gas conversion for currently financed at 3.5 percent, but would probably
the GPP comes on stream. The financial equilibrium need to rise toward 7 percent by 2030. Without these
tariff converges across all scenarios towards NIS improvements, the financial equilibrium tariff to which
0.50–0.60 (US$0.14–0.17) per kWh by 2030, which all scenarios converge by 2030 rises substantially
is just slightly above the current tariff. However, in the from NIS 0.50–0.70 (US$0.14–0.19) per kWh to NIS
early years, the tariff differences can be very large, 0.90–1.10 (US$0.25–0.30) per kWh. Moreover, during
ranging from NIS 1.20 (US$0.33) per kWh for the the transition years, the financial equilibrium tariff gets
“PENRA Vision” scenario to NIS 0.70 (US$0.19) per as high as NIS 0.90–1.50 (US$0.25–0.42) per kWh.
kWh for the Maximum Cooperation scenario.
Failure to adjust GEDCO tariffs would result in massive
The financial equilibrium tariffs for GEDCO are hugely average annual subsidy requirements to keep GEDCO
sensitive to assumptions about improvements in afloat (figure II-11.12). For the PENRA Vision scenario,
operational performance, making this a critical area the subsidy requirements are estimated at NIS 1,100
122 | Securing Energy for Development in the West Bank and Gaza
Figure II-11.13: Comparing the First Five Affordability Deciles against Equilibrium
Tariff for the PENRA Vision Scenario, Assuming Efficiency Targets Are Met by 2030
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Equilibirum tariff Decile 1 Decile 2 Decile 3 Decile 4 Decile 5
Figure II-11.14: Subsidy Requirement to Maintain Affordability of GEDCO’s Tariffs to
the Poorest Households under the “PENRA Vision” Scenario, Assuming Efficiency
Targets Are Met
100
80
Cost (US $millions)
60
40
20
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Subsidy to 1st decile Subsidy to 2nd decile Subsidy to 3rd decile Subsidy to 4th decile
Securing Energy for Development in the West Bank and Gaza | 123
million–1,200 million (US$300 million–330 million) An alternative approach is to allow GEDCO’s tariffs
during the early years of the transition, although they to adjust to the evolving financial equilibrium tariff,
decline as efficiency targets are reached. Another way while providing a social safety net to safeguard
of stating this is that if new power projects are taken on affordability to the poorest. The fiscal costs of keeping
without performing tariff adjustments, GEDCO could GEDCO’s tariffs constant would clearly be prohibitive.
be expected to lose an average of NIS 0.47 (US$0.13) At the same time, increasing tariffs beyond their
on every kWh sold over the entire time horizon until already relatively high level could create affordability
2030. with the losses in the initial five years being up to problems among Gaza’s impoverished population.
NIS 0.8 (US$0.22) per kWh. These subsidies assume The affordability analysis conducted for this study
that GEDCO meets the desired efficiency targets by suggests that the affordable tariff limit will be NIS 0.42
2030. If this expectation is not fulfilled, then the annual (US$0.11) per kWh in 2018 for the bottom decile
subsidy requirements would increase by, on average, of the population, NIS 0.65 (US$0.18) per kWh for
a further NIS 308 million (US$81 million) per year over the second decile, NIS 0.83 (US$0.23) per kWh for
the time horizon until 2030. the third, NIS 1.0 (US$0.27) per kWh for the fourth,
and NIS 1.17 (US$0.32) per kWh for the fifth decile
TABLE II-11.4: IMPACT OF THE “PLANNED FUTURE” ENERGY SCENARIO ON
GOVERNMENT ACCOUNTS
AS % OF GDP 2016 2025
BASELINE
PLANNED FUTURE DO NOTHING
Revenue 44.1 44.4 47.3
Expenditure 47.1 40.5 48.6
Of which electricity subsidies 4.7 0.9 6.0
Operational balance -3.0 3.9 -1.3
TABLE II-11.5: IMPACT OF THE “PLANNED FUTURE” ENERGY SCENARIO ON
MACROECONOMIC PERFORMANCE
AVERAGE ANNUAL GROWTH PLANNED FUTURE DO NOTHING
2016–25
GDP at market prices 4.6 4.1
Investment 8.9 5.2
Consumer price index 1.5 1.5
124 | Securing Energy for Development in the West Bank and Gaza
of the population (figure II-11.13). A targeted subsidy
designed to keep electricity bills affordable for the
poor as tariffs adjust to meet financial equilibrium
would have a much lower fiscal cost, estimated
starting at less than NIS 70 million (US$19 million)
per year, increasing to NIS 80 million (US$22 million)
per year in the subsequent years, then dropping to
less than NIS 10 million (US$3 million) per year by
2030, as costs come down and target efficiencies are
reached (figure II-11.14).
MACRO FISCAL MODEL
A combined energy investment and reform package
produces tangible macro fiscal benefits. To evaluate
the fiscal and macroeconomic impact of PENRA’s
current projects in the pipeline, a computable
general equilibrium (CGE) model is designed for
the Planned Future scenario described above. For
modeling purposes, this scenario is characterized
by a steep expansion in domestic power generation
accompanied by a fall in energy costs.
The CGE model predicts that the Planned Future
scenario ensures electricity subsidies are fully
eliminated and there is a boost in GDP growth and
investment. From a fiscal perspective, the Planned
Future scenario entails a dramatic reduction in
electricity subsidies that are otherwise projected to
escalate to 6.0 percent of GDP by 2025 under the
Do Nothing scenario, to a much lower level of 0.9
percent of GDP by 2025 (table II-11.4). This makes
a substantial contribution to the net government
operating balance estimated to be in substantial
surplus under the Planned Future versus a sizeable
deficit under the Do Nothing scenario. The Planned
Future scenario also delivers a significant boost to
the growth rate of the economy, which would be 0.5
percentage points of GDP higher than otherwise for
the entire decade (table II-11.5). The main sector to
benefit from the energy turnaround is investment,
which grows as much as 3.7 percentage points
of GDP higher than otherwise, partly as a result of
the increased fiscal space created by reducing
electricity subsidies.
Securing Energy for Development in the West Bank and Gaza | 125
PART III
Conclusions and
Recommendations
Securing Energy for Development in the West Bank and Gaza | 127
CHAPTER 12
A Four-Phase Road Map to
Improved Energy Security in
the West Bank and Gaza
This concluding chapter brings together all of the energy sector depend on greater creditworthiness.
analysis in the report to define a sequenced and Without improved creditworthiness, the sector cannot
prioritized roadmap of recommendations for the sign new power import deals or close PPAs with
Palestinian electricity sector. The starting point independent power producers for increased domestic
for the road map is to strengthen the Palestinian power-generation projects; as recent experience
Electricity Transmission Company’s (PETL’s) with renewable energy development has illustrated.
operational capacity and financial sustainability. While Creditworthiness is equally important to allow the
an important interim agreement was signed in July import of natural gas into the Palestinian territories,
2017, PETL is still negotiating with the Israeli Electric whether through gas purchase agreements with
Corporation about (i) a power purchase agreement Israel or ultimately a contract to develop Palestinian
(PPA), (ii) the energization of several high-voltage gas from the Gaza Marine field. None of these
substations, and (iii) the transfer of connection ventures can get off the ground unless the Palestinian
points from distribution companies (DISCOs) and electricity sector becomes a credible off-taker.
municipality and village councils to PETL. In parallel,
PETL should focus on (i) negotiating the power supply There are several distinct components that will need
agreements with Palestinian distributors, (ii) putting in to be tackled if creditworthiness is to be improved.
place billing and collection systems to sell power to,
and collect payments from, Palestinian distributors, First, replace generation from the Gaza Power Plant
and (iii) providing advice to the Palestinian Electricity (GPP) with increasing electricity imports from Israel to
Regulatory Council (PERC) for the calculation of a provide considerable relief until a conversion to gas can
tariff for selling power to the distributors. With these be undertaken. The cost of diesel-fired generation at
mechanisms in place, PETL could accelerate its GPP is exceptionally high, at approximately US$0.30
progress toward fulfilling its role and responsibilities per kilowatt hour (kWh), even at current low oil prices.
under the PPA and reduce its reliance on donor This is approximately three times the cost of power
assistance for operational costs. Once these imports from Israel, which also provides a much more
immediate measures are in place, the question reliable level of supply. Until GPP is ready for the
becomes what needs to be done next to begin to switch over to gas-fired generation that would slash
move toward the vision of improved energy security in costs to US$0.068 per kWh, it would be desirable
the Palestinian territories. The analysis suggests that to substitute domestic diesel-fired power generation
there is a certain sequence in which measures will with Israeli power imports, taking advantage of the
need to be taken. Four distinct phases are identified. new 161 kV line that is in an advanced stage of
planning. Even considering the need to continue to
PHASE 1: IMPROVE SECTOR pay capacity charges of US$0.026 per kWh to GPP,
CREDITWORTHINESS every reduction of one kWh in diesel-fired power
generation would be sufficient to buy two kWh of
The first phase needs to focus on what is by far the Israeli imports. Such a move would simultaneously
highest priority issue in the Palestinian electricity sector reduce costs and improve quantity and reliability of
today: namely, the issue of financial creditworthiness. supply, and thereby increase prospects for improved
Progress on all other aspects of the Palestinian recovery of costs through tariff revenues.
128 | Securing Energy for Development in the West Bank and Gaza
Second, accelerate improvements in the operational Third, create securitization mechanisms to ensure
and commercial performance of Palestinian that Palestinian DISCO revenues are not diverted
DISCOs. Cost-recovery tariffs could be significantly to other municipal projects. Due to the lack of a
reduced over time if the operational and commercial subnational financing framework in the West Bank
performance of the Palestinian DISCOs could and Gaza, DISCO revenues remain vulnerable to
be improved to reasonable regional benchmark diversion into municipal budgets. The long-term
levels. For the utilities in the West Bank, improved solution to this problem, which is to strengthen the
operational performance would take US$0.03 basis of subnational public finance, is important for
per kWh off the financial equilibrium tariff, while in broader development reasons that go well beyond the
Gaza improving operational performance is worth energy sector. However, this will likely take some time
as much as US$0.11 per kWh. Achieving further to achieve. Hence the importance of finding interim
improvements can build on some recent successes mechanisms to securitize the revenues needed for
with the introduction of prepaid and smart meters that the DISCOs to meet the costs of wholesale power
helped to raise revenue collection rates to 85 percent purchase. This could take the form of a payment
on average across the utilities. Further improvements prioritization hierarchy, combined with an escrow
in revenue collection are required, particularly for account that requires revenues to be deposited to
weak performers such as Gaza Electricity Distribution cover a certain advance period of wholesale power
Company and Southern Electricity Distribution purchases before these can be supplied. The issue
Company. Moreover, across the board, attention of securitization of revenues is particularly critical in
needs to turn toward improving network losses Gaza, and would be an essential component of any
which remain abnormally high despite all efforts. In moves to substitute increased Israeli power imports
this regard, it is recommended to establish a revenue for domestic diesel-fired power generation.
protection program to permanently measure and bill
every kWh sold to the largest DISCO customers with
state-of-the-art technology.
Securing Energy for Development in the West Bank and Gaza | 129
Fourth, ensure that all Palestinian DISCOs move toward operator and single buyer and central bookkeeper of
cost recovery. Not all Palestinian DISCOs are charging the electricity sector. However, its start of operations
cost recovery tariffs today. Only two Palestinian utilities, has been delayed pending the closure of a long-term
Jerusalem District Electricity Company and Northern PPA with Israel and the energization of the high-voltage
Electricity Distribution Company, make formal tariff substations. The signing of an interim agreement with
submissions to PERC. The resulting uniform tariff that Israel to energize the Jenin high-voltage substation
is applied across all Palestinian utilities in the West Bank alone was the first step toward PETL’s financial and
is estimated to under recover costs for all but Northern operational sustainability, and this was completed on
Electricity Distribution Company. Moreover, PERC’s July 10, 2017 after extensive negotiations. PETL is
practice of not passing through collection inefficiencies now able to resell the discounted power to DISCOs in
to the retail tariff, while defensible from the standpoint the north of the West Bank at a slight markup, allowing
of consumers, further weakens the financial solidity them to obtain revenues. The next step is the signing
of the sector. In addition, Gaza Electricity Distribution of the main long-term PPA for all substations. In the
Company does not follow PERC tariff guidelines and meantime, PETL should make further progress toward
has not adjusted its electricity tariff for a decade, its goal of being the single buyer, by ensuring that all
currently charging a retail tariff that is US$0.03–0.05 wholesale power purchases are undertaken through
per kWh lower than the wholesale purchase price its intermediation in order to improve transparency
of electricity, without considering the costs of power and discipline of the sector.
distribution. The higher costs of electricity production
in Gaza, combined with the sensitive social context, PHASE 2: ADVANCE PARALLEL “NO
suggest that efforts to improve cost recovery in Gaza REGRETS” MEASURES
would need to be preceded by measures to both
reduce costs and improve the availability of power While the absolute priority is to improve the
supply, such as the switching of diesel-fired power creditworthiness of the electricity sector, there
generation for Israeli imports. are several other no regrets measures that can
advance in parallel during a second phase. Even
Fifth, build the capacity of PETL to play its envisaged after decisive steps are taken to address the issue of
role in the sector. In the new sector architecture, PETL creditworthiness, time will be needed for a payment
has been assigned a dual role of transmission system record to be established and a reputation to be
130 | Securing Energy for Development in the West Bank and Gaza
built. During this period of consolidation, it would be kilometers of transmission and distribution lines in
helpful to accelerate measures that will facilitate the the Gaza Strip affected by past conflicts. But more
development of other power supply options that will needs to the done. Additional feasibility studies for the
become feasible once the issue of creditworthiness transmission and distribution lines to deliver the power
has been adequately addressed. to the end-consumer will, however, be required.
First, create the infrastructure needed to support the Fourth, improve the enabling environment for
import of natural gas into the Palestinian territories. independent power projects. While the financial
All the planning analysis confirms the strategic role creditworthiness of the sector is the single largest
that natural gas-fired power generation can play in impediment to the implementation of independent
the electricity mix for both the West Bank and Gaza, power projects, there are several other simple
as well as its relatively attractive cost. The first step measures that could be taken to improve the quality
in making this possible is to construct the relatively of the enabling environment, and which could be
modest pipeline extensions needed to make possible handled through secondary legislation or executive
the import of gas from the Israeli system. These will regulations that develop broad provisions in the
create the platform for credible negotiations for gas existing sector legislation. These include further
supply agreements and ultimately the construction clarifying the provisions for licensing new generators
of a new gas-fired plant, or the conversion to gas in and the provisions associated with connection to the
the case of Gaza. The Gas-for-Gaza Project led by grid. The roles of PERC and PETL in this process also
the Office of the Quartet has focused its efforts in need to be further spelled out.
removing key obstacles for the construction of a gas
pipeline from Israel to the GPP. Fifth, establish a risk-mitigation mechanism to support
the next generation of Palestinian independent power
Second, pursue an aggressive program to promote projects. Risk mitigation is no substitute for addressing
the uptake of rooftop solar photovoltaics (PV). Unlike the fundamental underlying creditworthiness issues
grid-based solar power, rooftop solar PV is highly in the sector, and it does not make sense to move
decentralized and is not contingent on progress ahead with risk mitigation until the Palestinian
toward sector creditworthiness and the capacity of Authority has demonstrated a sustained and credible
PETL. Moreover, it has been shown that rooftop solar commitment to improving the financial standing of the
PV can play a valuable role as an electricity safety net sector. Nevertheless, once this has taken place, risk
to increase the resilience of the Palestinian electricity mitigation may play a valuable role in getting the next
system and ensure that critical humanitarian needs generation of Palestinian independent power projects
can be met. This is particularly true in the case of off the ground. It would therefore be valuable to work
Gaza, where the World Bank will support a pilot with donors to develop a suitable mechanism for
rooftop solar PV project to reduce the high upfront risk mitigation, evaluating the relevance of a range of
capital expenditures for the customers and test the financial instruments such as guarantees, first loss,
sustainability of a revolving fund model. In parallel, the blended finance, and viability gap finance.
French Development Agency is planning to launch a
project-based on a financial intermediary model to PHASE 3: IMPLEMENT FIRST WAVE OF
support the scaling up of renewable energies. INDEPENDENT POWER PROJECTS
Third, complete the domestic transmission backbone In a third phase, it will become possible to make progress
in Gaza. Domestic transmission constraints are already with a major wave of Palestinian independent power
an issue in Gaza, and these will only become more projects. These will build on the critical foundational
severe as efforts to increase the supply of power bear elements already tackled under the first two phases.
fruit. It is therefore important to ensure that the modest It makes sense to begin with those projects that look
transmission and distribution upgrades required are to be the most tractable from a technical and political
completed in a timely fashion, and certainly well ahead perspective, which suggests focusing on developing
of any future expansion of GPP. The Gaza Electricity combined cycle gas turbine (CCGT) capacity and
Network Rehabilitation Project, financed by the World utility-scale solar PV in Areas A and B.
Bank, has constructed or rehabilitated more than 250
Securing Energy for Development in the West Bank and Gaza | 131
First, convert GPP to CCGT gas-fired technology as Fifth, engage in dialogue over the use of Area C for
the most urgent of the domestic power-generation the development of Palestinian power infrastructure
projects. Conversion of GPP to CCGT gas-fired and renewable energy generation. The planning
technology once a gas pipeline comes on stream analysis highlights the economic value of Area C,
would save between US$45 million and US$62 both as a location for grid-based solar generation
million annually in fuel bills and provide Gaza with a and as the conduit for any future Palestinian electricity
cost-effective domestic source of power generation. transmission infrastructure. While there is much that
still needs to be done before the issue of Area C
Second, proceed with the construction of a becomes a binding constraint, the political complexity
new CCGT gas-fired plant initially in Jenin, and of the issue suggests that it may be helpful to begin
eventually in Hebron. Once the gas transportation a dialogue process that over time can help to clarify
infrastructure is in place, and some improvements the modalities for making use of Area C. A related
to the sector environment have been achieved, the question is the need to coordinate Palestinian plans to
implementation of the Jenin CCGT plant should be ramp up renewable energy generation with those that
relatively straightforward. Guarantee products might also exist on the Israeli side, in order to ensure that
be required to reduce the risk of nonpayment by the challenges related to grid stability and the integration
off-taker. Two important issues need to be addressed of intermittent sources can be adequately handled to
in the project design. One is the arrangements for the benefit of both sides.
selling any surplus energy back into the Israeli grid.
The other is to ensure that the terms of a future gas PHASE 4: IMPLEMENT
supply agreement are sufficiently flexible to allow for TRANSFORMATIONAL PROJECTS
an eventual switch of supply from the Gaza Marine
gas field, should this prove to be desirable. The fourth and final phase would build on earlier
Third, embrace a more ambitious target for utility- success to tackle the more challenging, and
scale solar PV farms in Areas A and B. As noted in potentially transformational, projects needed to
the planning analysis, it looks feasible to develop over complete the Palestinian energy vision. These include
600 MW of solar PV capacity in the West Bank based the construction of solar generation and transmission
on potential in Areas A and B as well as rooftop. This backbone infrastructure in Area C, as well as the
goes far beyond the current target of 130 MW by 2020. development of the Gaza Marine gas field.
With the improvements in the enabling environment in
place, as well as the establishment of risk-mitigation First, develop a Palestinian transmission backbone
mechanisms, it should become feasible to scale-up in the West Bank. The analysis has shown that as
and accelerate efforts to develop this solar potential. domestic Palestinian power generation ramps up, the
cost of wheeling charges back through the Israeli grid
Fourth, establish suitable wheeling arrangements with rapidly become quite significant. A more economic
Israel. As the volume of domestic power generation option in the long term would be to construct a
in the West Bank ramps up, there will be increasing Palestinian transmission backbone.
need to move power away from generation plants
toward Palestinian load centers. At present, this can Second, develop utility-scale solar PV and
be done only by wheeling power back through the concentrated solar power projects in Area C of the
Israeli grid and reimporting into the West Bank at West Bank. If a successful track record of solar farm
another location. The analysis suggests that wheeling development can be established on the more limited
charges are relatively costly, particularly if low- land endowments of Areas A and B, and suitable
voltage networks need to be used. It will therefore be transmission backbone infrastructure can be put in
important to ensure that the number of substations place across Area C, the West Bank would be ready
in the West Bank increases in such a way as to to benefit from larger scale solar development in Area
keep pace with the expansion of domestic supply. It C. This would entail both solar PV and concentrated
would also be important to have dialogue with the solar power technologies.
Israeli regulator, Public Utility Authority, regarding the
charges for wheeling, and to explore any possible Third, move ahead with the development of the Gaza
alternative arrangements (such as power swaps) that Marine gas field. As noted, the development of the
may help to contain costs. Gaza Marine gas field is critically dependent on having
132 | Securing Energy for Development in the West Bank and Gaza
TABLE III-5.1: INDICATIVE INVESTMENT NEEDS ASSOCIATED WITH THE
PALESTINIAN ENERGY AGENDA (US$ MILLIONS)
WEST BANK GAZA WEST BANK AND GAZA
PUBLIC PRIVATE PUBLIC PRIVATE PUBLIC PRIVATE
Phase One - - - - - -
Phase Two 7a 800–1,100b 135c 240–320d 142 1,040–1,420
Phase Three 930e 900–990f - 1,830–1,920
Phase Four 188g 375–500h - 250–1,200i 188 620–1,700
Total 195 2,105–2,530 135 1,390–2,510 330 3,495–5,040
a
Includes natural gas pipeline of 15 kilometers (km) for Jenin Power Plant (JPP).
b
Includes 530 megawatt (MW) of rooftop in the West Bank, assuming cost of US$1,500–2,000 per kilowatt peak (kWp).
c
Includes natural gas pipeline of maximum 20 km (section inside Gaza only) and upgraded transmission and distribution network capable of absorbing power
from expanded Gaza Power Plant, Israeli Electric Corporation, and Egyptian supply options.
d
Includes 160 MW of rooftop in the West Bank, assuming cost of US$1,500–2,000 per kWp.
e
Includes JPP at 400 MW and Hebron Power Plant (HPP) at 120 MW, as well as 130 MW of renewable energy in Areas A and B.
f
Includes GPP upgrade to 560 MW on natural gas in Gaza.
g
Includes the West Bank transmission backbone and distribution grid upgrade assuming four new substations are active, JPP and HPP are online, access to
area C is granted, and Jordanian connector is expanded.
h Includes 500 MW of utility-scale solar in Area C, assuming cost of US$750–1,000 per Watt-peak.
i
Estimate of costs for development of Gaza Marine gas field.
a creditworthy off-taker to sign the gas purchase deal. CONCLUDING REMARKS
Given the abundance of gas discoveries in the eastern
Mediterranean and the relatively small nature of the The implementation of this road map would require
field, the development of this field will likely need to private investment of the order of NIS 13 billion to NIS
be underwritten by a significant Palestinian demand 18 billion (US$3 billion to US$5 billion) complemented
for gas. For all the reasons described, this demand by public investment of around NIS 1 billion (US$0.3
will take time to develop and would be achieved only billion). Table III-5.1 clarifies the indicative investment
once significant gas-fired power generation was on- needs that would be required during each phase of
stream and establishing a solid gas purchase payment the road map in the West Bank and Gaza. Of the
record in both the West Bank and Gaza. That would total investment requirements of NIS 14 billion to NIS
be a suitable juncture at which to sign a bankable 20 billion (US$3.8 billion to US$5.4 billion), over 90
deal for the development of the field, allowing the percent corresponds to the private sector, between
Palestinian gas-fired plants to switch gradually from 50 and 75 percent to the West Bank.
Israeli to Palestinian gas as the new field starts to
become productive. Given the relatively small volume Progress in many of the areas identified will require
of Palestinian demand, it may make sense to consider continued and even deepened cooperation with
the options for Gaza Marine development that require Israeli institutions (table III-5.2). In every phase of
the least infrastructure development—by making use the road map, progress depends on coordinated
of stranded infrastructure from the Israeli Mari B field— measures being taken on both the Palestinian and
thereby making the field economic at lower levels of Israeli sides. Close coordination will be needed on
throughput. Seen from this perspective, the primary both sides throughout the implementation process.
value of the Gaza Marine field to the Palestinian
economy lies not so much as a supply of gas, which In conclusion, the analysis presented in this report has
is in any case abundantly available in the region, nor allowed numerous elements of a Palestinian energy
even as a source of energy security, since Palestinian vision to come into focus. It has also clarified what
gas would inevitably need to be transported through are the most immediate steps that need to be taken
Israeli infrastructure. Rather it is an eventual source of in support of that vision.
fiscal revenues for the Palestinian Authority, estimated
at US2.7 billion over 25 years.
Securing Energy for Development in the West Bank and Gaza | 133
TABLE III-5.2: SUMMARY OVERVIEW OF THE PROPOSED ROAD MAP FOR
PALESTINIAN ENERGY SECURITY
PHASE 1: IMPROVE SECTOR PHASE 2: ADVANCE PARALLEL NO REGRETS
CREDITWORTHINESS MEASURES
Substitute Israeli imports for diesel-fired Create infrastructure for import of natural gas
generation in Gaza
P : Gradually ramp down GPP and use the savings P, I : Construct natural gas pipelines for West Bank
to buy additional IEC supply until GPP can be and Gaza paving the way for construction of new/
converted to gas. upgraded power plants.
I : Provide additional power to Gaza through 161kV.
Improve operational and commercial efficiency Improve enabling environment for IPPs
P : Continue improvement of DISCO performance P : Update and improve legislation and licensing
by reducing losses, increasing collection rates and provisions that would help IPPs enter the market
bringing down overhead costs. One mechanism can and also clarify roles and responsibilities of PERC
be through a revenue protection program aiming and PETL in this environment.
to permanently measure and bill every KWh sold
largest DISCO consumers.
Securitize payments of wholesale electricity Promote uptake of rooftop solar PV
P : Strengthen sub national public finance to avoid P : Set aggressive targets for 160MW of rooftop PV
diversion of electricity bill collections to municipal in Gaza and 530MW in West Bank.
budgets and set up escrow accounts both in Gaza
and West Bank to ring fence collections.
Adjust tariffs to better reflect cost recovery Develop transmission backbone in Gaza
P : Reexamine the retail tariffs and increase rates to P : Upgrade T&D network to allow increase in
allow better cost recovery by DISCOs. power supply and reduction in losses.
Build the capacity of PETL to play its role Design a risk mitigation mechanism for IPPs
P : PETL to streamline billing to and payments from P, D : After creditworthiness issues from Phase
DISCOs while in parallel pushing to energize the I have been improved, develop financial risk
new substations and sign the PPA with IEC. mitigation instruments such as guarantee
I : Sign bulk supply PPA and energize new mechanisms.
substations.
134 | Securing Energy for Development in the West Bank and Gaza
PHASE 3: IMPLEMENT FIRST WAVE OF IPPS PHASE 4: IMPLEMENT TRANSFORMATIONAL
PROJECTS
Convert GPP to CCGT gas-fired technology Develop grid-scale solar PV/CSP farms in Area C
P : Complete conversion and upgrade of GPP P : Begin development of renewables in Area C
ensuring flexible gas supply agreement to allow only after a successful track record of renewable
switch to Gaza Marine. development in Areas A and B.
I : Enter into gas supply agreement for GPP. I : Provide permits for construction in Area C.
Construct new CCGT plant at Jenin, then Hebron Develop transmission backbone in the West Bank
P : Complete JPP and HPP construction with P : Begin development of a transmission backbone,
flexible gas supply agreement to allow switch to considering also the possibility of negotiating
Gaza Marine. Build additional substations to keep a swap mechanism that eliminates the need for
pace with increased domestic generation. wheeling or building of infrastructure.
I : Enter into gas supply agreement for JPP and I : Provide permits for construction in Area C
HPP. and/or provide swap alternatives to building a
backbone.
Increase renewable energy targets Develop Gaza Marine Gas Field
P : Increase renewable energy targets to 600MW in P : Develop Gaza Marine with least amount of
West Bank and 160MW in Gaza by 2030 (includes infrastructure development to keep costs low.
rooftop solar) but only after the right enabling I : Allow permission to use existing Israeli
environment has been established from Phase I. infrastructure for evacuation of Gaza Marine.
Establish wheeling arrangements with IEC
P, I : Negotiate lower wheeling tariffs and/or swap
arrangements until a transmission backbone is built
Engage in dialogue over use of Area C
P, I : Coordinate on Area C access and permitting
issues as well as grid stability and regional
integration for supply expansion and transmission
infrastructure.
Securing Energy for Development in the West Bank and Gaza | 135
Appendix
Securing Energy for Development in the West Bank and Gaza | 137
APPENDIX A:
The Palestinian
Electricity Sector
Map A.1: Electricity Supply System in the West Bank and Gaza
IBRD 43948 | SEPTEMBER 2018
Existing Power Plant
Future Power Plant
Existing Substations
New Substations or Under Construction
Jenin
Future Substations
Future Transmission Lines (220/66 kV) JENIN
Existing 33 kV Distribution Lines
Existing 22 kV Distribution Lines TUBAS
Tulkarm Tubas
HIGH VOLTAGE LINES: TULKARM
New Feed Lines from Israel to West Bank Nablus
Prospective Feed Line from Israel to Gaza
QALQILYAH
Feed Line to Jericho Qalqilyah NABLUS
Prospective Feed Line from Jordan
Feed Line from Egypt to Gaza SALFIT
JORDAN
Salfit
0 10 20 Kilometers W e s t Ba nk
RAMALLAH
JERICHO
Ramallah
Me dite r r a n ean
Jericho
Sea JERUSALEM
Jerusalem
ISRAEL
Bethlehem
BETHLEHEM
Dead Sea
JABALYA
Jabalya
Gaza City Hebron
Gaza HEBRON
Deir el Balah GAZA CITY
KHAN
YUNIS DEIR EL BALAH
Khan
Yunis Governorate Capitals
Rafah Northern West Bank is fed from: Armistice Demarcation Lines, 1949
• 2x33kV feeders from Beisan substation No-man’s Land Areas,
RAFAH • 12x33kV feeders from Ariel (Salfit) substation Armistice Demarcation Line, 1949
• 2x33kV feeders from Mt. Afraym substation Jerusalem City Limit, Unilaterally
• 3x22kV feeders Expanded by Israel June 1967;
then Annexed July 30, 1980
ARAB Southern West Bank is fed from:
Governorate Boundaries
REP. OF • 10x33kV feeders from Hebron substation
• 4x33kV feeders from 2 portable substations Administrative Boundary
EGYPT
International Boundaries
138 | Securing Energy for Development in the West Bank and Gaza
Map A.2: Power Supply to Gaza
IBRD 43949 | SEPTEMBER 2018
Electric Feeder (Israel)
M e d i t e r r a n e a n Se a
Electric Feeder (A.R. Egypt) 0 4 8 Kilometers
Hospital
Water Treatment Facilities
North Gaza
Pumping Stations Grizim
(Al Bahar Line)
Wastewater Desalination Plants
Water Wells
53%
Meiron
Sewage Outlet (in constant use) (Beit Lahia line)
Gaza 12
Sewage Outlet (overflow only) 4 MW
MW
Open Border Crossing 8
55%
MW
Erez Eival
Closed, but open for exceptional (Beit Hanun) Jabalia Line
cases Border Crossing
Closed Border Crossing 12
MW
Built-up areas
Refugee Camps Middle Area
Governorate Boundaries
Armistice Demarcation Line, 1949
International Boundary
59%
12
MW Nekarot
Khan Yunis Nahal Oz/Fuel Pipeline (Baghdad Line)
12 Karni Crossing
MW (Al Montar)
Gaza Power 12 Hemda
(Al Quba Line)
58%
Plant MW
Iron
(Al Shaff Line)
Rafah
x
CURRENT SITUATION WITH GPP
58% 12
MW
Romah
(Middle Line)
TURNED OFF
Gaza Strip Total
4
MW Deficit
66%
Kela'
(Kisufim Line)
8
MW
Percentage of
ISRAEL demand met
Electricity by provider
12 A.R. of
MW Israel Egypt
Shiryon 80% 20%
(Khan Yunis Line)
5
MW 10
MW
450 MW Demand
Gaza-2
5
MW 150 MW Available
Line
10 2
MW MW
Palestine Sufa 1.9 Million Affected population
Line 10 Surya
MW (Rafah Line)
Gaza-1
Rafah
(Al ‘Awda) 16-20 HOURS
Line of scheduled electricity outages are
Kerem Shalom implemented across Gaza per day.
AR AB R E P.
(Karrm Abu Salem)
Source: OCHA 2016. https://www.ochaopt.org/content/
O F E GYPT gaza-strip-access-and-movement-august-2016
Securing Energy for Development in the West Bank and Gaza | 139
TABLE A.1: PERC FLAT TARIFF STRUCTURE
SEGMENTS 2011 2012 2014 FEB ‘15 SEPT ‘15
Residential (postpaid): All West Bank except Jericho and Jordan Valley [NIS per kWh]
1–160 kWh per month 1–100 kWh per month: 0.4085 0.465 0.490 0.441 0.437
161–250 kWh per month 101–200 kWh per month: 0.4546 0.510 0.528 0.475 0.471
251–400 kWh per month 0.590 0.635 0.572 0.543
Above 200kWh per month: 0.4795
401–600 kWh per month 0.620 0.665 0.600 0.581
Above 600 kWh 0.690 0.735 0.662 0.642
Fixed fees per day 0.333 0.333 0.333 0.333 0.333
Residential (prepaid): All West Bank except Jericho and Jordan Valley [NIS per kWh]
Flat Rate (no segments) 0.467 0.520 0.565 0.500 0.475
Fixed fees per day 0 0 0 0 0
Residential (postpaid): Only Jericho and Jordan Valley [NIS per kWh]
1- 500 kWh per month NA 0.480 NA 0.450 0.428
Above 500 kWh per month NA 0.520 NA 0.490 0.466
Residential (prepaid): Only Jericho and Jordan Valley [NIS per kWh]
Flat rate (no segments) NA 0.520 NA 0.475 0.451
Commercial (postpaid): Single and three-phase [NIS per kWh]
Flat rate (no segments) 0.518 0.630 0.667 0.614 0.596
Fixed fees per day 0.667 0.667 0.667 0.667 0.667
Commercial (prepaid): Single and three-phase [NIS per kWh]
Flat Rate (no segments) 0.508 0.600 0.637 0.586 0.568
Fixed fees per day 0.34 0 0 0 0
Industrial (low voltage): Less than 60 MWh consumption per month [NIS per kWh]
Flat rate (no segments) 0.428 0.500 0.537 0.500 0.485
Fixed fees per day 1 1 1 1 1
Industrial (medium voltage: 6.6, 11, 33kV) [NIS per kWh]
Flat rate (no segments) 0.399 0.450 0.487 0.440 0.414
Fixed fees per day 4 4 4 4 4
Industrial 2 (marble and stone) [NIS per kWh]
Flat rate (no segments) NA NA NA 0.54 0.5238
Water pump [NIS per kWh]
Flat rate (no segments) 0.467 0.500 0.537 0.485 0.460
Fixed fees per day 1 1 1 1 1
Agriculture [NIS per kWh]
Flat Rate (no segments) 0.409 0.460 0.497 0.448 0.440
Fixed fees per day 0.333 0.333 0.333 0.333 0.333
Street lights [NIS per kWh]
Flat rate 0.407 0.466 0.503 0.453 0.450
Fixed fees per day 0.333 0.333 0.333 0.333 0.333
Temporary service (postpaid) [NIS per kWh]
Flat rate 0.683 0.800 0.837 0.754 0.754
Fixed fees per day 0.667 0.667 0.667 0.667 0.667
Temporary service (prepaid) [NIS per kWh]
Flat rate 0.683 0.800 0.837 0.754 0.754
Fixed fees per day 0.34 0.34 0.34 0 0
Note: The flat tariff is applied to residential, commercial, and industrial customers consuming less than 60 MWh per month.
140 | Securing Energy for Development in the West Bank and Gaza
TABLE A.2: PERC TIME OF USE (TOU) TARIFF STRUCTURE (NIS PER KWH)
LOW VOLTAGE (NIS PER KWH)
SEASON TOU TARIFF CATEGORY 2015 ISRAEL 2011 PA 2012 PA FEB 2015 SEPT 2015
TARIFF TARIFF TARIFF PA TARIFF PA TARIFF
Rate–A (off-peak) 0.3802 0.3055 0.4364 0.4283 0.4010
Winter
Rate–B (mid-peak) 0.6035 0.5648 0.7541 0.6798 0.6263
Rate–C (peak) 1.0052 0.9774 1.2859 1.1323 1.0283
Rate–A (off-peak) 0.3304 0.2697 0.3826 0.3722 0.3602
Spring and
Rate–B (mid-peak) 0.409 0.3408 0.4776 0.4607 0.4400
autumn
Rate–C (peak) 0.503 0.4259 0.5914 0.5666 0.5303
Rate–A (off-peak) 0.3441 0.2756 0.3955 0.3876 0.3767
Summer
Rate–B (mid-peak) 0.4964 0.4453 0.6026 0.5591 0.5408
Rate–C (peak) 1.1466 1.0792 1.4105 1.2915 1.1894
MEDIUM VOLTAGE (NIS PER KWH)
SEASON TOU TARIFF CATEGORY TARIFF ISL 2011 PA 2012 PA FEB 2015 SEPT 2015
2015 [6] TARIFF [4] TARIFF [3] PA TARIFF PA TARIFF
[2] [1]
Rate–A (off-peak) 0.3014 0.2684 0.3642 0.3395 0.3149
Winter
Rate–B (mid-peak) 0.513 0.5165 0.6667 0.5778 0.5285
Rate–C (peak) 0.8796 0.8963 1.1583 0.9908 0.8939
Rate–A (off-peak) 0.2556 0.2355 0.3147 0.2879 0.2780
Spring and
Rate–B (mid-peak) 0.3259 0.2996 0.4007 0.3671 0.3491
autumn
Rate–C (peak) 0.4141 0.3795 0.5078 0.4664 0.4336
Rate–A (off-peak) 0.2639 0.2367 0.3220 0.2973 0.2886
summer
Rate–B (mid-peak) 0.3997 0.3905 0.5108 0.4502 0.4349
Rate–C (peak) 0.9993 0.9772 1.2627 1.1256 1.0305
Note: The TOU tariff is applied to Industrial customers consuming less than 60 MWh per month.
Securing Energy for Development in the West Bank and Gaza | 141
TABLE A.3: JDECO BALANCE SHEETS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014 2015
Current assets
Accounts receivable 511,543,102 592,638,906 759,513,337 912,051,741 994,313,285
Cash and cash equivalents 66,731,355 78,507,761 89,072,998 81,999,095 76,013,661
Asset inventory in warehouse 50,328,765 32,279,908 41,059,610 46,348,215 45,437,813
Work under implementation 147,115,720 236,841,628 NA NA NA
Other current assets 3,493,216 7,661,401 18,406,544 15,083,321 10,010,723
Total current assets 779,212,158 947,929,604 908,052,489 1,055,482,372 1,125,775,482
Noncurrent assets
Property plant and equipment 327,291,487 361,827,870 415,044,614 627,740,662 715,900,801
Projects under construction NA NA 257,407,020 108,497,147 128,373,720
Intangible assets 50,000 50,000 50,000 50,000 50,000
Other noncurrent assets 7,130,789 22,717,324 32,248,657 43,470,784 46,554,248
Total noncurrent assets 334,472,276 384,595,194 704,750,291 779,758,593 890,878,769
Total assets 1,113,684,434 1,332,524,798 1,612,802,780 1,835,240,965 2,016,654,251
Current liabilities
Accounts payable 285,831,913 441,908,286 881,953,033 1,027,225,379 1,255,331,424
Other current liabilities 115,593,048 116,281,908 132,567,633 139,247,227 143,390,312
Total current liabilities 401,424,961 558,190,194 1,014,520,666 1,166,472,606 1,398,721,736
Noncurrent liabilities
Long term loans 192,511,116 152,496,471 117,087,630 92,051,231 68,657,070
Provision for end of service 67,999,128 68,395,500 86,197,324 81,978,304 89,250,091
Deferred revenue 127,381,058 179,957,470 114,982,955 118,558,214 130,182,770
Other allocation reserves 3,586,600 3,586,600 3,586,600 3,586,600 5,086,600
Total noncurrent liabilities 391,477,902 404,436,041 321,854,509 296,174,349 293,176,531
Equity
Paid up capital 178,875,000 178,875,000 178,875,000 178,875,000 178,875,000
Treasury shares -3,879,311 -7,666,691 -1,486,709 -3,622,230 -3,622,230
Statutory reserve 9,187,500 9,187,500 9,187,500 9,187,500 9,187,500
Revaluation reserve 86,962,931 69,570,345 53,716,168 33,576,949 67,683,536
Retained earnings 49,635,451 119,932,409 36,135,646 154,576,791 72,632,178
Total equity 320,781,571 369,898,563 276,427,605 372,594,010 324,755,984
Total liabilities and equity 1,113,684,434 1,332,524,798 1,612,802,780 1,835,240,965 2,016,654,251
Source: 2011–15 JDECO annual reports (all years audited by Price Waterhouse Coopers (PWC).
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TABLE A.4: JDECO INCOME STATEMENTS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014 2015
Operating income
Electricity sales (billed) 694,862,965 875,140,233 888,860,424 950,714,795 949,052,263
Purchased electricity -562,555,632 -800,261,437 -831,806,133 -886,356,917 -871,483,182
Gross Profit from sales 132,307,333 74,878,796 57,054,291 64,357,878 77,569,081
Subscriber’s contribution to 35,149,206 22,703,391 68,183,242 54,921,120 55,149,003
extension of services
Revenue from services 9,828,978 7,166,019 9,646,416 11,571,609 10,182,591
Total operating income 177,285,517 104,748,206 134,883,949 130,850,607 142,900,675
Operating expenses
General and administrative expenses -145,790,757 -148,425,865 -162,865,171 -171,517,383 -187,635,103
Depreciation expenses -23,871,283 -21,160,451 -19,752,101 -29,677,585 -36,690,360
Provision for doubtful receivables NA NA -2,378,492 -2,245,586 -4,000,000
Provision for obsolete or damaged NA NA -1,508,245 -1,508,245 -1,815,124
goods
Total operating expenses -169,662,040 -169,586,316 -186,504,009 -204,948,799 -230,140,587
Net Income or losses before other 7,623,477 -64,838,110 -51,620,060 -74,098,192 -87,239,912
income and expenses
Financing expenses -21,769,450 -33,838,017 -28,076,247 15,225,873 10,827,836
Other income 8,993,026 27,270,860 4,725,648 5,217,910 2,191,500
Annual income or loss before income -5,152,947 -71,405,267 -74,970,659 -53,654,409 -74,220,576
tax
Income tax expense -2,589,440 0 0 -2,791,446 -7,658,068
Annual income or loss -7,742,387 -71,405,267 -74,970,659 -56,445,855 -81,878,644
Source: 2011–15 JDECO annual reports (all years audited by PWC).
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TABLE A.5: SELCO BALANCE SHEETS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014 2015
Current assets
Cash and cash equivalents 3,183,063 9,114,211 5,435,813 16,670,961 11,389,588
Checks under collection 4,381,660 6,607,877 5,379,639 2,308,503 4,388,066
Stakeholders net receivables 128,539,580 142,283,171 158,385,189 205,881,442 218,715,066
Inventories 42,268,623 38,112,171 30,555,028 33,265,776 27,559,593
Prepaid payments and debit 4,403,698 5,548,385 9,511,609 13,917,083 23,312,365
balances
Total current assets 182,776,624 201,665,815 209,267,278 272,043,765 285,364,678
Noncurrent Assets
Beit Ummar Municipality 6,892,635 6,892,635 6,892,635 6,892,635 6,892,635
Net fixed assets 86,856,645 107,515,454 107,259,124 108,602,044 138,986,851
Work-in-progress 13,109,462 526,611 4,385,403 9,405,428 0
Other 0 0 0 1,602,317 3,382,006
Total noncurrent assets 106,858,742 114,934,700 118,537,162 126,502,424 149,261,492
Total assets 289,635,366 316,600,515 327,804,440 398,546,189 434,626,170
Current liabilities
Accounts payable 11,928,801 5,054,300 15,598,036 16,196,681 37,843,068
Other current liabilities 7,671,467 10,503,416 11,557,674 17,974,835 18,323,477
Total current liabilities 19,600,268 15,557,716 27,155,710 34,171,516 56,166,545
Long-term liabilities
Long-term loans 78,142,027 84,069,134 82,815,894 83,084,752 83,015,967
Severance allowances 2,817,115 3,334,956 4,695,549 4,646,758 5,563,625
Ministry of Finance 179,409,815 223,048,447 257,816,215 325,136,253 333,309,386
Total long-term liabilities 260,368,957 310,452,537 345,327,658 412,867,763 421,888,978
Total liabilities 279,969,225 326,010,253 372,483,368 447,039,279 478,055,523
Equities
Paid-in capital 44,250 44,250 44,250 44,250 44,250
Statutory reserve 44,250 44,250 44,250 44,250 44,250
Voluntary reserve 1,869,495 1,869,495 1,869,495 1,869,495 1,869,495
Stakeholders receivables -31,065,858 -40,474,211 -57,391,364 -46,594,927 -61,433,602
Shareholders current account 41,522,376 41,522,376 41,522,376 41,522,376 41,522,376
Accumulative (loss) – Statement B -2,748,372 -12,416,014 -30,767,935 -45,378,534 -25,476,122
Net equities 9,666,141 -9,409,854 -44,678,928 -48,493,090 -43,429,353
Total liabilities and equities 289,635,366 316,600,399 327,804,440 398,546,189 434,626,170
Source: SELCO financial statements, 2011–13 audited by Talal Abu Gazaleh, but 2014–15 draft or unaudited. form.
144 | Securing Energy for Development in the West Bank and Gaza
TABLE A.6: SELCO INCOME STATEMENTS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014 2015
Revenues
Electricity sales plus discount 48,333,776 55,906,513 53,766,667 76,048,100 67,230,123
Electricity purchase -42,969,409 -54,065,475 -52,664,853 -70,714,130 -48,869,845
Operating expenses (wages, rents, -4,024,643 -5,046,172 -8,078,247 -8,251,986 -11,083,814
salaries, maintenance)
Installation services revenues 1,537,144 2,743,024 2,442,701 2,178,763 867,314
Other operating revenues 3,424,981 1,205,492 1,293,851 1,171,357 4,758,443
Total profit (loss) 6,301,849 743,382 -3,239,881 432,104 12,902,221
Contributions in kind 131,826 300,269 - 623,738 4,021,210
Currency differential -3,588,404 862,298 2,585,184 -39,483 -249,711
Total profit (loss) before administrative 2,845,271 1,905,949 -654,697 1,016,359 16,673,720
and general expenses
Expenses
Administrative, general, and operating -4,009,067 -4,216,934 -10,058,292 -6,555,902 -7,412,130
expenses
Other expenses 2,180,286 1,566,260 1,914,811 347,531 6,909,898
Allowance -4,928,673 -5,493,227 -6,801,094 -7,145,739 -7,115,438
Financing costs -1,574,845 -2,233,066 -2,387,574 -1,933,661 -3,185,965
The provision for doubtful debts -502,135 -1,196,624 -340,034 -339,187 -222,797
Total expenses -8,834,434 -11,573,591 -17,672,183 -15,626,958 -11,026,432
Net income or loss of the year -5,989,163 -9,667,642 -18,326,880 -14,610,599 5,647,288
Accumulative (loss) at the beginning of 2,225,724 -2,748,372 -12,416,014 -30,767,935 -45,378,534
the year
Prior-years’ adjustments -19,203 - -25,041 0 14,255,124
Net accumulative (loss) at the end of the -3,782,642 -12,416,014 -30,767,935 -45,378,534 -25,476,122
year – Statement A
Source: SELCO financial statements, 2011–13 audited by Talal Abu Gazaleh, but 2014–15 in draft or unaudited form.
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TABLE A.7: HEPCO BALANCE SHEETS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014 2015
Current assets
Cash and cash equivalent 10,542,073 13,424,893 13,090,423 2,947,436 5,782,708
Checks under collection–short 5,510,679 6,152,219 7,967,833 9,876,538 9,387,145
term
Accounts receivables–net 294,580,488 339,491,140 401,093,998 389,259,352 382,332,268
Inventory 28,680,295 39,868,393 30,765,489 30,762,287 29,994,661
Other current assets 3,073,656 357618 1,321,385 8,942,093 5,902,513
Hebron municipality current 133,858,383 153,102,568 187,741,096 225,874,663 270,649,990
account
Total current assets 476,245,574 552,396,831 641,980,224 667,662,369 704,049,285
Long-term assets
Checks under collection–long 1,423,064 1,364,601 3,007,089 6,761,154 11,181,157
term
Work in process 0 10537049 19,480,450 2,776,993 7,290,115
Properties, fixed assets NBV 128,520,429 127,103,039 126,096,754 142,789,491 137,973,496
Concession rights 30,444,000 30,444,000 30,444,000 30,444,000 30,444,000
Total long-term assets 160,387,493 169,448,689 179,028,293 182,771,638 186,888,768
Total assets 636,633,067 721,845,520 821,008,517 850,434,007 890,938,053
Liabilities and owner’s equity
Current liabilities
World Bank loan–short term 661,915 686,135 1,029,203 1,805,633 3,419,999
Accounts payable plus 466,273,583 555,898,298 650,710,732 626,763,044 651,371,638
outstanding
Unearned revenue 4,526,352 5,960,690 1,705,579 10,422,151 11,022,622
Other current liabilities 1,559,105 3,785,656 3,467,256 2,035,616 11898610
Total current liabilities 473,020,955 566,330,779 656,912,770 641,026,444 677,712,869
Long-term liabilities
Employees end of service 3,596,685 4,364,141 5,248,868 5,163,790 7,014,518
benefit
World Bank loan–long term 9,381,319 8,640,322 8,299,574 7,181,005 6,450,622
Deferred revenues–grants and 6,822,433 10,334,784 20,864,471 23,974,775 25,285,153
in-kind
Total long-term liabilities 19,800,437 23,339,247 34,412,913 36,319,570 38,750,293
Total liabilities 492,821,392 589,670,026 691,325,683 677,346,014 716,463,162
Owner’s equity Hebron municipality
paid in capital 152,745,000 152,745,000 152,745,000 152,745,000 152,745,000
Prior period adjustments–VAT -4,303,468 NA
Reconciliation
Prior period adjustments -8,933,325 -20,569,506 -2,062,166 -8,339,560 -5,448,532
Prior period adjustments–MoF 41,222,720 41,222,720
reconciliation
Accumulated losses -8,236,760 -14,044,297
Total owner’s equity 143,811,675 132,175,494 129,682,834 173,087,932 174,474,891
Total liabilities and owner’s equity 636,633,067 721,845,520 821,008,517 850,433,946 890,938,053
Source: HEPCO annual reports (financial statements not audited)
146 | Securing Energy for Development in the West Bank and Gaza
TABLE A.8: HEPCO INCOME STATEMENTS (IN NIS EXCLUDING VAT)
2011 2012 2013 2,014 2015
Revenues
Electricity sales 144,250,785 159,362,877 171,194,239 179,775,466 183,560,826
Add: Tariff differences 9,352,890 21,979,208 9,700,234 9,854,794 9,612,348
Add: Fixed charges NA NA NA 2,991,710 NA
Deduct: Cost of electricity purchased -136,354,132 -159,809,793 -170,222,657 -175,900,386 -163,700,004
Gross profit 17,249,543 21,532,292 10,671,816 16,721,584 29,473,170
Other income
Customer participations 4,247,980 1,596,640 2,165,075 2,640,750 6,896,943
Other operating revenues 8,704,419 10,570,952 13,004,102 11,546,126 7,922,121
Accrued of deferred revenues 758,048 583,833 600,000 795,173 800,000
Total other income 13,710,447 12,751,425 15,769,177 14,982,049 15,619,064
Total operating income 30,959,990 34,283,717 26,440,993 31,703,633 45,092,234
Expenses
Operating expenses -1,476,263 -3,067,033 -2,841,731 -1,829,166 -2,722,492
General and administrative expenses -1,366,052 -1,878,389 -2,706,498 -1,469,510 -1,346,796
Payroll expenses -10,037,633 -12,013,416 -12,983,957 -11,912,764 -12,358,333
Depreciation -9,002,162 -8,797,369 -9,207,810 -10,251,450 -9,762,652
Community Municipality of Hebron NA -231,614 -178,414 NA -853,424
contributions
Loan interest expense -105,696 NA NA NA -195,000
World Bank loan NA NA NA -170,000 NA
Currency differential loss -539,704 -120,016 -15,243 -100,000 -100,000
Bad debt expenses or doubtful -1,000,000 -11,472,400 -1,000,000 -3,000,000 -6,000,000
receivables
Net book value of assets disposed NA NA NA NA -1,000,000
Other NA NA NA -927,688 NA
Total operating expenses -23,527,510 -37,580,237 -28,933,653 -29,660,578 -34,338,697
Net income 7,432,480 -3,296,520 -2,492,660 2,043,055 10,753,537
Source: HEPCO annual reports (financial statements not audited).
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TABLE A.9: GEDCO BALANCE SHEET (IN NIS EXCLUDING VAT)
2014 2015
Assets
Current assets
Cash and cash equivalents 6,389,609 2,197,965
Customers’ receivables 3,545,123,306 3,743,707,146
Materials and supplies in warehouses 14,635,146 24,182,036
Partners current accounts (municipalities) 370,615,454 399,610,375
Receivables and other current assets 14,697,288 35,880,987
Total current assets 3,951,460,803 4,205,578,509
Noncurrent Assets
Financial assets at fair value 413,478 484,398
Property, plant, and equipment, net 116,354,190 122,062,881
Projects in progress 4,374,270 10,707,531
Total noncurrent assets 121,141,938 133,254,810
Total assets 4,072,602,741 4,338,833,319
Liabilities and shareholders’ equity
Current liabilities
Payables and other liabilities 103,218,121 128,883,852
Banks overdraft 0 13,195,769
Total current liabilities 103,218,121 142,079,621
Noncurrent liabilities
Palestinian National Authority (PNA) 3,978,060,454 4,208,767,055
Canal Company for Electricity Distribution (Egypt) 100,122,920 151,475,280
Deferred revenues 80,043,837 97,539,206
Sundry provisions 59,569,735 61,649,421
Total noncurrent liabilities 4,217,796,946 4,519,430,962
Total liabilities 4,321,015,067 4,661,510,583
Shareholders’ equity
In-kind capital (electricity distribution network) 149,280,948 149,280,948
Revaluation reserve–electricity network 50,011,980 50,0 11,980
Cumulative change in fair value 6,030 76,950
Deferred losses -1,156,470,721 -447,711,284
This year loss or profit–exhibit (B) 708,759,437 -74,335,858
Net shareholders’ equity -248,412,326 -322,677,264
Total liabilities and shareholders’ equity 4,072 1 602,741 4,338,833,319
Source: GEDCO financial statements (unaudited).
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TABLE A.10: GEDCO INCOME STATEMENT (IN NIS EXCLUDING VAT)
2014 2015
Operating revenues from billed sales 509,181,596 517,553,841
Cost of Sale
Cost of energy sold -383,614,843 -406,186,153
Energy lost (not billed) -127,853,756 -126,671,379
Operating expenses -3,299,263 -5,540,937
Total cost of sale -514,767,862 -538,398,469
Gross profit -5,586,266 -20,844,628
Deduct
Depreciation of electricity network -12,500,915 -13,152,821
Staff costs -40,490,490 -44,020,905
General and administrative expenses -13,817,427 -13,678,708
Losses aggression -35,188,472 -18,726
-101,997,304 -70,871,160
Add
Realized grants and cash donations 1,507,955 1,191,189
Realized grants and in-kind donations 17,707,847 5,535,508
Other revenues 2,882,112 3,823,384
22,097,914 10,550,081
Loss for the year from activities -85,485,656 -81,165,707
Other items
Prior years’ adjustments 794,245,093 6,829,849
Total other items 794,245,093 6,829,849
This year loss or profit–exhibit (A) 708,759,437 -74,335,858
Source: GEDCO financial statements (unaudited).
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TABLE A.11: NEDCO BALANCE SHEETS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014
Current assets
Accounts receivable 48,714,506 97,809,318 142,280,736 128,961,956
Cash on hand at banks 11,223,360 24,619,157 23,092,885 23,137,898
Dues from municipal and village NA 56,036,239 80,236,793 70,964,603
councils
Other current assets 52,200,611 22,194,384 37,580,642 19,153,316
Total current assets 112,138,477 200,659,098 283,191,056 242,217,773
Noncurrent assets
Property and equipment 230,296,617 253,445,831 258,628,054 261,864,378
Projects under construction NA 1,037,694 691,256 3,331,636
Stock items NA 22,683,775 28,566,280 25,916,981
Total noncurrent assets 230,296,617 277,167,300 287,885,590 291,112,995
Total assets 342,435,094 477,826,398 571,076,646 533,330,768
Current liabilities
Accounts payable 31,620,495 18,117,173 64,573,004 70,652,834
Other current liabilities 76,439,237 185,617,359 219,583,341 170,255,539
Total current liabilities 108,059,732 203,734,532 284,156,345 240,908,373
Noncurrent liabilities
Provision for end of service 1,230,496 2,641,153 4,188,232 6,109,462
Deferred earnings NA 33,786,138 37,921,059 39,528,711
Other noncurrent liabilities 300,700 NA NA NA
Total noncurrent liabilities 1,531,196 36,427,291 42,109,291 45,638,173
Equity
Paid-up capital 15,251,594 17,231,440 17,231,440 17,231,440
Shareholder accounts 204,698,552 208,832,878 208,932,490 209,415,550
Statutory reserve 1,289,402 2,191,547 2,896,229 3,766,961
Optional reserve 1,289,402 2,191,547 2,896,229 3,766,961
Retained earnings 10,315,216 7,217,163 12,854,622 12,603,310
Total equity 232,844,166 237,664,575 244,811,010 246,784,222
Total liabilities and equity 342,435,094 477,826,398 571,076,646 533,330,768
Source: NEDCO financial statements audited by Ernst and Young (2015 financial statements not available).
150 | Securing Energy for Development in the West Bank and Gaza
TABLE A.12: NEDCO INCOME STATEMENTS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014
Operating income
Electricity sales (billed) plus subscriptions plus 188,881,771 225,555,641 254,389,364 260,922,894
services, etc.
Electricity purchases plus salaries and wages plus -178,567,444 -199,879,476 -229,675,461 -249,814,659
depreciation
Gross profit per operating Income 10,314,327 25,676,165 24,713,903 11,108,235
Operating expenses
General and administrative expenses -10,119,348 -17,066,283 -12,359,573 -12,741,808
Depreciation -723,176 -1,889,580 -1,697,289 -1,508,697
Provision for doubtful receivables -795,182 1,269,174 -792,774 -5,422,052
Other expenses -300,700 NA NA NA
Total operating expenses -11,938,406 -17,686,689 -14,849,636 -19,672,557
Net income or losses before other income and -1,624,079 7,989,476 9,864,267 -8,564,322
expenses
Revenue settlement with MoF 0 0 0 24,865,770
Grant from PENRA 1,804,535 NA NA NA
Other income 310,568 2,916,473 1,878,699 -841,050
Annual profit before income taxes 491,024 10,905,949 11,742,966 15,460,398
Income tax expenses -399,893 -1,884,496 -4,696,143 -6,753,083
Annual profit after income tax 91,131 9,021,453 7,046,823 8,707,315
Source: NEDCO financial statements audited by Ernst and Young (2015 financial statements not available).
Securing Energy for Development in the West Bank and Gaza | 151
TABLE A.13: TEDCO BALANCE SHEETS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014 2015
Current assets
Cash in bank 4,569,288 5,633,391 6,586,378 35,731,934 3,670,399
Checks 0 1,016,042 1,152,079 1,842,673 3,021,252
Accounts receivable 18,974,046 22,267,521 25,261,915 33,723,803 40,106,657
Other receivables 3,980,653 7,003,961 16,088,166 27,497,055 14,732,989
Accessories and spare parts in warehouse 809,865 1,535,601 1,488,859 1,669,365 1,959,394
Prepaid expenses 141,785 164,227 166,001 225,038 186,853
Total current assets 28,475,637 37,620,743 50,743,398 100,689,868 63,677,544
Fixed assets 20,849,458 22,975,233 24,146,557 25,764,776 28,768,289
Fixed asset consumption -6,723,629 -7,846,018 -9,030,484 -10,132,413 -11,451,747
Net fixed assets 14,125,829 15,129,215 15,116,073 15,632,363 17,316,542
Total assets 42,601,466 52,749,958 65,859,471 116,322,231 80,994,086
Liabilities and equity
Accounts payable 11,608,119 30,917,332 43,164,091 92,984,000 55,848,851
Other payables 9,498,750 0 1,712,992 1,931,121 0
Due payments 7,133 1,202,011 41,373 5,500 9,500
Income tax provision 65,103 65,103 65,103 65,103 572,664
Other provisions 524,622 755,152 956,586 1,237,181 1,611,351
Total liabilities 21,703,727 32,939,598 45,940,145 96,222,905 58,042,366
Capital 15,361,808 15,361,808 15,361,808 15,361,808 15,361,808
Capital reserve 5,374,958 5,374,958 5,374,958 5,374,958 5,374,958
Legal per statutory reserve 481,660 481,660 481,660 510,557 795,796
Earning from previous years 663,091 0 0 0 0
Losses 0 -320,687 -1,408,066 -1,309,997 -1,147,997
Net loss for the year -983,778 -1,087,379 108,966 162,000 2,567,155
Total equity 20,897,739 19,810,360 19,919,326 20,099,326 22,951,720
Total liabilities and equity 42,601,466 52,749,958 65,859,471 116,322,231 80,994,086
Source: TEDCO financial statements audited by Jamal Abu Farha.
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TABLE A.14: TEDCO INCOME STATEMENTS (IN NIS EXCLUDING VAT)
2011 2012 2013 2014 2015
Revenues
Electricity sales–prepaid 17,539,822 20,048,480 21,065,333
Electricity sales–mechanical counters 29,751,149 34,608,924 7,916,514 11,280,770 10,736,612
Electricity sales–medium voltage 12,124,651 13,012,333 13,374,891
Electricity sales–street lighting 1,135,804 1,228,366 1,045,340
Electricity purchases -26,771,696 -33,147,964 -38,208,786 -44,740,672 -42,342,607
Gross profit electricity sales 2,979,453 1,460,960 508,005 829,277 3,879,569
Other revenues
Revenue from miscellaneous services 0 2,163,512 1,696,691 3,118,616 3,610,845
Government support for electricity
production (subsidy) 0 0 2,976,902 2,472,444 2,821,416
Income from transformer 346,075 825,730 801,657 773,759 1,206,323
maintenance center
Total other revenues 346,075 2,989,242 5,475,250 6,364,819 7,638,584
Expenses
Operating expenses -2,781,780 -3,159,127 -3,210,182 -3,985,514 -4,801,092
General and administrative expenses -887,262 -1,768,156 -1,906,374 -2,305,516 -2,561,213
Transformer main center expenses -640,264 -610,298 -757,733 -723,066 -730,790
Total expenses -4,309,306 -5,537,581 -5,874,289 -7,014,096 -8,093,095
Net profit from transformer -294,189 215,432 43,924 50,693 475,533
maintenance center
Total profit from electricity sales
(not including transfer maintenance -689,589 -1,302,811 65,042 129,307 2,949,525
center)
Total net profit (including transfer -983,778 -1,087,379 108,966 180,000 3,425,058
maintenance center)
Income tax 0 0 16,345 38,000 572,664
Statutory reserve–10% 0 0 10,897 18,000 285,239
Net profit after taxes and reserves 0 0 81,724 124,000 2,567,155
Source: TEDCO financial statements audited by Jamal Abu Farha.
Securing Energy for Development in the West Bank and Gaza | 153
APPENDIX B:
Electricity Demand
Figure B.1: Shifting Patterns of Energy Usage for Cooking and Baking (percentage
of households)
100
90
80
70
60
50
40
30
20
10
0
Jul Jan Jul Jan Jul Apr Apr Jan Jul Jul Jul Jan Jul Jan Jul Apr Apr Jan Jul Jul
2003 2004 2005 2006 2008 2009 2013 2003 2004 2005 2006 2008 2009 2013
Cooking (stove top) Baking (oven)
Other Kerosene Wood Gas Electricity Not available
Source: Palestinian Central Bureau of Statics (PCBS,) Household Energy Surveys, 2003–13.
Figure B.2: Shifting Patterns of Energy Usage for Water Heating (percentage of
households)
100
90
80
70
60
50
40
30
20
10
0
2003 2004 2005 2009 2006 2008 2001 2003 2004 2005 2009 2013
January April July
Other Kerosene Solar Wood Gas Electricity Not available
Source: PCBS, Household Energy Surveys, 2001–13.
154 | Securing Energy for Development in the West Bank and Gaza
TABLE B.1: ELECTRICITY CONSUMPTION REGRESSION MODEL RESULTS FOR
THE SUMMER SEASON
INDEPENDENT VARIABLE OBSERVATIONS R-SQUARE
Household grid electricity consumption, July 14,001 0.16
VARIABLE COEFFICIENT STANDARD ERROR T-STATISTIC
Gaza region dummy 191.9 28.8 6.7
North West Bank region dummy 183.8 28.1 6.5
Mid West Bank region dummy 344.3 28.8 12.0
South West Bank region dummy 211.1 28.6 7.4
Ownership of electric air conditioner 108.5 9.8 11.1
Ownership of electric fan 53.6 14.8 3.6
Ownership of solar heater 27.7 4.1 6.7
Main cooking fuel is electricity 10.9 38.5 0.3
Main baking fuel is electricity -2.3 3.9 -0.6
Main water heating fuel is electricity 41.7 6.0 7.0
Ownership of electric generator -20.0 13.5 -1.5
TABLE B.2: ELECTRICITY CONSUMPTION REGRESSION MODEL RESULTS FOR
THE WINTER SEASON
INDEPENDENT VARIABLE OBSERVATIONS R-SQUARE
Household grid electricity consumption, January 6,733 0.20
VARIABLE COEFFICIENT STANDARD ERROR T-STATISTIC
Gaza region dummy 239.4 22.5 10.6
North West Bank region dummy 217.7 23.5 9.3
Mid West Bank region dummy 329.8 24.9 13.2
South West Bank region dummy 268.7 23.5 11.4
Ownership of electrical heater 51.3 4.9 10.5
Ownership of solar water heater 26.4 3.5 7.6
Main cooking fuel is electricity 9.8 21.6 0.5
Main baking fuel is electricity 4.8 5.4 0.9
Main water heating fuel is electricity 67.5 5.2 13.1
Ownership of electric generator -45.9 10.9 -4.2
Securing Energy for Development in the West Bank and Gaza | 155
TABLE B.3: EXISTING AND FORECAST ELECTRICITY NEEDS OF THE WATER AND
WASTEWATER SECTOR IN GAZA
WATER/WASTEWATER FACILITY 2014 2017 2018 2020 2025 2030 2035
North Gaza WWTP (NGEST) component
Terminal pumping station 2 1 1 2 2 3 3
Waste water treatment plant 2 2 2 3 4 5 5
Recovery and reuse scheme phase 1 2 2 3 3 4 5
Recovery and reuse scheme phase 2 3 3 4 5 5 6
NGEST total 4 8 9 11 14 17 19
Planned central Gaza WWTP (KFW) 7 7 8 11 13
Khanyounis WWTP 2 2 3 5 6
Rafah existing WWTP 1 2 2 2 2 3
Gaza existing WWTP (shikh Ejleen) 5 3 3 3 3
Central desalination plant 35 35 35 55 55
Deiralbalah desalination plant 1 1 1 2 2 2
Gaza desalinization plant 3 3 3 3 3 3
Existing W and WW facilities 25 33 30 30 30 30 30
Total Gaza governorates energy required for
water and wastewater facilities 34 46 87 93 99 127 134
Note: WWTP = wastewater treatment plant. NGEST = Northern Gaza Emergency Sewage Treatment. KFW = Kreditanstalt für Wiederaufbau.
156 | Securing Energy for Development in the West Bank and Gaza
Securing Energy for Development in the West Bank and Gaza | 157
APPENDIX C:
Importing Electricity
from Israel
TABLE C.1: ELECTRICITY GENERATION IN ISRAEL BY TYPE OF FUEL AND
PRODUCER, 2014–15
COAL NATURAL GAS GASOIL HFO RENEWABLES TOTAL
GWH % GWH % GWH % GWH % GWH % GWH %
2014
IEC 30 58% 22 42% 0.05 0% 0.01 0% 0 0% 52 84%
IPPs 0 0% 9 91% 0 0% 0.01 0% 0.87 9% 10 16%
Total 30 49 31 49.5 0.05 0.1 0.02 0 0.87 1.4 62 100%
2015
IEC 29 58% 21 42% 0.37 1% 0.06 0% 0 0% 50 78%
IPPs 0 0% 13 90% 0.12 1% 0.02 0% 1.28 9% 14 22%
Total 29 44.6 34 52.6 0.49 0.7 0.08 0.1 1.28 2 65 100%
Source: Israel’s Public Utility Authority (PUA), June 2016.
Note: IEC = Israeli Electric Corporation; IPP = independent power producer.
TABLE C.2: ISRAELI GENERATION CAPACITY, 2007–15
(MW) 2007 2008 2009 2010 2011 2012 2013 2014 2015
Installed capacity 11,297 11,649 11,664 12,769 12,759 13,248 13,483 13,617 13,617
TABLE C.3: IEC ELECTRICITY SALES BY TYPE OF CONSUMERS, 2014–15
TOTAL ELECTRICITY 2014 TOTAL ELECTRICITY 2015
CONSUMPTION (%) (MWH) CONSUMPTION (%) (MWH)
Domestic 34.8 17,604 32.1 15,981
Industrial 18.0 9,108 17.9 8,951
Public and commercial 30.3 15,342 32.0 15,953
Water pumping 4.0 2,018 4.8 2,404
Agriculture 2.6 1,332 3.5 1,769
East Jerusalem electricity company 4.2 2,128 3.9 1,945
Palestinian authority 6.1 3,069 5.8 2,899
Total 100 50,601 100 49,902
Source: IEC Financial Statement of 2015 (published March 31, 2016).
Securing Energy for Development in the West Bank and Gaza | 159
TABLE C.4: ELECTRICITY DEMAND FORECAST FOR ISRAEL, 2016–30
YEAR GENERATION (GWH) CONSUMPTION (GWH) PEAK DEMAND (MW)
2016 67.8 63.4 13,191
2017 70.1 65.5 13,670
2018 72.4 67.7 14,126
2019 74.8 69.9 14,577
2020 76.9 71.9 14,960
2021 79.2 74.0 15,446
2022 81.5 76.2 15,895
2023 83.9 78.4 16,348
2024 86.2 80.6 16,767
2025 88.5 82.7 17,265
2026 91.0 85.0 17,734
2027 93.6 87.5 18,236
2028 96.1 89.8 18,688
2029 98.7 92.2 19,237
2030 101.1 94.5 19,711
Source: Ministry of National Infrastructure, Energy and Water Resources, http://energy.gov.il/Subjects/Electricity/Pages/GxmsMniAboutElectricity.aspx.
Note: The forecast is based on data from IEC and is based on an annual growth of 1.9% in GDP per capita and extreme heat stress conditions.
TABLE C.5: OVERVIEW OF ISRAELI TRANSMISSION AND DISTRIBUTION SERVICE
TARIFFS (NIS AGOROT PER KWH, AS OF SEPTEMBER 13, 2015)
TOU TRANSMISSION TRANSMISSION AND DISTRIBUTION
SEASON BLOCK TARIFFS * DISTRIBUTION TARIFFS** TARIFFS***
Off peak 0.89 3.46 2.55
Winter
Shoulder 1.10 3.89 2.78
Peak 2.80 7.22 4.38
Off peak 0.81 3.22 2.41
Transition
Shoulder 1.36 4.17 2.80
Peak 1.79 4.82 3.01
Off peak 1.42 4.20 2.77
Summer
Shoulder 2.60 6.32 3.68
Peak 6.12 12.13 5.90
Source: Israel PUA.
Notes: US$1 = NIS 3.846 (June 30, 2016). Ultra-high voltage = 400 kV and 161 kV; high voltage = 22 kV and 33 kV. TOU = time of use.
* Ultra-high voltage producer selling to ultra-high voltage consumer.
** Ultra-high voltage or high-voltage producer selling to “far away” high-voltage consumer.
*** Ultra-high voltage producer selling to “close by” high-voltage consumer.
160 | Securing Energy for Development in the West Bank and Gaza
TABLE C.6: EFFICIENCY COEFFICIENTS AND RETURN ON EQUITY USED IN
ISRAELI TARIFF-SETTING (%)
SHARE OF EFFICIENCY WEIGHTED ANNUAL WEIGHTED
ASSETS COEFFICIENT EFFICIENCY RETURN ON RETURN ON
COEFFICIENT EQUITY EQUITY
Generation 50.1 2.0 1.00 7.62 3.82
Transmission 19.5 1.3 0.25 5.50 1.07
Distribution 30.3 3.7 1.12 6.20 1.88
100.0 2.38 6.78
Source: Israel PUA and IEC Financial Statements, 2015.
TABLE C.7: PERIOD DEFINITIONS FOR ISRAELI TIME-OF-USE TARIFF RATES
SEASON TIME OF DAY TIME-OF-USE PERIOD DEFINITIONS
SATURDAYS AND SATURDAYS SATURDAYS AND
HOLIDAYS AND HOLIDAYS HOLIDAYS
Summer Peak 1017
(July – August)
Shoulder 0710, 1721
Off-peak 0024 0024 0007, 2124
Winter (December–February) Peak 1719 1620 1622
Shoulder 1921 0608, 0816,
2224
Off-peak 0017, 2124 0016, 2024 0006
Transition (remaining months) Peak 06 20
Shoulder 1721 0620 2022
Off-peak 0017, 2124 0006, 2024 0006, 2224
Source: Israel PUA. Last updated February 15, 2010.
TABLE C.8: ISRAELI TIME-OF-USE TARIFFS (NIS AGOROT PER KWH)
SEASON TOU BLOCK LOW HIGH ULTRA- HIGH
VOLTAGE** VOLTAGE** VOLTAGE**
Winter Off-peak 35.60 27.96 25.18
Shoulder 55.60 46.92 43.62
Peak 91.29 79.36 73.93
Transition Off-peak 31.98 24.68 22.10
Shoulder 39.06 30.99 27.89
Peak 47.08 38.49 35.06
Summer Off-peak 33.44 25.62 22.63
Shoulder 48.01 38.61 34.47
Peak 105.59 91.49 84.18
Source: Israel PUA as of September 13, 2015.
* US$1 = NIS 3.846 (June 30, 2016).
** Ultra-high voltage = 400 kV and 161 kV; high = 22 kV and 33 kV; low = 400 volt.
Securing Energy for Development in the West Bank and Gaza | 161
TABLE C.9: ISRAELI BULK SUPPLY TARIFFS (NIS AGOROT PER KWH)
LOW VOLTAGE HIGH VOLTAGE
44.35 35.92
Source: Israel PUA as of September 13, 2015.
TABLE C.10: ISRAELI SYSTEM MANAGEMENT SERVICES TARIFFS (NIS AGOROT
PER KWH)
SEASON TIME-OF- ADMINISTRATIVE SYSTEM BACKUP OTHER SYSTEM TOTAL
USE COSTS BALANCE SERVICES SERVICES
Off-peak 0.27 0.58 0.40 4.01 5.26
Winter
Shoulder 0.27 0.58 0.77 4.01 5.63
On-peak 0.27 0.58 1.35 4.01 6.21
Off-peak 0.27 0.58 0.34 4.01 5.20
Transition
Shoulder 0.27 0.58 0.43 4.01 5.30
On-peak 0.27 0.58 0.56 4.01 5.42
Off-peak 0.27 0.58 0.34 4.01 5.20
Summer
Shoulder 0.27 0.58 0.54 4.01 5.41
On-peak 0.27 0.58 1.41 4.01 6.27
Average tariff 0.27 0.58 0.54 4.01 5.40
Source: Israel PUA as of September 13, 2015.
Note: US$1 = NIS 3.846 (June 30, 2016).
162 | Securing Energy for Development in the West Bank and Gaza
APPENDIX D:
Importing Natural Gas for
Domestic Power Generation
TABLE D.1: PROSPECTIVE INDUSTRIAL CONSUMERS OF NATURAL GAS IN THE
WEST BANK
NAME OF CITY TYPE OF DIESEL LPG NATURAL GAS
NO. COMPANY FACTORY CONSUMPTION CONSUMPTION DEMAND 1,000
(LITER PER YEAR) (KG PER YEAR) CM PER YEAR
1 BPC Company Ramallah Pharmaceutical 134,785 0 126
2 Star Factory Ramallah Chemical 59,512 31,055 94
3 Al-Juneidi Factory Hebron Food 1,020,000 0 954
4 Aziza Factory Tulkarem Food 170,138 0 159
5 NBC Factory Ramallah Food 134,611 0 126
6 Siniora Factory Aziza Food 202,042 0 189
7 Sinokrot Factory Ramallah Food 166,307 116,798 301
8 Al-Jebrini Factory Hebron Food 92,028 121,575 238
9 Al-Arz Company Nablus Food 0 112,794 141
10 Al-Safa Factory Nablus Food 0 116,575 146
11 Al-Betra Company Hebron Food 0 67,192 84
12 NAPCO Company Nablus Aluminum 0 379,464 474
Total consumption per year 1,979,423 945,453 3,033
Source: Palestinian Federation of Industry, Eco Energy’s Calculation of NG Demand.
Notes: LPG = liquid petroleum gas; kg = kilogram; Natural gas conversion factors: 1,000 liters of diesel = 935 cubic meters of (cm) gas; 1 ton LPG = 1,250 cm.
TABLE D.2: FORECAST DEMAND FOR NATURAL GAS BASED ON POWER
GENERATION IN THE WEST BANK
INSTALLED ELECTRICITY TOTAL ELECTRICITY PERCENTAGE OF NATURAL GAS
DOMESTIC
CAPACITYa GENERATION DEMANDb PRODUCTIONc DEMANDd
Year MW GWh GWh % bcm
2022 200 1226 6417 19 0.24
2023 200 1226 6802 18 0.24
2024 400 2453 7210 34 0.47
2025 400 2453 7643 32 0.47
2026 400 2453 8101 30 0.47
2027 400 2453 8587 29 0.47
2028 600 3679 9103 40 0.71
2029 600 3679 9649 38 0.71
2030 600 3679 10228 36 0.71
Jenin IPP: 200 MW in 2022, 400 MW by 2024. Tarkumiye IPP: 200 MW by 2028.
a
b
Based on 2015 demand in the West Bank of 4,286 GW and assumed growth rate of 6% per annum.
c
Share of domestic gas-based generation of total electricity demand in the West Bank.
d
CCGTs have 57% efficiency and operated at 70% capacity.
Securing Energy for Development in the West Bank and Gaza | 163
TABLE D.3: FORECAST DEMAND FOR NATURAL GAS BASED ON POWER
GENERATION IN GAZA
NATURAL GAS–BASED POWER CAPACITY AND TOTAL DOMESTIC NATURAL GAS
GENERATION ELECTRIC
CONVERTED NEW TOTAL GENERATION DEMANDb PRODUCTION DEMANDd
GPPa CCGTa CAPACITY (%)c
Year MW MW MW GWh GWh % bcm
2022 70 70 429 1462 29 0.11
2023 70 70 429 1550 28 0.11
2024 140 140 858 1643 52 0.21
2025 140 140 858 1741 49 0.21
2026 140 100 240 1472 1846 80 0.33
2027 140 100 240 1472 1956 75 0.33
2028 140 100 240 1472 2074 71 0.33
2029 140 100 240 1472 2198 67 0.33
2030 140 100 240 1472 2330 63 0.33
a
Gaza Power Plant (GPP): 70 MW conversion from gasoil to gas at 2022, additional 70 MW by 2024; new 100 MW CCGT by 2026
b
Based on 2015 demand in Gaza of 972 GWh, and assumed average growth rate of 6% per annum.
c
Share of domestic gas–based generation of total electricity demand in Gaza.
d
Converted GPP works at 45% efficiency; new CCGT works at 57% efficiency; all plants work at 70% capacity.
FIGURE D.4: NATURAL GAS PRICES IN ISRAEL 2016 (US$ PER MMBTU)
CONSUMER INITIAL PRICE INDEXATION
IEC 5.7 U.S. CPI +/- 1% per year *
Major IPPs 4.7-5.0 IEC generation tariff with ceiling
Major industries 4.7-5.5 Basket of fuels with cap
Marketing companies 5.2-5.8 Heavy fuel oil with cap
final price for small industries 6.0-7.0 Heavy fuel oil with cap
Note: MMBTU = million British thermal units.
* IEC’s price indexation formula: U.S. CPI+1% per year until 2020 and then U.S. CPI - 1% per year for 7 years.
164 | Securing Energy for Development in the West Bank and Gaza
APPENDIX E:
Importing Electricity
from Jordan and Egypt
TABLE E.1: PROJECTED FOSSIL FUEL SUPPLY SITUATION IN THE EGYPTIAN
POWER MARKET
AVERAGE CAPACITY UNIT 2015 2016 2017 2018 2019 2020 2021
UTILIZATION
Average (fossil fuel) % 54% 55% 52% 44% 40% 41% 41%
SPECIFIC GENERATION UNIT 2015 2016 2017 2018 2019 2020 2021
COST (MARGINAL CASH
COST FOR EEHC)
Coal US$ per kWh 0.000 0.000 0.000 0.000 0.000 0.030 0.033
Heavy fuel oil US$ per kWh 0.042 0.044 0.045 0.047 0.048 0.050 0.052
Light fuel oil US$ per kWh 0.059 0.059 0.060 0.062 0.064 0.065 0.068
Natural gas US$ per kWh 0.022 0.024 0.025 0.027 0.029 0.032 0.034
Average (fossil fuel) US$ per kWh 0.027 0.029 0.030 0.032 0.033 0.035 0.038
SPECIFIC GENERATION 2015 2016 2017 2018 2019 2020 2021
COST (MARGINAL UNIT
ECONOMIC COST)
Coal US$ per kWh 0.000 0.000 0.000 0.000 0.000 0.030 0.033
Heavy fuel oil US$ per kWh 0.042 0.035 0.045 0.051 0.057 0.063 0.070
Light fuel oil US$ per kWh 0.096 0.078 0.106 0.119 0.133 0.149 0.167
Natural gas US$ per kWh 0.039 0.033 0.042 0.046 0.050 0.056 0.063
Average (fossil fuel) US$ per kWh 0.040 0.034 0.043 0.047 0.052 0.057 0.062
GENERATION UNIT 2015 2016 2017 2018 2019 2020 2021
Coal GWh - - - - - 5,995 19,376
Heavy fuel oil GWh 37,489 39,701 39,726 41,118 43,935 45,067 44,987
Light fuel oil GWh 451 450 427 364 328 336 336
Natural gas GWh 124,005 131,543 138,433 147,148 154,814 158,803 158,520
Total (fossil fuel) GWh 161,946 171,694 178,586 188,629 199,076 210,202 223,218
CAPACITY UNIT 2015 2016 2017 2018 2019 2020 2021
Combined-cycle gas turbine MW 11,730 12,480 17,230 23,730 29,730 29,730 29,730
Gas turbine MW 6,794 7,020 5,820 7,030 7,030 7,030 7,030
Steam turbine (oil and gas MW 2,800 2,800 2,800 2,832 2,832 2,832 2,832
boiler)
Steam turbine (coal boiler) MW - - - - - 1,600 5,180
Total (fossil fuel) MW 21,324 22,300 25,850 33,592 39,592 41,192 44,772
Securing Energy for Development in the West Bank and Gaza | 165
APPENDIX F:
Developing Domestic
Renewable Power Generation
TABLE F.1: ESTIMATION OF DISAGGREGATED POTENTIAL FOR RESIDENTIAL
ROOFTOP PV
NUMBER OF RESIDENTIAL ROOFTOPS
POPULATION INDIVIDUAL HOUSEHOLD NUMBER NO.
GOVERNORATE POPULATION* (%) HOUSES (HH) SIZE* OF HHS ROOFTOP
(%)* FOR PV
West Bank 2,790,331 Region 57.4% 4.9 569,455 326,867
Jenin 303,565 WB-N 1,094,815 24.1% 223,432 128,250
Tubas 62,627 WB-N
Tulkam 178,774 WB-N
Nablus 372,621 WB-N
Qualqilya 108,049 WB-N
Salfit 69,179 WB-N
Ramallah 338,383 WB-C 1,011,269 22.2% 206,381 118,463
Jericho 50,762 WB-C
Jerusalem 411,640 WB-C
Bethlehem 210,484 WB-C
Hebron 684,247 WB-S 684,247 15.0% 139,642 80,155
Gaza Strip 1,760,037 Gaza 1,760,037 38.7% 29.3% 5.7 308,778 90,472
North 348,808
Gaza 606,749
Dier al Balah 255,705
Khan Yunis 331,017
Rafah 217,758
TOTAL 4,550,368 100.0% 878,234 417,339
Note: WB-N = West Bank north; WB-C = West Bank central.
* Information provided by Palestinian Central Bureau of Statics (PCBS).
TABLE F.2: ESTIMATION OF NUMBER OF ROOFTOPS FOR NONRESIDENTIAL
ROOFTOP PV
Public administration 200
Schools 2,200
Commercial 5,000
Source: Information provided by Palestinian Energy and Environmental Research Center (PEC).
166 | Securing Energy for Development in the West Bank and Gaza
TABLE F.3: ASSUMPTIONS REGARDING LAND REQUIREMENTS FOR SOLAR POWER
GENERATION IN THE WEST BANK AND GAZA (SQUARE METERS PER KWP)
Rooftop solar 8–12
Utility-scale PV 24–32
CSP 31–40
Wind 210–330
Source: National Renewable Energy Laboratory (NREL). 2013. Land-Use Requirements for Solar Power Plants in the United States. Golden, CO: NREL; and
NREL. 2009. Land-Use Requirements of Modern Wind Power Plants in the United States.
TABLE F.4: ESTIMATION OF OVERALL POTENTIAL FOR ROOFTOP SOLAR PV IN
THE WEST BANK AND GAZA
MAXIMUM POTENTIAL CAPACITY – ROOFTOP SOLAR
West Bank
NO. OF AREA PER ROOFTOPS WELL AVAILABLE POTENTIAL
ROOFTOPS ROOFTOP (M2) AVAILABLE ORIENTED SURFACE (M2) CAPACITY
FOR PV (MW)
Residential 326,867 150 30% 30% 4,412,709 490
Public 123 200 40% 100% 9,811 1
Schools 1,349 160 50% 100% 107,925 12
Commercial 3,066 300 30% 100% 275,944 31
Gaza
NO. OF AREA PER ROOFTOPS WELL AVAILABLE POTENTIAL
ROOFTOPS ROOFTOP AVAILABLE ORIENTED SURFACE (M2) CAPACITY
FOR PV (M2) (MW)
Residential 90,472 150 30% 30% 1,221,373 136
Public 77 200 40% 100% 6,189 1
Schools 851 160 50% 100% 68,075 8
Commercial 1,934 300 30% 100% 174,056 19
Total West Bank and Gaza 697
TABLE F.5: ESTIMATION OF POTENTIAL FOR UTILITY-SCALE SOLAR POWER
GENERATION IN THE WEST BANK AND GAZA
MAXIMUM POTENTIAL CAPACITY – UTILITY SCALE SOLAR
TOTAL SURFACE AVAILABLE AVAILABLE POTENTIAL
ACCORDING TO PETL ACCORDING TO PETL CAPACITY
(KM2) (%) (%) (KM2) (MW PEAK)
Areas A and B 2,488 40% 0.12% 3 103
Area C 3,732 60% 2.64% 98.5 3374
Total 6,220 100% 2.76% 101.5 3476
Securing Energy for Development in the West Bank and Gaza | 167
FIGURE F.6: CURRENTLY INSTALLED AND ONGOING SOLAR PROJECTS AT
GAZA HOSPITALS
MOH FACILITY UNIT BENEFITING OF DONOR CAPACITY BUDGET STATUS
THE PROJECT (W) (US$)
1 Shifa hospital Cardiac care Italian workers 4,500 50,000 Completed
syndicate
2 Shifa hospital ICU JICA 30,000 150,000 Completed
Nassr pediatric NCU (Nursery) Sawaed Society 20,000 90,000 Completed
3 hospital
Harazen maternity OT, lab, lighting UNDP 12,000 60,000 Completed
4 hospital
Emirati RC maternity OT lights UNDP 8,000 40,000 Completed
5 hospital
6 EGH ICU ICRC 30,000 140,000 Completed
7 32 PHC clinics Refrigerators for ICRC 750 190,000 Completed
vaccines
8 Tahreer maternity OT, delivery wards, Human Appeal 50,000 217,180 Ongoing
hospital NCU, ED Int.
9 Al-Aqsa hospital OT, NCU, Cardiac care UNDP 60,000 225,000 Ongoing
10 Indonesian hospital OT, ED UNDP 60,000 225,000 Ongoing
11 Rantissi specialized NCU, part of Lab Welfare 30,720 150,000 Ongoing
hospital Association
Total 305,970 1,537,180
Source: Provided to the World Bank by the World Health Organization (WHO) office in Gaza ( September 2017).
168 | Securing Energy for Development in the West Bank and Gaza
FIGURE F.7: CRITICAL UNITS IN GAZA MOH HOSPITALS IN NEED OF SOLAR ENERGY
MOH FACILITY TARGETED UNIT HOURS OF CAPACITY BUDGET
POWER SUPPLY (KWP) (US$)
1 Shifa hospital Hemodialysis (38 HD unit plus desalinization 12 100 500,000
plant)
NCU for premature babies (35 incubators) 24 30 120,000
Cardiac care 24 30 120,000
Laboratory 24 20 80,000
Sterilization unit—to operate 1 operating 12 40 160,000
theater (OT) sterilizer
2 EGH OT rooms (8 rooms) 6 30 120,000
NCU (14 beds) 24 30 120,000
Neurology care (12 beds) 24 30 120,000
Laboratory 24 20 80,000
Sterilization unit (to operate 1 OT sterilizer) 12 40 160,000
3 Nasser hospital OT rooms (3 rooms) 6 20 80,000
(Khanyounis)
ICU (16 beds) 24 30 120,000
Hemodialysis (18 HD unit plus desalinization 12 50 200,000
plant)
NCU for premature babies (20 incubator) 24 30 120,000
Laboratory 24 20 80,000
Sterilization unit (to operate 1 OT sterilizer) 12 40 160,000
Rantissi ICU (4 beds) 24 10 40,000
4 specialized
Hemodialysis (5 HD units) 12 10 40,000
hospital
Dorra pediatric ICU (6 beds) 24 20 80,000
5 hospital
Laboratory 24 20 80,000
6 Eye hospital OT rooms (3 rooms) 6 15 60,000
Sterilization unit (to operate 1 OT sterilizer) 12 40 160,000
Beit Hanoun OT rooms (2 rooms) 6 15 60,000
7 hospital
Laboratory 24 20 80,000
Sterilization unit (to operate 1 OT sterilizer) 12 40 160,000
Al-Aqsa hospital Hemodialysis (18 HD units) 12 50 200,000
8
Laboratory 24 25 100,000
Sterilization unit (to operate 1 OT sterilizer) 12 40 160,000
ICU (6 beds) 24 15 60,000
9 Najjar hospital
Laboratory 24 20 80,000
Sterilization unit (to operate 1 OT sterilizer) 12 40 160,000
Emirati RC NCU 24 10 40,000
10 maternity hospital
Laboratory 24 20 80,000
Sterilization unit (to operate 1 OT sterilizer) 12 40 160,000
Total in US$ 1,010 4,140,000
Source: Provided to the World Bank by the World Health Organization (WHO) office in Gaza (September 2017).
.
Securing Energy for Development in the West Bank and Gaza | 169
APPENDIX G:
Developing Transmission
Infrastructure
Map G.1: Map of Existing Transmission Infrastructure in the West Bank and Gaza
IBRD 43950 | SEPTEMBER 2018
Existing Power Plant
Existing Substations 2x22kV feeders
2x33kV feeder from
Existing 22 kV Distribution Lines Beisan 161/33kV s/s
Existing 33 kV Distribution Lines
Existing IEC 161kV Transmission Lines Jenin
JENIN
feeders
3x22kV
Northern West Bank is fed from: TUBAS
• 2x33kV feeders from IEC Beisan substation Tulkarm Tubas
• 12x33kV feeders from IEC Ariel (Salfit) substation TULKARM
JORDAN
2x33kV feeder from
• 2x33kV feeders from IEC Mt. Afraym substation Immanuel 161/33kV s/s
• 3x22kV feeders from IEC Immanuel substation Nablus
• 5x22kV feeders from IEC QALQILYAH
Qalqilyah NABLUS
Southern West Bank is fed from:
• 10x33kV feeders from IEC Hebron substation
• 4x33kV feeders from 2 portable substations SALFIT Salfit 2x33kV feeder from
Mt. Afraym 161/33kV s/s
Gaza is fed from: 12x33kV feeder from
Ariel (Salfit) 161/33kV s/s
• 10x33kV feeders from IEC
• 3x33kV feeders from A.R. Egypt Wes t B an k
RAMALLAH JERICHO
Ramallah 1x33kV feeder from
Jordan (5MW)
M e dite rra n e a n
Se a Jericho
Jerusalem
JERUSALEM
ISRAEL
Bethlehem
BETHLEHEM
Dead Sea
JABALYA
Jabalya
Gaza City Hebron
Gaza GAZA CITY
10x33kV feeder from
Hebron 161/33kV s/s
Deir el Balah HEBRON
KHAN DEIR EL BALAH
YUNIS 10x33kV feeder from
RAFAH Israel Electric Company (120MW)
Khan Yunis
Rafah
Governorate Capitals Governorate Boundaries
Armistice Demarcation Lines, 1949 Administrative Boundary
No-man’s Land Areas, International Boundaries
ARAB Armistice Demarcation Line, 1949
REP. OF Jerusalem City Limit, Unilaterally
EGYPT 0 10 20 Kilometers Expanded by Israel June 1967;
then Annexed July 30, 1980
170 | Securing Energy for Development in the West Bank and Gaza
Map G.2: Location and Service Area of New Palestinian Electricity Transmission
Company High-Voltage Substations
IBRD 43951 | SEPTEMBER 2018
New PETL Substation
Jalamah S/S Service Area Jenin Al Jalamah s/s
Sarra S/S Service Area
Jenin
Qalandia S/S Service Area
Beit Ula S/S Service Area JENIN
Governorate Capitals
Armistice Demarcation Lines, 1949
TUBAS
Tulkarm Tubas
No-man’s Land Areas,
Armistice Demarcation Line, 1949 TULKARM
Governorate Boundaries Nablus Sarra s/s
Administrative Boundary Nablus
International Boundaries QALQILYAH NABLUS
Qalqilyah
SALFIT
Salfit
a
Se
an
JORDAN
RAMALLAH
ane
JERICHO
err
Ramallah
dit
Ramallah Qalandia s/s
Me
Jericho
JERUSALEM
Jerusalem
ISRAEL
Bethlehem
BETHLEHEM
Tarqumiya Beit Ula s/s
D ead S ea
Hebron
HEBRON
0 10 20 Kilometers
Securing Energy for Development in the West Bank and Gaza | 171
Map G.3: Land in the West Bank Is Divided into Areas A and B, under Palestinian
Civil Administration, and Area C under Israeli Civil Administration
IBRD 43952 | SEPTEMBER 2018
LAND CLASSIFICATION ACCORDING Umm
TO OSLO AGREEMENT Al-Fahm
Area A
Beit Shean
Area B Jenin
Area C
Main cities and towns
Maythalun
Armistice Demarcation Lines, 1949
No-man’s Land Areas, Tulkarm Tubas
Armistice Demarcation Line, 1949
Jerusalem City Limit, Unilaterally Tayibe
Expanded by Israel June 1967;
then Annexed July 30, 1980 Tire
Nablus
Administrative Boundary
Qalqiliya
International Boundaries
Qabalan
ea
Salfit
an S
Tel Aviv
ane
JORDAN
iterr
Ramla Baytin
Med
Ramallah
Jericho
Jerusalem
ISR A E L
Bethlehem
Surif
Bayt Fajjar
Dead Sea
Hebron
Yattir
Az Zahiriyah
0 10 20 Kilometers
172 | Securing Energy for Development in the West Bank and Gaza
APPENDIX H:
Robust Planning Methodology
and Detailed Technical Results
INTRODUCTION 1. In a deterministic analysis, what does a least-cost
capacity expansion plan look like, which ensures
This technical appendix describes the methodological the West Bank are Gaza are self-reliant and able
considerations and input assumptions behind the to meet demand securely (assuming there are no
power system expansion model used for the report. capital constraints)?
The analysis applies concepts from the robust- 2. What are the features of a capacity plan that
decision-making framework to develop power- ensures the West Bank are Gaza can respond to a
generation capacity expansion plan for both the wide range of uncertainties including contingencies
West Bank and Gaza that takes into consideration around electricity imports? What are the cost
endogenous and exogenous uncertainties. It is implications of such a plan? How well does this
built around a linear programming (LP) optimization second plan perform in terms of costs compared
and simulation model that generates scenarios to with a classic least-cost plan?
capture the pervasive uncertainties in a region where 3. How does the average cost of production change
geopolitical conditions heavily influence the availability by sharing reserve margin requirements with
of electricity and fuel supply. neighboring countries?
4. Given capital constraints, what is a balanced mix
The analysis compares the output of classical methods that combines (ii) and (iii) to keep average costs of
to power-system expansion planning with the robust- production at a specified annual level?
decision-making-related approach to show how 5. How does access to regulated land (known
uncertainties can affect the choice of technology as Area C) affect the generation mix and
options. The analysis also presents results that take system costs?
into account constraints to project-financing access. 6. If political uncertainties are not resolved over
the planning horizon, what is the impact of only
The geopolitical conditions, and related uncertainties, implementing projects that are solely within the
call for a significant shift from traditional planning control of the Palestinian Authority (PA), and what
methods. To the extent that political, social, and is the impact of delayed action or inaction on
economic uncertainties can be abstracted for unmet demand?
modelling purposes, they have been incorporated
in the analysis largely through varying assumptions Limitations of the Study
related to the availability, timing, and cost of
infrastructure development. While efforts have been made to include some
uncertainties in the expansion plan, it is not
Objective comprehensive in this regard. Importantly, climate
risks are not included in the analysis. For example,
Given the uncertainties, the objective of the rising air temperatures reduce the efficiency of
generation-expansion planning component of the plants (including most types of solar PV plants) while
study is to propose a set of generation options increasing demand (for cooling) during the summer
that perform well under various conditions. They months, among others.
are designed to be able to satisfy peak load and
energy demand up to 2030 reliably, and at the most The location of plants and financial structuring of
efficient cost. The analysis thus seeks to answer the potential projects are other important issues that
following questions: can affect which specific projects materialize. These
Securing Energy for Development in the West Bank and Gaza | 173
issues are beyond the scope of the study, which does generation mix that satisfies peak load and energy
not consider locational issues. demand under a predefined set of constraints. The
robustness of the plan is tested through a carefully
Delays during construction are also not considered in selected set of scenarios. Under the current
the analysis. Construction delays can impact project circumstances in the West Bank and Gaza, the sheer
costs, and large projects tend to be more exposed number of uncertainties leaves such an approach
to this risk. As an example, doubling the construction too vulnerable to failure measured by the inability to
time for a gas turbine from 24 to 48 months could meet demand.
increase project costs by close to 10 percent.1 Delays
also expose the project to fluctuations in material An approach to counter this risk could be to plan for
prices linked to international commodity prices. the worst or close to worst case scenario, but this
Including these issues tends to further strengthen the comes at cost. While partly justifiable, this cost in the
case for distributed generation options. form of capital expenditure is likely to be unwarranted
because the system will be overly designed. The
METHODOLOGICAL CONSIDERATIONS approach adopted for this study therefore seeks to
balance the goal of meeting demand at all times, with
Planning for the expansion of power sectors in the risk of stranded assets under multiple scenarios.
developing countries is challenging, due in part to
the uncertainty associated with demand projections Bazilian and Chattopadhyay (2016) describe three
because historical trends are typically different from possible planning techniques for fragile states: (i)
expected growth patterns. The power sector in the least-cost planning tools that include risk premiums
West Bank and Gaza falls in this category. Additionally, as inputs; (ii) extension of least-cost planning models
the geopolitical situation in the West Bank and Gaza with a simulation component to reflect some of the
(one of the territories on the World Bank’s list of uncertainties associated with fragile and conflict
fragile situations) introduces additional layers of states; and (iii) stochastic programming and robust
significant uncertainty. 2 decision models that are specifically designed to
facilitate decision making under uncertainty.
Constraints imposed by fragility have been routinely
left out of power-sector planning in most conflict- In a case study for the Republic of South Sudan,
prone countries. It manifests through various impacts Bazilian and Chattopadhyay (2016) employed the first
on technology choices, timing, cost of and access approach (i) to look at the impact of differentiating the
to financing, and so forth. The lack of financing, cost of capital for risky projects (typically large, scale-
delays, and damages are all constraints and risks efficient infrastructure that are cheaper but highly
that need to be considered in planning for these exposed to the risk of destruction and significant
plans to be more effective. Although these issues are delays) from smaller but less risky options. By using
well understood in qualitative terms and practiced a higher weighted average cost of capital (WACC) for
in the field, it is only recently that consideration is riskier projects as a proxy to capture a wide range
being given to quantitatively formalize this trade-off of financing risks, the analysis results in a shift away
to produce a power system plan that finds a good from large, centralized technology options to more
balance between cost and risks and characterizes decentralized choices. For the case of the West
the ever-changing dynamics of fragile states (Bazilian Bank and Gaza, there is no evidence to conclude
and Chattopadhyay 2016 ). that financing for scale-efficient projects like thermal
power plants will be more expensive than financing
For the West Bank and Gaza, uncertainties around for more decentralized options or by how much.
demand projections, the level of electricity imports,
timing of fuel availability, volumes and costs of fuel, In another case study, Spyrou, and Hobbs (2016)
granting of access to expand infrastructure, and the use a two-stage stochastic planning model to
risk of high outage rates mean the classic approach analyze the impact of climate risks on the power
to least-cost expansion planning is not adequate. system expansion plan for Bangladesh—one of the
The classic approach to least-cost planning typically most vulnerable countries to climate change (World
assumes expected outage rates, fuel and plant Bank 2013 ). The analysis concludes that modeling
availability, and a load growth forecast to project a the relationship between climate and power system
174 | Securing Energy for Development in the West Bank and Gaza
parameters could save up to US$1.6 billion in 2015 Figure H.1: Process Flow for Selecting
dollars. In a two-stage stochastic programming model, Robust Options
an action is taken in the first stage (or the present)
knowing that the future could evolve in many different 1. Scenarios: Develop multiple future scenarios from
predefined ranges of uncertain parameters using
ways, based on a set of random parameters. A set
Monte Carlo
of recourse decisions is then defined to determine a
course of action in the second stage that responds to
the outcome of the uncertain parameter. The goal is to
find a solution that optimizes the expected outcome of
2. Multiple least-cost plans: For each future
a decision. Stochastic programming models are reliant
scenario, develop a least-cost plan
on the fact that probability distributions governing
the data are known or can be estimated (Shapiro
and Philpott 2007) (Shapiro, Dentcheva, and
Ruszczynski 2009).
3. Review options: Evaluate least-cost plans to
Establishing such probability distributions for the West rank technologies and capacities according to
frequency of selection across scenarios
Bank and Gaza can be challenging. There is little
historical data to inform the design of the distribution
parameters. The distribution shapes could be
attempted through the use of expert judgement, but
the political underpinnings in the West Bank and Gaza 4. Stack and test options:
increase the subjectivity of such an exercise.
Select technologies and capacities ranked
The approach used to deal with uncertainties in this highest, i.e., selected in 100% of scenarios.
study involves using Monte Carlo simulations to draw
scenarios from a range of parametric uncertainties and
then running them through a deterministic LP model. Test resultant plan across multiple
The simulations serve to “recognize” the stochastic scenarios and observe total system costs.
nature of the parameters, but this process falls short
of a full stochastic model because the final selection
of the capacity plan is decided by the modeler rather Reduce preference ranking and select
than the model. associated technologies and capacities
until least selected options (i.e., only in 1%
of scenarios) are available.
The Monte Carlo simulation process considers random
variation in uncertain parameters such as demand and
generation availability, fuel prices, and so forth, to form
a composite sample that represents one realization
or “future” of all possible uncertain parameters.
The LP dispatch optimization (determination of 5. Robust plan: Select plan with the lowest average
the optimal output of power generation plants) is of total system costs across multiple scenarios
solved for the sample to obtain one-point estimate
of system costs, prices, and so forth. The process
is repeated for a large set of samples (for example,
somewhere between 100 and 1,000, depending
on the number of parameters and their variance) to
form a distribution of the outcomes. The process is
fundamentally not very different from running a large
number of alternative scenarios with the exception
that (i) we directly represent the probability distribution
of each uncertainty parameter rather than accepting
a predefined scenario with a specific view on the
uncertain parameters and (ii) we therefore can evaluate
Securing Energy for Development in the West Bank and Gaza | 175
the impact of multiple uncertain parameters on the Details of the process flow are as follows:
final output, be it prices or system costs.
Step 1: Develop Multiple Scenarios
The process flow for the analysis is shown in figure H.1.
We start by identifying all the input parameters that are After identifying the uncertain parameters, multiple
uncertain. These include the timing and availability of scenarios were generated using Monte Carlo sampling
fuel, energy demand, fuel prices, amount of imports, techniques. Each scenario contains a random draw
availability of power plants, and investment costs, from within the distribution of the individual parameters
among others (see table H.1). The ranges for these for every year in the planning horizon. For example, it
uncertain parameters were developed by the project will include a certain demand profile for every year,
team after consultations in Jordan, Israel, Egypt, and plant availability for every year, fuel prices for every
the West Bank and Gaza. year, and so on. Since the draws from the various
parameters are completely independent, two valid
In this type of analysis, it is important to identify the questions arise at this stage: (i) How certain are we
correlations between parameters. Of particular interest that the combination of individual draws adequately
was the correlation between fuel and electricity import cover the worst-case scenarios? (ii) how plausible is
prices. Since the transition from oil-based generation the combination of all the individual draws?
to gas-based generation, electricity prices in Israel
have been decoupled from international oil prices, The coverage of scenarios depends on the number of
because most of the production is driven by long- draws for the Monte Carlo analysis. A higher number
term gas purchase agreements. The growing share of of draws increases the coverage of scenarios.
renewable energy will further decouple the two prices. This needs to be balanced with the computational
requirements. The number of scenarios was selected
This is likely to be the case for Egypt as well. We to minimize the variance in total system costs across
therefore assume no correlation between fuel prices scenarios, an indication that enough samples across
and imports from Israel and Egypt. Electricity prices the range of uncertainty have been selected. In this
in Jordan, on the other hand, are correlated with fuel study, 100 draws were used to demonstrate the
prices, and this assumption has been used in the study. merits of the study approach.
At present, gas generation is based on liquified natural
gas, and so prices are linked to the international gas For question (ii), the primary issue of concern was
market. However, there are considerations to import the link between outages caused by sabotage and
gas from Israel or other countries. Jordan is also demand. As an example, how plausible is a scenario
considering oil shale and nuclear power as generation with high outages and high demand growth? Using
options, together with a strong renewable energy the study approach, it is also possible to discard
portfolio. These plans, if implemented, will reduce the combinations of parameters that are unreasonable.
link between international oil and electricity prices.
TABLE H.1: INPUT PARAMETERS AND ASSOCIATED UNCERTAINTIES
PARAMETER UNCERTAINTY
Fuel Prices, volumes, and availability of diesel (as a result of attacks and politically imposed
constraints)
Timing, volumes, prices, and availability of gas
CAPEX Variations in photovoltaic, wind, and concentrated solar power CAPEX
Electricity Prices, volumes, and availability
imports
Demand High volatility in projected demand
Transmission Uncertainties around the commissioning of West Bank backbone and West Bank-Gaza
connection
Plant availability Extended outages as a result of damage or difficulty in reaching plant locations; damage due
to sabotage incurs a cost to the system
176 | Securing Energy for Development in the West Bank and Gaza
Figure H.2: Characterizing Four Possible Economic Conditions of the West Bank and
Gaza
• Significant disrutptions to supply due • Disruptions to supply due to
to sabotage sabotage and
• Limited imports • Limited imports
• WB Transmission • Limited fuel (diesel)
backbone may be • WB Transmission
commissioned backbone mad be in
• Very limited fuel place
(diesel)
A. War B. Siege • Low load growth
• High unmet demand • Hight unmet demand
• Disruptions due to
• Open imports higher level of
• Gas available C. Prosperous D. Stagnant imports
• WB Transmission • Limited fuel
backbone commissioned (diesel or gas)
• Increased uncertainty in • WB Transmission
load growth backbone may be
• Low unmet demand commissioned
• Increased uncertainty in load growth
• Relatively hight unmet demand
To design the scenarios, the study categorizes four Step 2: Develop Multiple Least-Cost Plans
possible states in the West Bank and Gaza: war,
siege, economic stagnation, or economic prosperity. For each of the four scenarios we develop an expansion
These conditions are characterized by different levels plan using the core LP model. It is important to note
of investments in power sector infrastructure and that the model considers the entire planning horizon
demand characteristics as shown in figure H.2. and optimizes capacity and dispatch to minimize
system costs for the horizon. It does not optimize
For extended periods in the planning horizon, or the solution on a year-to-year basis. For example, if
the entire duration, either territories of the West a scenario draws on natural gas being available but
Bank and Gaza could be in a state of siege (as is also draws low availability for the gas plants in some
the case in Gaza presently), stagnation (as is the years, the model considers this availability and may
case in the West Bank), or prosperity where there install more capacity within defined constraints to
are no limits to infrastructure development. A state satisfy the supply-demand balance. It will not only use
of war is more transient, marked by particular years the higher availability of preceding years to determine
with high outages, limited imports, and limited optimal capacity and timing. The core LP model is
fuel supply. For example, over the entire planning explained in a later section.
horizon, a territory could be in a state of stagnation
with spot disturbances in which supply options are Step 3: Review Plans and Rank Options
disrupted. History shows destroyed equipment is
restored, and this is assumed to continue. It was In this step, we analyze, for every year in every scenario,
also decided to establish a minimum availability the frequency with which technology options are
threshold for imports from Israel, the main source of picked and, when picked, the capacity that is installed
imports, since it was unrealistic to anticipate this to be in that year. The aim is to identify those technology-
completely unavailable. capacity options that are robust across multiple
Securing Energy for Development in the West Bank and Gaza | 177
scenarios. These are then ranked by the percentage because the demand forecast is uncertain. To deal with
of times the technology-capacity mix is selected in this problem, we run multiple experiments (multiple
every scenario and for every year. To determine the scenarios that draw from the uncertain parameters)
capacity that is picked up across multiple scenarios, whenever we include additional options in the stack
we approximate the plant capacities to the nearest and observe the performance of the capacity plan.
10MW. This is similar to creating 10MW “bins.”3 It is important to distinguish this step from step 2,
where we develop multiple capacity plans to satisfy
Step 4: Stack and Test Options multiple future scenarios.
The most preferred technology-capacity options are In step 2, the question we answer is this: if the future
those that are selected in most scenarios. Figure H.3 looked like a particular scenario, what types of plants
shows variation of the capacity of available generation should be built? When should they be built and how
options across multiple scenarios. Existing capacity should they be dispatched? In this step, whenever
is always included. As seen from the figure, 194 MW we add onto the stack of technology-capacity
of the plant PVr-WBC is robust in all scenarios, while options, we take this as our capacity plan and ask the
the first concentrated solar power (CSP) of 20 MW is question: If this was my capacity plan, how would it
only picked up in 11 percent of scenarios. Technology perform in multiple scenarios?
and capacity options that appear in 100 percent of
scenarios constitute no-regret options. Moving to The stack developed in step 4 can also be used to
the right of the chart, the capacities of technologies select projects to prioritize. The more robust options at
increase but are less robust. the bottom of the stack should be given a higher priority.
While it would be ideal to include only the most robust Step 5: Select Robust Plan
technology-capacity options, this is unlikely to meet
demand, and so it is necessary to add more capacity. The performance of each potential capacity plan is
We therefore stack less preferred options to increase evaluated mainly through the change in total system
installed capacity that is, select capacities to right in costs or the objective function (least cost). By observing
figure H.3). At this point, we have little idea about the the total system costs across multiple scenarios, we
target capacity that will be adequate for the system, select the plan with the lowest cost as the “robust” plan.
Figure H.3: Cumulative Capacity by Technology
600
PVcAB-WBN CC-WBN
500
PVcAB-WBS CC-Gaza
Cumulative capacity (MW)
PVcAB-WBC DiesGen-Gaza
400
PVr-Gaza Jordan-WBC
300 CC-WBS Israel-WBN
Wind-WBS Egypt-Gaza
200
Bio-WBC Israel-Gaza
100
0
100
97
94
91
88
85
82
79
76
73
70
67
64
61
58
55
52
49
46
43
40
37
34
31
28
25
22
19
16
13
10
7
4
1
178 | Securing Energy for Development in the West Bank and Gaza
Jiang and Vogt-Schilb (2016) employ a similar STRUCTURE OF THE MODEL
approach in a case study for Bangladesh as the
quantitative basis for a “robust adaptive strategy The West Bank is modeled as three separate zones:
that performs acceptably over several dimensions WB North, WB Central, and WB South (see map H.1).
in as many plausible futures as possible.” The main Electricity imports from Israel is injected through three
differences are (i) Latin hypercube sampling was used points in the north, central, and south. Demand and
to reduce the need for large number of simulations, solar resource availability is accordingly distributed
while we use Monte Carlo sampling for this study, among the three zones in the West Bank. Gaza is
and (ii) after generating multiple expansion plans, the modeled as one separate zone.4
technology-capacity options were placed in large
bins to reduce the number of plans, each of which There is currently no transmission network in the
was then tested across multiple scenarios and West Bank or Gaza, and the two territories are not
performance assessed independently. In this study, directly connected either. The analysis of transmission
we develop the capacity plan starting with no-regret requirements is undertaken separately and not
options and increasingly adding less preferred options included in the model.
as described in step 4.
Map H.1: Categorization of Zones and Power Import Connections in
West Bank and Gaza
IBRD 43953 | SEPTEMBER 2018
Armistice Demarcation Lines, 1949 IEC-WB North Jenin
No-man’s Land Areas, IEC Injection Point
Armistice Demarcation Line, 1949 in North
Governorate Boundaries WEST BANK
Administrative Boundary NORTH Tubas
Tulkarm
International Boundaries
Nablus
Qalqilyah
Salfit
M e d ite r r a ne a n
JORDAN
Sea IEC-WB Central WEST BANK
IEC Injection Point Ramallah
in Center
CENTRAL
Jericho Jordan-WB
IEC-Gaza Jerusalem A.R. Egypt-WB
IEC Injection Point I SR A EL Imports from Jordan
in Gaza Bethlehem and A.R. Egypt
IEC-WB South Dead Sea
Jabalya IEC Injection Point Hebron
Gaza City in South
GAZA WEST BANK
Deir el Balah SOUTH
Khan Yunis
Rafah
A.R. Egypt-Gaza
ARAB REP. Injection Point
OF EGYPT for A.R. Egypt Imports
Securing Energy for Development in the West Bank and Gaza | 179
CapBal i, g, y capacity balance
CapBal1 i, g, y capacity balance
MaxBuild i, g
MinCapReserve b, y minimum capacity reserve
JointFuel i, g, y, t
MaxCFGen i, g, y maximum capacity factor limit for each generator (ex-
The model used for the West Bank and Gaza
cept is a • Generation: Operational characteristics of
import)
GAMS-based, least-cost planning tool that is in generation plants, such as thermal efficiency,
MaxCFImp i, g, y maximum capacity factor limit for each import source
many ways, simpler to populate (through an Excel maximum utilization factors, and so on
FuelBal
front fuel balance • Transmission: Transfer-capacity limits between
i, f, y than commercial
end) and easier to customize
FuelLimitCon
tools, i, f, y
as algorithms and procedures gasbe
can limits
built zones and associated losses
around the basic model to deal with uncertainties.
CapitalConstraint total capital
5 on new investment is constrained
Given i, g,and
the sparse data available
REProfileConsSolar y, tthe wide range
Solar of The main output of the model is a set of generation
profile
uncertainties the
necessary for i,
REProfileConsCSP g,analysis,
y, t this flexibility options and their associated timing, dispatch levels,
CSPprofile
critical.
is REProfileConsWind i, g, y, t CSP profile and residual or unmet demand. From this, the average
eTotalIECWB y total importscost fromof generation per year (or block of the load
IECto WB
Mathematical Description of the LP Model duration curve), associated emissions, total system
eTransferLimit i, j, y, t zonal transfer limit
This section briefly describes the LP least-cost costs, CAPEX requirements, and reserve margins,
RECapAreaC
planning model at the core controlThe
y of the analysis. total capacity of installed
among others, RE
can be calculated.
RepairCap g, y restore
deterministic least-cost planning model takes into capacity at a cost
consideration
TotalRepairs the following as
g, yinput: The objective
total repair costcarried function
through to years
- other be minimized is the
TotalRepairs1 g, y total repair cost carried net
discounted cost (at
through a rate
- year 1 of 10 percent) for the
• Cost:
eVRECapex Investment costs for
n, g,generation
y expansion, capex
Annualized planning periodsources
forVRE and is calculated as shown in EQ 1.
fuel prices, and fixed
eLimitIsraelImports b, y and variable operation and
Limit Israeli imports into WB
maintenance costs
eEqualizeIECWB1 y Distribute IECimports equally (for when there are no
• Load: Load forecasts in the form of load duration
curves for the planning years transmisison constraints)
eEqualizeIECWB2 y
Strategy5Con b, f, y constrain max gen by fuel to 50%
EQ Set 1: Objective Function
Equation Definitions
Obj
1
cost = ( (ord(y)−1)
·( (CRFN R · capN R,y · GenDataN R,CAPEXperkW ) · 1000 +
y (1 + r) NR
what is going on here n,RE VRECapexn,RE,y + (capg,y ·GenDatag,FOMperMW )+ (vImportReservesIM,y ·
g IM
ReserveImportsIM,y )+ (CumRepairg,y ·CRFrg ·GenDatag,CostOfRepair )·1000+ ( (Geni,g,f,y,t ·
g i,g,f |mapg,f t
Durationt · VCg,y,f ))+ ( (Geni,g,f,y,t · Durationt · GenEmisg,f ))[IncludeCO2Price]+
i,g,f |mapg,f t
( (Geni,g,f,y,t · Durationt · GenDatag,VOM )) + (USE1i,y,t · Durationt · VoLLy ) +
i,g,f |mapg,f t i,t
3
180 | Securing Energy for Development in the West Bank and Gaza
Symbols
Where the sets and decision variables are defined as follows :
Sets
Sets:
Name Domains Description
Name Domains Description
AreaCAccess2
i, j i nodes
IECEnergyShare min share of IEC imports
g g generators
VoLLReserve y reserve cost of reserve shortfall in dollar per MW
t t time increment of LDC
RECapex g, y RE capex
f f fuel type
MaxIECImports y random limits of imports
y * years
CRF g cost recovery factor
map g, f
CRFr g cost recovery factor for repair works
s * fuel price scenarios
pTransferLimit i, j, y transfer limit
b b states
DestroyedCap g, y fraction of capacity destroyed in a year
IM g imports as generators
VoLL y value of lost load in dollar per MWh
EX f export fuels
AvailableLand y land granted in Area C
NE f nonexport fuels all fuels apart from exports
LoadGrowthFactor i, y used in Monte Carlo
RE g renewables
ReserveImports g, y cost of holding import reserves
GE g generators
Availability g, y unit availability
NR g nonRE generators
ImportVolume f, y volume of imports
PV g PV technologies
FuelLimit s, f, y fuel limit
te te genertor technologies
FuelLimitFactor f, y used in Monte Carlo
mapbi b, i map nodes to territories
VC g, y, f variable cost in $ per MWh
mapij i, j map nodes
GenEmis g, f CO2 emissions in tons per MWh
mapig i, g map nodes to generators
ReserveContribution g, y contribution of imports to reserves
AreaC g Area C PV and CSP
EEScalingFactor y
IEC g Israel imports
n *
Variables
Decision variables:
Parameters
Name Domains Description
Gen i, g, f, y, t generation per unit per year per LDC pointin MW
Name Domains Description
cap g, y installed capacity in year y in MW
TechIndex te
Build i, g, y Build new capacity MW in year y
CSPProfile t, i
VRECapex n, g, y Annualized RE capex carried from Nth year to last year
Duration t
in USD
GenData g, *
Retire i, g, y Retire existing capacity
LandUse te
USE i, y, t unmet demand in MW
LDCBase i, t, y
USE1 i, y, t unserved energy in MW
PVProfile t, i
Unmetreserve b, y reserve capacity shortfall
WindProfile t, i
Surplus i, y, t surplus power (to get around the min load constraint!)
SetStrategy planning strategy
Fuel i, f, y fuel consumption in MMBTU
IncludeCO2Price
Tran i, j, y, t power transfer from zone i to j in MW
IncludeEnergyEfficiency
cost total system cost in billion USD
MaxCapital max gen investment in billion dollars
Repair g, y capacity to be repaired by year after year 1
r discount rate
vImportReserves g, y imported reserves in MW
DumpPrice cost of surplus or dump power in dollar per MWh
CumRepair *, *
lossfactor net energy interchange in pu
ReserveMargin system reserve margin in pu
Equations
1
Securing Energy for Development in the West Bank and Gaza | 181
2
The sum of Cap*CAPEXperkW determines the total Sum of GenEmis*CO2Price adds the cost of
annualized investment for all thermal generators in CO2 emissions if required and is set by the flag
a particular year. The cost recovery factor (CRF) is IncludeCO2Price. CO2 prices are not included in the
calculated using a weighted average cost of capital analysis for the West Bank and Gaza.
(WACC) of 10 percent.
In addition to regular costs, the objective function
For renewable energy (RE) plants, a separate term, includes penalties associated with violation of
BuiltRE, adds the annualized CAPEX requirements demand constraint, VoLL, which is set at US$750 per
to the(Surplus
objective i,y,t · Duration
function. t · has
This DumpPrice) +
been separated Unmetreserve
megawatt hour b,y · VoLLReserve
(MWh) y ))1000000
for this study, and reserve limit,
asi,t
a new variable because the CAPEX for RE plants b VoLLReserve, which is set at US$5,000 per kW in this
changes with time. Any new installation therefore study. Mathematically, the unserved energy variable
applies
CapBal the CAPEX requirements for the year of relaxes the demand balance constraint to avoid
i,g,y
installation calculated in a separate equation. infeasibility in time periods with excess demand. In
capg,y = capg,y−1 + Buildi,g,y − Retirei,g,y i, an
practice, it∀is g, yindirect measure
| ((ord(y) > 1)of ∧system reliability.
mapigi,g )
The sum of Cap*FOMperMW adds the fixed operating Its valuation is an economic concept that indicates
and maintenance costs for all generators per installed the willingness to pay by electricity consumers to
CapBal1i,g,y VC + VOM together make up the avoid supply interruption (Electricity Commission
kW every year.
short-run
capg,y = marginal
Buildi,g,y − for
cost each generator, VC being ∀i,
Retire 2008). The study
g, y | ((ord(y) = 1)reports VoLL to be as high
∧ GenData as
i,g,y g,CAPEXperkW )
the cost of fuel and VOM being variable operating and US$44,500 per MWh in Australia and US$960 per
maintenance costs. MWh for Chile. Mathematically, because of the role
RepairCapg,y this plays in balancing demand and supply, the value
The sum of CumRepair*CostOfRepair adds a for lost load needs to be high enough to prevent the
Repair
cost g,y = cap
whenever g,y · DestroyedCap
there is damage to g,y a plant. The model from curtailing load as a means of ∀ g, y
minimizing
CostOfRepair is assumed to be a third of the CAPEX, system costs. The selected VoLL is set at the cost of
and CumRepair carries the total annualized repair self-generation through portable household gasoline
TotalRepairs g,y
costs through the planning horizon. Repair costs are generators.
assumed
CumRepair to be recovered
g,y = CumRepairover 12 g,yyears
−1 + (irrespective
Repairg,y ∀g, y | (ord(y) > 1)
of the plant). 6
The objective function is minimized subject to various
constraints described here:
TotalRepairs1g,y
(Surplusi,y,t · Durationt · DumpPrice) + Unmetreserveb,y · VoLLReservey ))1000000
CumRepair
i,t g,y = Repairg,y b ∀g, y | (ord(y) = 1)
EQ Set 2: Capacity Balance and maximum build capacity
CapBali,g,y
MinCapReserveb,y
capg,y = + Build
( capg,y−1(cap i,g,y − Retirei,g,y ∀i, g, y | ((ord(y) > 1) ∧ mapigi,g )
g,y · ReserveContributiong,y )) + Unmetreserveb,y ≥ (1 + ReserveMargin) ·
i|mapbib,i g |mapigi,g
CapBal1
max{ i,g,y LDCBasei,t,y t} ∀b, y
capg,yi|=
mapbib,i
Buildi,g,y − Retirei,g,y ∀i, g, y | ((ord(y) = 1) ∧ GenDatag,CAPEXperkW )
MaxBuild
RepairCapi,g
g,y
Build
Repair = cap
g,y i,g,y ≤ g,y
GenData
· DestroyedCap
g,Pderated g,y ∀i, g | GenDatag,CAPEXperkW
∀g, y
y
TotalRepairsg,y
eVRECapexn,RE,y
CumRepairg,y = CumRepairg,y−1 + Repairg,y ∀g, y | (ord(y) > 1)
VRECapexn,RE,y = VRECapexn,RE,y−1 + (Buildi,RE,y · RECapexRE,y · CRFRE ·
i|(ord(y)=n.val)
TotalRepairs1g,y
1000) ∀n, RE, y | (ord(y) > 1)
CumRepairg,y = Repairg,y ∀g, y | (ord(y) = 1)
Capacityi,g,y,t
MinCapReserveb,y
Geni,g,f,y,t ≤ capg,y ∀i, g, y, t
f | map g,f ( (cap g,y · ReserveContribution
182 | Securing Energy for Development in the West Bank and Gaza
g,y )) + Unmetreserve b,y ≥ (1 + ReserveMargin) ·
i|mapbib,i g |mapigi,g
max{ LDCBase t} ∀b, y
JointFueli,IM,y,t
Geni,IM,f,y,t ≤ capIM,y ∀i, IM, y, t
f |mapIM,f
MaxCFGeni,GE,y
First, the dynamic links across the years is captured horizon is restricted to the planned capacity addition.
in the first equality
( (Gen constraint that defines the variable Additionally, constraints ensure new plants are
i,GE,f,y,t · Durationt )) ≤ capGE,y · 8760 · GenDataGE,MaxCF · AvailabilityGE,y
Cap . Capacity
f |mapGE,f t may be augmented by building new not mothballed and existing capacity is included.
units (that
∀i, GE, y is, Build ), or it can be mothballed (Retire). Finally, the capacity addition, annual capacity, and
Second,
JointFuel first-year capacity is restricted to the power output are subject to a set of conditions as
the i,IM,y,t
existing capacity, and the total capacity that can represented by the last two constraints.
be built forGen
MaxCFImp a newi,IM,ystation
i,IM,f,y,t over
≤ cap the entire planning
IM,y ∀i, IM, y, t
f |mapIM,f
( (Gen
EQ Set 3: Capacity i,IM,f,y,t · Limits
Utilization Durationt )) ≤ capIM,y · 8760 · GenDataIM,MaxCF · AvailabilityIM,y ·
f |mapIM,f t
MaxCFGeni,GE,y
ImportVolumeEX,y ∀i, IM, y
( (Geni,GE,f,y,t · Durationt )) ≤ capGE,y · 8760 · GenDataGE,MaxCF · AvailabilityGE,y
EX |mapIM,EX
f |mapGE,f t
∀ i, GE, yi,f,y
FuelBal
Geni,g,f,y,t · Durationt
Fueli,f,y = i,IM,y
MaxCFImp ( ( )) ∀i, f, y
t
0.293071 · GenDatag,Efficiency
g |mapg,f
( (Geni,IM,f,y,t · Durationt )) ≤ capIM,y · 8760 · GenDataIM,MaxCF · AvailabilityIM,y ·
f |mapIM,f t
FuelLimitConi,N E,y
ImportVolumeEX,y ∀i, IM, y
Fuel
EX |map E,y ≤
i,NIM,EX FuelLimit1,N E,y · FuelLimitFactorN E,y ∀i, N E, y
eTotalIECWB
FuelBal i,f,y y
Geni,g,f,y,t · Duration
≤+
(capIEC,y
(Surplus +·vImportReserves
Duration IEC,y )
( ( t · DumpPrice) MaxIECImports )) y ·b,y
Unmetreserve ImportVolume
· VoLLReserve y ))1000000 ∀yy
t
Fuel i,f,y =
i,y,t ∀,y
IsraelImport i, f,
IEC
i,t
t
0 . 293071 · GenData g, b
Efficiency
g |mapg,f
Generation
CapBal from all units (existing
eEqualizeIECWB1
i,g,y y and new) is limited by are limited to import caps and the availability of the tie
FuelLimitCon
the maximum capacity factors on the Cap. Availability line. This is defined by the second equation. The third
i,N E,y
cap
theg,y
isFuel = capg,y
maximum
Israel-WBS −1cap
= + Build
,y capacity factor,
Israel-WBC − Retire
i,g,y and
,y i,g,y of the
it is one ∀i, g, y |
equation ensures ((ord(y)
that sum of 1) ∧ mapig
>imports from ∀ y
) to
Israel
i,g
i,N E,y ≤ FuelLimit1,N E,y · FuelLimitFactorN E,y ∀i, N E, y
random parameters sampled. Imports (which are the three zones of West Bank do not exceed Israel-
modelled as generators running on an “import fuel”), West Bank import cap.
eEqualizeIECWB2
CapBal1i,g,y y
eTotalIECWBy
cap
EQ Set
Israel-WBC
g,y 4:
=Destroyed
Build = cap
,y i,g,y Capacity
− Retirei,g,y
Israel-WBN ,y ∀y
∀i, g, y | ((ord(y) = 1) ∧ GenDatag,CAPEXperkW )
(capIEC,y + vImportReservesIEC,y ) ≤ MaxIECImportsy · ImportVolumeIsraelImport,y ∀y
IEC
eTransferLimit
RepairCap g,y i,j,y,t
Trani,j,y,t
g,y =≤ cap
pTransferLimit
eEqualizeIECWB1
Repair g,y · DestroyedCap
y i,j,y g,y ∀i, j, y, t | mapij
∀g,i,j
y
capIsrael-WBS,y = capIsrael-WBC,y ∀y
TotalRepairsg,y
eEqualizeIECWB2
CumRepairg,y = CumRepair
y g,y −1 + Repairg,y ∀g, y | (ord(y) > 1)
capIsrael-WBC,y = capIsrael-WBN,y ∀y
TotalRepairs1g,y
5
eTransferLimit
CumRepairg,y = Repair
i,j,y,t g,y ∀g, y | (ord(y) = 1)
Trani,j,y,t ≤ pTransferLimiti,j,y ∀i, j, y, t | mapiji,j
MinCapReserveb,y
( (capg,y · ReserveContributiong,y )) + Unmetreserveb,y ≥ (1 + ReserveMargin) ·
i|mapbib,i g |mapigi,g
max{ LDCBasei,t,y t} ∀b, y
Securing Energy for Development in the West Bank and Gaza | 183
i|mapbib,i
5
( (Geni,IM,f,y,t · Durationt )) ≤ capIM,y · 8760 · GenDataIM,MaxCF · AvailabilityIM,y ·
f |mapIM,f t
ImportVolumeEX,y ∀i, IM, y
EX |mapIM,EX
Major outages
FuelBal i,f,y
due to damage incur a cost, and the plant out of service. These repairs incur a cost to
probability of damage is defined as another uncertain the system that is amortized over 12 years. The first
Geni,g,f,y,t
parameter. DestroyedCap is a fraction · Durationt equation calculates the destroyed capacity in a year.
that represents
Fueli,f,y = ( ( )) ∀i, f, y
0.293071 For
the installed capacity destroyed. distributed
· GenData The second and third calculated total repairs for all
g,Efficiency
g |mapg,f t
generation sources, damage has less of an impact years and the first year respectively. It is this variable
and DestroydCap is small. Centralized units are more that is multiplied by the per kW repair costs in the
exposed to the risk
FuelLimitCon of damage that takes the entire objective function.
i,N E,y
Fueli,N E,y ≤ FuelLimit1,N E,y · FuelLimitFactorN E,y ∀i, N E, y
EQ Set 5: Zonal Balance
eTotalIECWBy
DemBalBasei,y,t
(capIEC,y + vImportReservesIEC,y ) ≤ MaxIECImportsy · ImportVolumeIsraelImport,y ∀y
Geni,g,f,y,t +USEi,y,t +USE1i,y,t − Surplusi,y,t + (Tranj,i,y,t · 0.97) − Trani,j,y,t =
IEC
g,f |mapg,f j j
LDCBasei,t,y · EEScalingFactory ∀i, y, t | IncludeEnergyEfficiency
eEqualizeIECWB1y
cap Israel-WBS,y =i,y,t
DemBal1Base capIsrael-WBC,y ∀y
Geni,g,f,y,t +USE1i,y,t −Surplusi,y,t + (Tranj,i,y,t ·lossfactor)− Trani,j,y,t =
eEqualizeIECWB2y
g,f |(mapg,f ∧mapigi,g ) j |mapiji,j j |mapiji,j
LDCBase i,t,y,y = capIsrael-WBN,y
capIsrael-WBC ∀i, y, t | (IncludeEnergyEfficiency = ∀
0)y
CapitalConstraint
eTransferLimiti,j,y,t
( i,j,y,t
Tran (Buildi,g,y · GenData
≤ pTransferLimit g,CAPEXperkW ))
i,j,y ∀i, j, y, t | mapiji,j
y i,g
1000 ≤ MaxCapital · 1000
eLimitIsraelImports W est Bank ,y
By Kirchoff’s First Law (also known as KCL Kirchoff’s Demand is one of IECEnergyShare the key random parameters in the
current law), the total line flows (Gen and out ·
into i,IEC,f,y,t of model.t )
Duration ≤ (1a−
Given · ord(y))
distribution of peak and energy, · the
15
node must
a IEC,i,f,t |(mapbiequal
West Bank,ithe
∧map difference
IEC,f ) between the 5 random sampling process draws a demand profile for
generation flowing into the node and the off-takes.
(LDCBasei,t,y · Durationt · LoadGrowthFactoreach of the load blocks, and the dispatch optimization
i,y ) ∀ W est Bank , y | ((ord(y) +
Thus, the nodal balance constraints equate demand, is repeated for each such demand sample (along with
i,t|mapbiWest Bank,i
generation, losses, and electricity flows to and from other random parameters). The first equation is used
2015)
the node. AreaCAccess2)
>Generation deficit violation variables (USE1) in energy-efficiency scenarios, and the second is used
are also included to deal with those rare situations in when energy efficiency is not part of the scenario.
which the system may be unable
REProfileConsSolar i,P V,y,tto meet the load at
a node, due to a general shortage of generation or to The third equation limits transfers to the capacity of
transmission Gen system failure.≤
i,P V,f,y,t Lines conventional
have a t,i
PVProfile · capP V,y the transmission corridor (pTransferLimit ) which
∀i, P V, y, t is
direction
f |mapigi,Passociated
V
with them. A positive Tran variable also randomly sampled.
represents power flowing into the node for some lines
and power flowing out for others. A fraction of the loss
REProfileConsCSP
(LS ) is attributed to the load end of the line.
i,g,y,t
Geni,g,f,y,t ≤ CSPProfilet,i · capg,y ∀i, g, y, t | (GenDatag,Type = 7)
f |mapigi,g
REProfileConsWindi,g,y,t
Geni,g,f,y,t ≤ WindProfilet,i · capg,y ∀i, g, y, t | (GenDatag,Type = 8)
f |mapigi,g
184 | Securing Energy for Development in the West Bank and Gaza
RECapAreaCy
TotalRepairsg,y
CumRepairg,y = CumRepairg,y−1 + Repairg,y ∀g, y | (ord(y) > 1)
TotalRepairs1g,y
EQ Set 6: Reserve
CumRepair Requirements
g,y = Repairg,y ∀g, y | (ord(y) = 1)
MinCapReserveb,y
(
JointFueli,IM,y,t (capg,y · ReserveContributiong,y )) + Unmetreserveb,y ≥ (1 + ReserveMargin) ·
i|mapbib,i g |mapigi,g
max{ Geni,IM,f,y,t
LDCBase ≤i,t,y
capt }
IM,y ∀i, IM, y,y
∀b, t
f |mapIM,f
i|mapbi b,i
MaxCFGen
MaxBuild i,g i,GE,y
Reserve is modelled for each territory (b). Although frequency falls, and generators with spinning
Build(
provision of regulation
i,g,y
(Gen
≤ GenData
i,GE,f,y,t · Durationt ))
is fundamentally
g,Pderated
≤ capGE,y
different from· 8760 · GenData
reserve respond
∀i, g MaxCF
GE, · Availability
|under ‘free
GenData GE,y action.” In the
governor
g,CAPEXperkW
provision of contingency reserve, and the former is longer time frame, generators that are not currently
f |
y map GE,f t
∀i, GE,
also y
governed by an additional set of constraints in synchronized may synchronize and commence
real-time,
eVRECapex the nature of constraints that are relevant generation. ReserveContribution is a factor that
n,RE,y
in a long-term
MaxCFImp planning framework is largely similar determines available capacity that contributes to the
i,IM,y
across
VRECapex n,RE,y and
regulation reserve. Contingency
= VRECapex n,RE,y −1 + reserve reserve requirements.
(Buildi,RE,y · RECapexRE,y · CRFRE ·
response( is expected to occur
(Geni,IM,f,y,t automatically
· Durationt )) ≤ cap when
IM,y · 8760 · GenDataIM,MaxCF · AvailabilityIM,y ·
i|(ord(y)=n.val)
f |mapIM,f t
1000) ∀n, RE, y | (ord(y) > 1)
ImportVolumeEX,y ∀i, IM, y
EX |Set
EQ 7: Fuel Consumption and Constraints
mapIM,EX
Capacityi,g,y,t
Geni,g,f,y,t ≤ capg,y
FuelBal ∀i, g, y, t
i,f,y
f |mapg,f
Geni,g,f,y,t · Durationt
Fueli,f,y = ( ( )) ∀i, f, y
t
0.293071 · GenDatag,Efficiency
g |mapg,f
FuelLimitConi,N E,y 4
Fueli,N E,y ≤ FuelLimit1,N E,y · FuelLimitFactorN E,y ∀i, N E, y
JointFueli,IM,y,t
eTotalIECWB y
Gen ≤ cap ∀i, IM, y,
≤ MaxIECImportsy · ImportVolumeIsraelImport t
(capIEC,y i,IM,f,y,t IM,y IEC,y )
+ vImportReserves ,y ∀y
f |mapIM,f
IEC
MaxCFGeni,GE,y y
eEqualizeIECWB1
capIsrael-WBS
The first equation
( ,y = cap
(Gen defines
Israel-WBC
i,GE,f,y,t · Duration
the t )) ≤ capGE,y
fuel consumption
,y as a· 8760 · GenDataFor
companies. GE,MaxCF · Availability
this stage ∀y
of the GE,y
planning exercise,
function of the generation from that type of fuel across we do not impose take-or-pay constraints, even
f | map GE,f t
∀i,
all generating
GE, y
eEqualizeIECWB2 units over all load duration curve blocks though this is likely to be the case for gas supply. Our
y
in that year. We have assumed a constant heat rate objective at this stage is to establish what volume of
capIsrael-WBC
over the entire ,y = capIsrael-WBN
generation range,y of a generator, but gas for the power sector is least cost. ∀y This, together
MaxCFImp i,IM,y
this can be changed to represent the detailed heat with other domestic uses of gas in the West Bank
rate characteristic
( (Gen
eTransferLimit of the unit
i,IM,f,y,t
i,j,y,t using a piecewise
· Duration linear
t )) ≤ capIM,y and
· 8760 Gaza, will
· GenData inform
IM,MaxCF the structure
· Availability IM,yof· any take-or-
f |mapIM,f The second constraint is a simple bound
function. t pay contract, the details of which will need to be
Tran
on the ≤ pTransferLimit
maximum amount of fuel that is available in thoroughly analyzed. ∀i,
Thej, y, t | mapij
third
i,j,y,t
ImportVolume i,j,y
EX,y y ensures that
∀constraint
i, IM,i,j
a year. It is also possible to represent any take-or- total generation in every load block does not exceed
EX |mapIM,EX
pay fuel contracts for individual generating stations or rated capacity.
FuelBali,f,y
Geni,g,f,y,t · Durationt
Fueli,f,y = ( ( )) ∀i, f, y
0.293071 · GenDatag,Efficiency
g |mapg,f t 5
Securing Energy for Development in the West Bank and Gaza | 185
FuelLimitConi,N E,y
Fueli,N E,y ≤ FuelLimit1,N E,y · FuelLimitFactorN E,y ∀i, N E, y
eLimitIsraelImports W est Bank ,y
IECEnergyShare
(Geni,IEC,f,y,t · Durationt ) ≤ (1 − · ord(y)) ·
15
IEC,i,f,t|(mapbiWest Bank,i ∧mapIEC,f )
(LDCBasei,t,y · Durationt · LoadGrowthFactori,y ) ∀ W est Bank , y | ((ord(y) +
i,t|mapbiWest Bank,i
EQ Set 8: Variable Renewable Energy Profiles
2015) > AreaCAccess2)
REProfileConsSolari,P V,y,t
Geni,P V,f,y,t ≤ PVProfilet,i · capP V,y ∀i, P V, y, t
f |mapigi,P V
REProfileConsCSPi,g,y,t
Geni,g,f,y,t ≤ CSPProfilet,i · capg,y ∀i, g, y, t | (GenDatag,Type = 7)
f |mapigi,g
REProfileConsWindi,g,y,t
Geni,g,f,y,t ≤ WindProfilet,i · capg,y ∀i, g, y, t | (GenDatag,Type = 8)
f |mapigi,g
RECapAreaCy
These equations define the limits of generation from types of variable renewable energy (VRE)—PV, CSP
(capAreaC,y · LandUsete ) ≤ AvailableLandy ∀y
variable RE sources. REProfile is the maximum and wind—have unique profiles.
AreaC,te|(GenDataAreaC,Type =TechIndexte )
utilization of the RE plant in every time block. All three
EQ Set 9: Combined Solar and PV Capacity Cannot
6 Exceed Total Land Available
JointFueli,IM,y,t
Geni,IM,f,y,t ≤ capIM,y ∀i, IM, y, t
f |mapIM,f
MaxCFGeni,GE,y
INPUT PARAMETERS Renewable
( (Geni,GE,f,y,t · Durationt )) ≤ capGE,y · 8760 energy
· GenData sources
GE,MaxCF could GE,y
· Availability be a significant
f |mapGE,f t part of the energy mix in the West Bank and Gaza,
In∀this section,
i, GE, y we describe the main inputs required with total potential of between 3,100 and 4,000
for the model including the RE profiles, load blocks, MW (depending on the share of CSP and PV. See
and generator data.
MaxCFImp table H.3). There is considerable technical potential
i,IM,y
for solar PV and CSP (at least 98 percent of RE
Generator ( Data potential),
(Geni,IM,f,y,t · Durationt )) ≤ capIM,y · 8760 · GenDatabut the
IM, bulk
MaxCF · (at least 76 percent
Availability IM,y · of potential
f |mapIM,f t solar generation) is in Area C of the West Bank and
Generators are defined by the parameters defined in can be realized only if Israel grants
ImportVolume y to the land.
access
∀i, IM,
EX,y
table H.2.
EX |mapIM,EX
The Gaza Power Plant (GPP) is the only The technical potential for gas- or diesel-fired plants
operating power plant. The installation costs for depends on the volume of fuel.
variable VRE technologies are modeled to reduce
cover
FuelBal planning horizon. The rate at which
thei,f,y
VRE prices reduce is sampled and discussed in a
Gen i,g,f,y,t · Durationt
later
Fuelsection.
i,f,y = ( ( )) ∀i, f, y
t
0.293071 · GenDatag,Efficiency
g |mapg,f
FuelLimitConi,N E,y
Fueli,N E,y ≤ FuelLimit1,N E,y · FuelLimitFactorN E,y ∀i, N E, y
eTotalIECWB y for Development in the West Bank and Gaza
186 | Securing Energy
(capIEC,y + vImportReservesIEC,y ) ≤ MaxIECImportsy · ImportVolumeIsraelImport,y ∀y
TABLE H.2: GENERATOR PARAMETERS
FUEL INSTALLATION FIXED VARIABLE CONTRIBUTION BASE MAX HEAT
COST (2018) O&M O&M TO RESERVE* UNIT REPAIR RATE
SIZE COSTS
US$ PER KW US$ US$ PER % MW US$ PER MMBTU
PER MWH KW PER
KW MWH
PER
YEAR
Rooftop PV Solar 2,591 15 0.0 0.0 0.0 864 0.0
(PVr)a
Utility PV Solar 1,646 13 0.0 0.0 0.5 549 0.0
(PVc)a
Concentrated Solar 5,552 59 10.0 0.8 10.0 1,851 0.0
solar power
or thermal
(CSP)a
Wind (Wind)a Wind 1,863 51 0 0.0 1.0 621 0.0
Biogas (Bio)d Landfill/ 3,942 107 5.0 1.0 2.0 1,314 14.5b
manure
Distributed Diesel 800 15 15.0 1.0 2.0 263 10.0
diesel genset
(DiesGenb
Combined Gas/ 1,300 6.2 3.5 1.0 140.0 433 6.7
cycle gas diesel
turbine (CC)b
Simple cycle Gas/ 1,000 25 7.5 1.0 100.0 333 9.0
gas turbine diesel
(GT)b
Imports from 5 0.0 Scenario 0.0 0.0
Jordanc
Imports from 5 0.0 Scenario 0.0 0.0
Israelc
Imports from 5 0.0 Scenario 0.0 0.0
Egyptc
Sources: a team estimates based on NREL Annual Technology Baseline; b high end of Lazard’s levelized cost of energy
analysis (version 9.0); c team estimates; d International Energy Agency, World Energy Outlook.
Note: O&M = operations and maintenance.
* A factor that determines available capacity that contributes to the reserve requirements. PV and wind, for example, are not firm and do not contribute to the
reserve margin in the analysis.
Securing Energy for Development in the West Bank and Gaza | 187
TABLE H.3: POTENTIAL GENERATOR CAPACITIES
Gaza Potential capacity (MW)
Rooftop photovoltaic (PVr) 163
Biogas (Bio) 2
Distributed diesel genset (DiesGen) Unconstrained
Combined cycle gas turbine (CC) Unconstrained
Simple cycle gas turbine (GT) Unconstrained
West Bank North Potential capacity (MW)
Rooftop photovoltaic (PVr) 210
Commercial photovoltaic (PVcAB) - Areas A and B 14
Wind (WindC) - Area C 9
Biogas (Bio) 10
Distributed diesel genset (DiesGen) Unconstrained
Combined cycle gas turbine (CC) Unconstrained
Simple cycle gas turbine (GT) Unconstrained
West Bank Central Potential capacity (MW)
Rooftop photovoltaic (PVr) 194
Commercial photovoltaic (PVcAB) - Areas A and B 7
Commercial photovoltaic (PVcC) - Area C 3,200
Concentrated solar power/thermal (CSP) - Area C 2,424
Biogas (Bio) 8
Distributed diesel genset (Diesel) Unconstrained
West Bank South Potential capacity (MW)
Rooftop photovoltaic (PVr) 131
Commercial photovoltaic (PVcAB) - Areas A and B 14
Wind (WindC) - Area C 36
Biogas (Bio) 7
Distributed diesel genset (DiesGen) Unconstrained
Combined cycle gas turbine (CC) Unconstrained
Simple cycle gas turbine (GT) Unconstrained
Source: Team estimates.
While there continues to be several discussions with optimized to minimize system costs within export
potential investors and the Palestinian Authority around limit constraints and gives the minimum transfer
new sources of generation, such as the Jennin power capacity when sizing the connection. Import sources
plant, there are no committed generation projects, so considered are shown in table H.4.
we do not include specific candidate projects in the
plan. We instead use generic generators to determine Under 2018 cost conditions, solar PV has the lowest
the capacities of various technologies that are robust. levelized cost of energy (LCOE) of all technologies
available, as shown in figure H.4. At low utilization
Electricity imports are modelled as generators with rates, diesel has the lowest, costs making it a good
no CAPEX requirements. The fuel fixed operations candidate for providing backup services. This also
and maintenance costs include the cost of providing means frequent outages, which affect the availability
ancillary services to the West Bank and Gaza, which of plants, increases average system costs.
is priced at US$12 MWh. The capacity is therefore
188 | Securing Energy for Development in the West Bank and Gaza
TABLE H.4: CURRENT CAPACITY AND PRICING OF ELECTRICITY IMPORTS
FROM TO CURRENT CAPACITY (MW) 2016 PRICE (US$ PER MWH)
Israel West Bank 800 90.0
Israel Gaza 120 90.0
Jordan West Bank 30 95.9
Egypt Gaza 10 50.0
Egypt West Bank (through Jordan) 0 N/Aa
Source: Team estimates.
a There is currently no power import from Egypt to the West Bank, but this could include the cost of generation of US$81 per MWh to Egypt and US$6.5 per
MWh wheeling charges to Jordan based on current transmission wheeling charges for renewables in Jordan at 4.6 Jordanian fils per kWh.
Figure H.4: Comparison of LCOE in U.S. Cents per kWh for Technology Options
400 2018
350
300
250
200
150
100
50
0
2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 34% 36% 38% 40%
Notes: CAPEX and O&M as shown in table H.3: Diesel = 21 US$ per MMBTU; WACC = 10%; 20-year life for PV and 30 for all others.
300 2025
250
200
150
100
50
0
2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 34% 36% 38% 40%
Notes: CAPEX and O&M as shown in table H.3: Diesel = 34.2 US$ per MMBTU; Gas = 5.5$ per MMBTU; WACC = 10%; 20-year life for PV and
30 for all others
Egypt-Gaza Jordan-West Bank IEC CSP Utility PV GT - Gas CCGT - Gas Distributed Diesel
Securing Energy for Development in the West Bank and Gaza | 189
Figure H.5: Forecast Demand and Peak Load in West Bank and Gaza
a. Demand forecast: Gaza (GWh) b. Demand forecast: West Bank (GWh)
9,000 9,000
8,000 8,000
7,000 7,000
6,000 6,000
5,000 5,000
GWh
GWh
4,000 4,000
3,000 3,000
2,000 2,000
1,000 1,000
0 0
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
High Case Central Case Low Case
c. Peak load forecast: Gaza (MW) d. Peak load forecast: West Bank (MW)
900 1,600
800 1,400
700 1,200
600
1,000
500
MW
MW
800
400
600
300
200 400
100 200
0 0
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
High Case Central Case Low Case
As the utilization rate increases, the high cost of Demand Data
diesel makes these far less attractive. Scale efficient
units like CCGTs become more cost effective. We The demand forecast developed shows a wide
also see CSP outperforming CCGT running on diesel range of uncertainty in outer years, rising to nearly 40
due to the high cost of diesel. These comparisons percent of the low forecast scenario in 2030. Peak
do not take into account other benefits of the various demand forecast was calculated with an assumed
technologies, such as the provision of ancillary load factor of 60 percent based on historical data
services and system support for thermal units, and from Jerusalem District Electricity Company (JDECO).
avoided generation emissions for renewable energy The resultant peak load is between 1,800 MW and
technologies. A different picture emerges in 2025 2,500 MW in the West Bank and Gaza, respectively
when the CAPEX for solar PV in particular is expected (figure H.5).
to be lower and gas is more likely to be available.
In this scenario, the LCOE for CCGT at 70 percent The peak and energy forecasts were used to develop
utilization is on par with the LCOE for utility-scale PV load blocks for each year in the horizon. (Load blocks
at US$0.54 per kWh at a gas price of US$5.5 per are used to reduce the size of the LP and computing
MMBTU. CSP costs are also lower, with a high end resource requirements.) In the absence of system
LCOE close to 15 US cents per kWh. data, load blocks were developed using simulated
190 | Securing Energy for Development in the West Bank and Gaza
Figure H.6: 24-Hour Profiles from Selected Months for West Bank
Jan Mar May Jul Sep Nov
1.2
1.0
0.8
0.6
0.4
0.2
0.0
0 3 6 9 12 15 18 21 0 3 6 9 12 15 18 21 0 3 6 9 12 15 18 21 0 3 6 9 12 15 18 21 0 3 6 9 12 15 18 21 0 3 6 9 12 15 18 21
Wind CSP PV Demand
hourly load data. Ideally, a year of system hourly load TABLE H.5: DISTRIBUTION OF DEMAND
data is the least requirement to first generate the IN THE WEST BANK
load duration curve and then the load blocks. This ZONE SHARE OF WEST
becomes even more critical if variable renewable BANK DEMAND
resources are included in the model, because the West Bank North 26%
coincidence between hourly load data and renewable West Bank Central 54%
resource availability is important.
West Bank South 20%
For this analysis, we obtained daily load curves for
the winter and summer seasons for the Jerusalem Renewable Energy Data
area from the distribution company (JDECO). This
gives a sense of the daily characteristics of demand. Variable renewable energy technologies considered
The same daily curve was assumed for the West were wind and solar for PV and CSP applications.
Bank and Gaza. The same profile was assumed for Unlike a broad resource assessment for a region,
weekends and weekdays but was shifted downward hourly energy output data is required to ensure
to simulate lower demand on weekend days. We also that output is correctly matched to the various load
obtained monthly energy consumption for the West blocks. The system advisor model from the National
Bank, which gives a sense of the seasonality and Renewable Energy Laboratory (NREL) was used to
month-to-month variations in demand. Combining calculate hourly energy output from resource data for
this data, we generated a rudimentary load duration all three technologies.7
curve that characterizes monthly load and seasonal
day load variations. The load block definition was Solar (PV and CSP): To consider year to year variations
maintained for all forecasted years and every demand in solar data, we use typical meteorological year
growth path (low, medium, high, and robust). (TMY) data provided by various bodies and entities.
TMY data includes monthly data that represent
The demand for West Bank was distributed across typical conditions and is selected from a multiyear
the three zones using historical sales data from the data set.8 The study utilized TMY data from three
distribution companies. Fifty-four percent of the load locations in Israel that are close to West Bank Tel Aviv
was allocated to central West Bank, 26 percent to for northern West Bank, Atarot for central West Bank,
northern West Bank, and 20 percent to southern and Bersheva for southern West Bank. TMY data
West Bank, as shown in table H.5. from Al Arish in Egypt was used for Gaza.9
Securing Energy for Development in the West Bank and Gaza | 191
Wind: Hourly wind speed data is not as readily available Demand
as irradiation data for most locations. To obtain hourly
data for the study, we scaled wind speeds from Demand is sampled between the low forecast and
weather station data (which is typically measured at high forecast. The uncertainty is observed in the rate
approximately 10 meters) to 80 m eters. 10 at which demand will grow. We first select a demand
point in the first year, and then for each subsequent
Understanding the complementarity between wind year we select a demand point between the demand
and solar resources will require several years of data, of the preceding year and the high load forecast
but the daily profiles used show that wind and solar trajectory. This ensures demand increases steadily
output coincide with each other as shown in figure (albeit at an unknown rate) as would be expected in
H.6. CSP could be used to better complement the West Bank and Gaza.
the resources.
Fuel Volumes and Pricing
Other Input Assumptions
Natural gas. Gas from various fields is considered as
Cost of capital. The weighted average cost of capital potential fuel for both Gaza and the West Bank with
is assumed at 10 percent. variable timing, volumes, and pricing: for example,
from different gas fields in Israel available in the north
Discount rate. The discount rate used to determine of West Bank, from Gaza or Egypt in the south of
the system net present value is assumed at West Bank (table H.6). The model is passive to the
10 percent. source of gas and the matrix is simplified, with three
sources of gas: one source for Gaza (GazaGas); one
CHARACTERIZING UNCERTAINTIES for the south of the West Bank (WB_SouthGas, for
plants such as Hebron); and a third source for gas
In this section, we discuss the representation in the north (WB_NorthGas, for plants such as the
of uncertainties in the model. While most of the Jenin). Each source of gas has a range of dates gas
uncertainties stem from the political conditions, others could be expected, an associated range of possible
such as uncertainties around demand forecasts and volumes, and a range of prices. The sampled
fuel prices are common to most power systems. scenarios draw from these ranges to determine
the year gas is available for power production, the
volume, and its price.
TABLE H.6: UNCERTAIN PARAMETERS AROUND GAS SUPPLY FOR POWER
GENERATION: TIMING, VOLUME, AND PRICING
AVAILABLE FOR POWER ANNUAL VOLUME (BCM) PRICE (US$ PER MMBTU)
Earliest Latest Min Max Min Max
Gaza gas 2022 2035 0.2 2.0 4.00 7.50
WB North gas 2021 2035 0.2 2.0 4.00 6.50
WB South gas 2024 2035 0.2 2.0 4.00 7.50
Source: Team estimates.
Note: bcm = billion cubic meters; MMBTU = million British thermal units.
192 | Securing Energy for Development in the West Bank and Gaza
Figure H.7: Diesel Price Range
1.8
1.6
1.4
1.2
1.0
$/liter
0.8
0.6
0.4
0.2
0.0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Upper bound Base case Lower bound
The sampled volume is the maximum annual volume of Import Volumes and Pricing
gas used for the planning horizon. For example, if the
sampled parameters for Gaza gas are 2025 available Two forms of uncertainties are simulated for power
year, 1.3 billion cubic meters (bcm) volume and price imports: (i) when import limits could increase due to
of 5.2 $ per MMBTU, there is no gas available in the changes in the West Bank and Gaza’s network to
model until 2025 and 1.3 bcm available from 2025 at accept higher imports or changes in the generation
a price of 5.2 $ per MMBTU. and network capacity of exporting countries to be able
to export more power and (ii) import prices following a
Diesel. The volume of diesel is unconstrained in the change in import volumes.
model unless an incident reduces supply. Shortages
in the past have largely been due to the inability to We first sample a year when anticipated changes
pay for fuel. Future diesel prices follow the trajectory in the networks allow for increased power imports.
for international oil price forecasts. Between 2000 Capacity before this year is fixed at current levels and
and 2015, oil prices in real 2010 U.S. dollars ranged then allowed to increase to an upper limit from the
between $32 and $98 per barrel or 66 percent and sampled year. For some imports, the upper limit is
200 percent of 2015 prices.11 There is a strong also a range, because it is unclear. After the capacity
correlation between the price of diesel and crude oil change, the price is sampled between the price of a
in most markets (EIA 2015 ), so we assume range of preceding year and an upper limit.
66–200 percent of the average cost of fuel for GPP in
2015 as an uncertainty range for the price of diesel. The cost of imports from Jordan is indexed to the
Therefore, the price per liter of diesel for every year is cost of fuel, but other import sources are independent
sampled between $0.51 and $1.57 for every scenario of fuel prices because they are largely based on
(see figure H.7). national gas reserves and contracted under long-
term purchase agreements.
The volume of diesel is unconstrained. There is a risk
to the availability of fuel caused either by damage to Imports from Israel. The increase in power imports
pipelines (in the case of gas supply) or restrictions to from Israel to West Bank is contingent on the
the movement of fuel tankers (for diesel) this is dealt commissioning of four transmission substations in
with in a later section. West Bank. Electricity imports could increase from
850 MW in 2017 to between 1,400 MW and 1,800
MW in 2020.
Securing Energy for Development in the West Bank and Gaza | 193
Figure H 8.9: Relationship between Cost of Imports from Jordan and Diesel Prices
20.00
18.00 y = -8.23 09x 2 + 27.5 97x - 3.3149
16.00
14.00
12.00
cents/kWh
10.00
8.00
6.00
4.00
2.00
0.00
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40
Diesel prices ($/liter)
The current import from Israel to Gaza is approximately earliest the connection could be upgraded is 2022,
120 MW and could be increased to between 220 MW increasing import capacity up to 1,000 MW. The cost
and 270 MW in 2022. of imports from Jordan is indexed to fuel prices. The
relationship is simplified using the polynomial function
The Israeli Electric Corporation (IEC) sells electricity to that best approximates the correlation between
JDECO at time-of-use tariffs, but to the rest of the West forecast fuel prices and forecast tariffs from 2016 to
Bank and Gaza at a bulk tariff rate of approximately 2025 as shown in figure H.8.
US$90 per MWh (close to the weighted average of
the time-of-use tariffs). There is the possibility that the Imports from Egypt. An increase in power imports
rest of the West Bank and Gaza will be transitioned to from Egypt to Gaza is contingent on upgrading the
time-of-use tariffs. There is also the likelihood that the current distribution link through the Sinai region,
price of electricity sold to the West Bank and Gaza will increasing the capacity of the grid in Gaza, the
increase with the change in import volumes. The team availability of excess generation in Egypt, and power
estimates this to be up to US$110 per MWh. transfer capability of the Egyptian network to wheel
power to the point of the connection line. The earliest
Pricing before the change in import limit is increased this could be expected is estimated to be in 2021 at
by 1 percent per annum. The 1 percent annual a capacity of 70–150 MW (see table H.7).12 Because
increase then continues from the new price. Consider this is uncertain, the volume of imports is also sampled
an example in which 2020 is the year sampled for an within this range.
increase in Israeli imports into West Bank. By 2020, the
cost of imports would be approximately US$92.7 per Jordan is connected with the Egyptian network
MWh due to the 1 percent change in prices. The price at 500 kV, and it is possible for Jordan to wheel
beyond 2020 is sampled between US$92.7 per MWh power from Egypt through to the West Bank. This is
and a defined upper limit. If the new price is sampled as contingent on the completion of the Green Corridor
US$95 per MWh, for example, it is applied from 2021 project by 2018–19 and the availability of excess
and increased at 1 percent per annum from 2022. capacity and energy in Egypt.13 If this is incremental to
Imports from Jordan. An increase in power imports current exports from Jordan, the Jordan-West Bank
from Jordan to the West Bank is contingent on connection needs to have been commissioned as
upgrading the current connection and the availability well. An additional 50–200 MW could be wheeled to
of excess capacity and energy in Jordan. Both Egypt through Jordan.
parameters are uncertain, as is the price at which
power will be sold eventually. It is estimated that the
194 | Securing Energy for Development in the West Bank and Gaza
TABLE H.7 : CHANGES IN ELECTRICITY IMPORT SOURCES AND CAPACITIES
FROM TO CHANGE IN CAPACITY CAPACITY (MW) PRICE AFTER CHANGE ($ PER MWH)
Earliest Latest Before Max After Min Max
Israel West Bank 2020 2030 850 1400-1800 Preceding year 110
Israel Gaza 2022 2035 120 270 Preceding year 110
Jordan West Bank 2022 2035 30 100-200 Based on oil price
Egypt Gaza 2021 2035 10 70-150 81 100
Egypt West Bank Same as Jordan-West 0 50-200 87.5a 106.5a
Bank
Source: Team estimates.
a Same rate sold to Gaza plus US$6.5 per MWh wheeling charge to Jordan.
Figure H.9: CAPEX Range for VRE Technologies (US$ per Watt)
Rooftop PV (PVr) Commercial PV (PVc)
3.5 2.5
3.0
2.0
2.5
2.0 1.5
1.5 1.0
1.0
0.5
0.5
0.0 0.0
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Concentrated Solar (CSP) Wind
7.0 2.0
6.0 1.8
1.6
5.0 1.4
4.0 1.2
1.0
3.0
0.8
2.0 0.6
1.0 0.4
0.2
0.0 0.0
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Notes: Base case scenario CAPEX estimates based on NREL’s 2016 Annual Technology Baseline. Lower bounds and upper
bound for wind are estimated by NREL in the 2016 Annual Technology Baseline. For wind, CAPEX is expected to increase due to the need for higher masts
and bigger turbines to maximize low wind speeds. Upper bound for PV is from the International Energy Agency (IEA) World Energy Outlook. Upper bound for
CSP is calculated by team using IEA trajectory for CSP without storage.
Securing Energy for Development in the West Bank and Gaza | 195
Cost and Land Access for VRE technologies The study demonstrates the benefit of utilizing the
solar resource in Area C, so the model is set up such
Installation costs for VRE technologies are expected that from the year access is granted, all potential
to decline, but the speed of decline is unclear (see land is available for use. We do not take the fact
a comparison of costs by NREL for example.)14 that access is granted on a project-by-project basis
Investment cost estimates for the region produced into consideration.
by the International Energy Agency for the World
Energy Outlook are considered to be on the high Fuel Interruptions and Plant Outages
side, especially when compared with the results
of tenders from various countries.15 (For example, There are several risks that could ultimately affect the
a recent bid in Zambia yielded US$0.06 per kWh.) volume of fuel available for power generation including
While this is unlikely to be the case in the West Bank the risk of vandalism to gas pipelines, reduced fuel
and Gaza, there is uncertainty around what could be volumes due to lack of payment and restrictions to
expected in the future. We therefore include a range the transportation of diesel. We define a probability of
of installation costs for VRE technologies. The team’s outage on the sources of fuel supply and a range of
CAPEX estimates are based on NREL’s 2016 Annual availability for each year as shown in table H.8.
Technology Baseline and the range of CAPEX variation
is shown in figure H.9. We ensure that CAPEX for The annual probability of interruption and availability of
rooftop and utility-scale PV are increased or reduced fuel are selected to show the relative risks associated
in tandem, but assume that the CAPEX for wind and with different sources following discussions with
CSP are independent from other technologies. various stakeholders. The probability of outage on
imported electricity together with the availability also
CSP and PV have different land requirements, capital captures possible challenges in exporting countries.
costs and generation profiles. CSP requires 30 percent
more land per MW installed, and is more than three A similar set of risks apply to power plants and
times more expensive than PV but is dispatchable, the connection lines. Centralized plants are more
while PV is not. The share of CSP and PV is optimized vulnerable to destruction than decentralized options.
by the model subject to land constraints. The land In the model, we specify a share of installed capacity
constraint is defined by EQ Set 9, which ensures that that is taken out of service when there are damages.
the total installed capacity of CSP and PV does not This percentage is assumed to be 50 percent, 75
exceed available land. As noted, at least 76 percent percent, or 100 percent of capacity for centralized
of the solar potential is in Area C, and therefore units and less than 5 percent for decentralized
projects are subject to Israel granting access to the units. In effect, this penalizes larger units because
site. We assume the earliest the West Bank and Gaza the availability can be significantly reduced due to
could access Area C is 2018 and the latest date of damages that affect the cost per unit of production.
2035. Allowing for a two-year construction period,
the earliest solar projects are allowed from 2020.
TABLE H.8: ANNUAL PROBABILITY OF OUTAGE AND MINIMUM AVAILABILITY
FOR FUEL SOURCES
PROBABILITY OF INTERRUPTION MINIMUM AVAILABILITY
Gaza Gas 0.12 0.3
West Bank North gas 0.05 0.6
West Bank South gas 0.10 0.6
Gaza diesel 0.40 0.3
West Bank diesel 0.30 0.4
Israel imports 0.02 0.8
Jordan imports 0.05 0.7
Egypt imports 0.20 0.6
Source: Team assumptions.
196 | Securing Energy for Development in the West Bank and Gaza
Damages incur costs to the system determined by select a duration of outage between a full year to
RepairCosts. Without knowing a priori the extent of as little as one month.16 The availability of plants is
damage, it is difficult to assess the costs or length calculated as follows:
of outage. For example,, replacing the step-up
transformers or fuel tanks to a gas plant both result (1-Share of Damaged Capacity) × (1−Duration of
in a complete shutdown of the plant, but the cost Outage) × Max Availability of Plant
implications and duration of outages are completely
different. In the model, we assume the cost of repairs Plants in Gaza are at a higher risk than those in the
to be a third of the cost of installation and randomly West Bank, as shown in table H.9.
TABLE H.9: ANNUAL RISKS ASSOCIATED WITH GENERATORS
GAZA PROBABILITY PERCENT OF MINIMUM MAXIMUM
OF DAMAGE CAPACITY DURATION OF DURATION
SUBJECT TO OUTAGE (% OF OUTAGE
DAMAGE OF YEAR) (% OF YEAR)
Rooftop PV (PVr) 0.05 1 8 50
Biogas (Bio) 0.05 100 10 80
Distributed diesel genset (Diesel) 0.10 1 10 80
Combined cycle gas turbine (CC) 0.15 50-100 10 100
Simple cycle gas turbine (GT) 0.15 50–100 10 100
Israel – Gaza 0.02 100 5 25
Egypt – Gaza 0.20 100 8 50
WEST BANK PROBABILITY % OF MINIMUM MAXIMUM
OF DAMAGE CAPACITY DURATION DURATION
SUBJECT TO OF OUTAGE OF OUTAGE
DAMAGE (% OF YEAR) (% OF YEAR)
Rooftop PV (PVr) 0.05 1 8 50
Commercial PV (PVcAB) 0.05 1 10 70
Concentrated solar power/thermal (CSP) 0.10 50-100 10 100
Wind (WindC) - Area C 0.05 5 10 80
Biogas (Bio) 0.05 100 10 80
Distributed diesel genset (Diesel) 0.10 1 10 80
Combined cycle gas turbine (CC) 0.10 50–100 10 100
Simple cycle gas turbine (GT) 0.10 50–100 10 100
Israel – West Bank 0.02 100 5 25
Jordan – West Bank 0.10 100 5 70
Egypt – West Bank 0.15 100 5 70
source: Elaboration based on team assumptions.
Securing Energy for Development in the West Bank and Gaza | 197
Distribution of Uncertain Parameters per kWh for the fuel cost assuming a CCGT) makes it
Multiple experiments were performed to develop a competitive option, so the critical parameter related
the capacity plan and, before discussing the results to gas is the timing or availability. Eighty-three percent
of the analysis, it is worth examining the uncertain of the experiments included the availability of gas in
parameters to understand their distribution. The the West Bank by 2030 compared with 66 percent
energy demand for 2030 sampled across multiple of samples in Gaza. This is because there are two
scenarios is negatively skewed with a mean of 4,032 likely sources of gas in the West Bank (either north or
GWh and 6,856 GWh in Gaza and the West Bank, south) and gas in the north has an earlier likelihood
respectively, as seen in figure H.10. This is higher than of materializing. Finally, access to Area C in the West
the 2030 median forecast of3,548 GWh and 6,004 Bank is critical for large-scale deployment of solar
GWh. We can also see that 30 percent of scenarios technologies and construction of the transmission
sample 2030 PV prices at or below US$1 per W, and backbone; 68 percent of the samples allowed access
the cost of CSP is relatively high in comparison. The to Area C by 2030, with 30 percent allowing access
price range for gas between US$4 per MMBTU and by 2022.
US$7.5 MMBTU (which translates to US$0.027–0.05
Figure H.10: Distribution of Uncertain Parameters from the Experiments
a) Distribution of energy demand in 2030 in Gaza and West Bank (GWh)
Gaza West Bank
25 100 15 100
20 80 12 80
Cumulative
Cumulative
Frequency
Frequency
15 60 9 60
10 40 6 40
5 20 3 20
0 0 0 0
3650
3700
3750
3800
3850
3900
3950
4000
4050
4100
4150
4200
6500
6550
6600
6650
6700
6750
6800
6850
6900
6950
7000
7050
7100
b) Distribution of CAPEX for CSP and Utility-scale PV in 2030 (US$ per kW)
CSP Utility PV
12 100 20 100
10
80 80
15
8
Cumulative
Cumulative
Frequency
Frequency
60 60
6 10
40 40
4
5
2 20 20
0 0 0 0
600
700
800
900
2,900
3,000
3,100
3,200
3,300
3,400
3,500
3,600
3,700
3,800
3,900
4,000
4,100
4,200
4,300
4,400
1,000
1,100
1,200
1,300
1,400
1,500
1,600
Frequency Cumulative
198 | Securing Energy for Development in the West Bank and Gaza
Figure H.10: Distribution of Uncertain Parameters from the Experiments (continued)
c) Distribution of the timing of gas for power production in Gaza and West Bank (year)
Gaza West Bank
10 100 15 100
8 80 12 80
Cumulative
Cumulative
Frequency
Frequency
6 60 9 60
4 40 6 40
2 20 3 20
0 0 0 0
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
d) Distribution of access to Area C in West Bank
12 100
10
80
8
Cumulative
Frequency
60
6
40
4
2 20
0 0
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Frequency Cumulative
Source: Team elaboration.
NOTES: The charts show the underlying frequency distribution of the labeled parameters. The bar charts show the number of times a value on the x-axis is
sampled. For example, in panel a for Gaza, 21 samples had projected demand at 4000 GWh in 2020. The curves show the cumulative frequency of the labeled
parameters. The unit of the x-axis is indicated in parenthesis in the title of each panel.
Securing Energy for Development in the West Bank and Gaza | 199
Combining these randomly generated parameters of the policy implications and relevance of the
yields a vast array of possible future scenarios, each scenarios to the West Bank and Gaza is found in the
with a different set of implications. For example, a main report.
scenario with access to Area C by 2020 may have a
relatively higher PV CAPEX trajectory resulting in little Nine expansion scenarios were developed for the
installed PV or vice versa. To keep track of the multiple West Bank and six for Gaza to answer the questions
future scenarios, we adopted a scoring system from raised by the study. The scenarios are not necessarily
which we can assess the underlying conditions for incremental, and some are used to illustrate the
each scenario. impact of modelling and policy choices, as described
in table H.10.
DETAILED RESULTS
Additionally, existing capacity options are tested and
This section describes the scenarios analyzed, a situation where no action taken is also simulated to
highlighting the differences in results with the aim of show the impact of inaction.
providing insights to these differences. A discussion
TABLE H.10: EXPANSION PLANS DEVELOPED TO ANSWER STUDY QUESTIONS
SCENARIOS DESCRIPTION
West Bank
WS1: Classic least cost Least-cost plan based on a best estimate of the future in the West Bank and Gaza
with reserve requirements satisfied domestically (high security)
WS2: Domestic reserves Robust expansion plan that considers uncertainties with reserve requirements
satisfied domestically (high security)
WS3: Shared reserves Robust expansion plan that considers uncertainties with reserve requirements
shared with imports (partial reliance on electricity imports for security)
WS4: Area C access WS3 with full access to Area C from 2018
WS5: Cost cap WS3 with system average cost capped at IE import tariffs
WS6: PENRA Vision Palestinian Energy And Natural Resources Authority (PENRA) Vision to limit
generation from any source to under 50%, with IEC providing reserves
WS7: Planned Future Scenario with current generation options under consideration by PENRA
WS8: High IEC Scenario with full supply from IEC and minimal investments in near-committed RE
projects
WS9: Do Nothing Continuation of the status quo with limited increase in IEC imports
Gaza
GS1: Planned Future Scenario with current generation options under consideration by PENRA
GS2: PENRA Vision PENRA Vision to limit generation from any source to under 50%, with IEC providing
reserves
GS3: Full supply with GPP Full supply to Gaza with the Gaza Power Plant (GPP)
GS4: High IEC Full supply to Gaza with IEC and GPP shut down and minimal investments in RE
GS5: Meet demand with gas Full supply with gas from Gaza marine gas fields
GS6: Do Nothing Continuation of the status quo with limited increase in IEC imports
A deterministic least-cost plan could be costly because any one particular future scenario—even the most
it is tailored for a particular scenario, and there is a likely future scenario—but will reduce the risk of
high chance of regret or failure or underutilized assets over- or underinvestment. We first look at a robust
when underlying assumptions change. To improve plan that ensures the West Bank is able to cover all
the resilience of the capacity plan to uncertainties, contingencies internally.
we employ the methodology described to develop
subsequent capacity plans. A plan that performs well Given that there is currently very little installed capacity,
under uncertainty may not necessarily be optimal for such a plan will require significant investments over
200 | Securing Energy for Development in the West Bank and Gaza
short periods. We therefore look at a scenario where TABLE H.11: UNDERLYING
reserve requirements are shared with interconnected ASSUMPTIONS FOR THE
systems to benefit from one of the main benefits DETERMINISTIC PLAN
of such connections—that is, the distribution of PARAMETER ASSUMPTION
reserve capacity requirements among them. Given Demand Central case
the high potential of solar in Area C, the impact of
Diesel prices Base case
access to Area C on generation options is evaluated
Gas prices US$5.75 per MMBTU
in WS4. In WS5, we examine the impact imposing
cost constraints on the model based on the policy Increase in Israel– 2021
West Bank
of the PA to cap the cost of energy to the costs of
imports from IEC. These scenarios are only relevant Increase in Jordan– 2024
West Bank
for the West Bank, because supply options to Gaza
are much more limited and most constraints result in Egypt–West Bank 2024
unmet demand. Increase in Israel-Gaza 2024
Increase in Egypt-Gaza 2023
Scenarios WS6 and GS2 evaluate PENRAs long-term Israel import price US$90 per MWh + 1% p.a.
vision to limit electricity generation from any source to Jordan import price Based on diesel price
under 50 percent, which diversifies the energy mix.
Egypt import price US$81 per MWh + 1% p.a.
Timing of gas (West Bank) 2022
Apart from S1, in which parameters were fixed, most
other cases considered uncertainties around demand, Timing of gas (Gaza) 2023
fuel pricing, and availability as described in previous Volume of gas 1.1 bcm
sections. Features of the scenarios are described in (West Bank)
Table H.10. Volume of gas (Gaza) 1.1bcm
Reserve margin 15%
The presentation of results follows the sequence of requirements
questions raised. Results for the West Bank are first Access to Area C 2020
presented, followed by results for Gaza. Financial constraints No
Unplanned outages No
West Bank
RE CAPEX Base case
A Classic Least-Cost Plan
In a deterministic analysis, what does a least-cost
capacity expansion plan look like, which ensures
the West Bank and Gaza are self-reliant and able
to meet demand securely (assuming there no
capital constraints)?
A classic least-cost plan based on the planners’
best estimate of the future performs extremely well
if that future materializes. Under the static conditions
described in Table H.11 , power generation switches
from IEC imports to gas and meets entire demand
(Figure H.11 – panel a). At approximately 6 US cents
per kWh, CCGT is the least-cost option when gas is
available followed by utility-scale PV at approximately
US$1,041 per kW and US$0.07 per kWh. Also, 410
MW of distributed diesel capacity is installed from
2018 largely to satisfy reserve margin requirements
and this is maintained through to 2030 (Figure H.11
– panel b).
Securing Energy for Development in the West Bank and Gaza | 201
Figure H.11: Energy and Mix and 2030 Capacity Share in a Deterministic Scenario
A. West Bank Supply B. West Bank energy supply (GWh)
Capacity in 2030 (MW)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
PV-Other PV-Area C CSP Wind Biogas Diesel Genset CCGT
GT Israel Imports Egypt Imports Jordan Imports WB-Gaza Exchange Unserved Energy Demand
Figure H.12: Energy and Mix for the Deterministic Plan under Test Conditions
8000
6000
4000
2000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Unserved Energy Israel Imports Biogas
WB-Gaza Exchange GT Wind
Jordan Imports CCGT CSP
Egypt Imports Diesel Genset PV-Area C
Demand PV-Other
How well does the least-cost plan perform In terms of reliability measured by the level of unmet
under uncertainty? demand, there is little impact, as unserved energy is
just 334 GWh over the planning horizon. Outages are
To test the performance of the classic least-cost plan, covered by a combination of diesel generators and
it is subjected to 100 simulations in which various imports from Egypt, Jordan, and Israel. However,
parameters such as demand, fuel availability and a comparison of costs shows that undiscounted
pricing, disruptions, and import volumes are varied. system costs nearly double, from US$8.7 billion to
On average (across the 100 samples), the share of US$16.5 billion (figure H.13).
gas in the energy mix drops to 45 percent, largely
substituted by imports from Israel (figure H.12).
202 | Securing Energy for Development in the West Bank and Gaza
Figure H.13: Comparison of System Costs for the Deterministic Scenario (US$ billions)
1.73
3.36
1.13
1.88 8.72 8.54 1.32 0.38
0.46 0.00
1.43
4.95 0.00
Unserved Energy Costs
Total
Fixed + Var O&M
Fixed + Var O&M
Fuel
Reserve Penalties
Fuel
CAPEX
CAPEX
Repair Costs
Total
Reserve Energy Costs
Reserve Penalties
Repair Costs
Deterministic plan Deterministic plan under shocks
Figure H.14: Total Energy Mix for 100 Possible Future Scenarios (2020–2030)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97
Wind Biogas CCGT
In some scenarios, gas materializes earlier than 2023, An optimal capacity plan was generated for multiple
PV-Area A/B PV-Area C Diesel Genset
so on average there is some gas in 2022. This helps sampled scenarios. Each plan is perfectly suited for
reduce system costs, but the gains are offset
Israel Imports Jordanby the
Imports the particular scenario,
Unserved Energy but the plans will perform
other scenarios when gas is available beyond 2023. differently across multiple scenarios. One hundred
Absent gas is replaced by imports to the extent future scenarios were developed and for each of
permitted. Destructions also add to the cost, but the these, a capacity plan was generated using the core
highest change in costs is due to higher fuel costs LP model.
(US$3.6 billion higher) as gas is substituted with more
expensive options when delayed or unavailable. As seen from figure H.14, IEC imports continue to
be a steady source of imports for West Bank across
Incorporating Uncertainties multiple scenarios. Generation from gas (CCGT) is
also prominent as well as PV which was not picked
What are the features of a capacity plan that ensures up in the deterministic scenario.
that the West Bank can respond to a wide range
of uncertainties including contingencies around In terms of capacity, the standard deviations in figure
electricity imports? What are the cost implications of H.15 show Israel imports provide a steady source of
such a plan? capacity. Technologies like CSP are also picked up in
Securing Energy for Development in the West Bank and Gaza | 203
later years, when access to Area C is granted. There robust. A plan comprising solely of no-regret options
is wide range around the solar PV capacity in Area is unlikely to satisfy demand and will result in high
C due to the combination of CAPEX and access to system costs. Therefore, capacity and technology
land. Diesel generators appear to be a robust option options that are less preferred across the scenarios
across multiple scenarios, but, as seen from figure need to be included in the expansion plan. Whenever
H.14, the utilization of these units is low because of additional capacity is added, the capacity plan is
the high cost of fuel. However, they are best suited tested across multiple scenarios. As more capacity
for providing system reserve because of the low is added, CAPEX requirements increase but unmet
CAPEX requirements. demand reduces and total system costs reduce
accordingly. Beyond a certain point, unmet demand
From the capacity plans, the most robust was is minimized and additional investments increase
developed. Capacities of a particular technology with system costs. The lowest point is selected as the
high frequency of selection across scenarios are more optimum capacity plan. (See figure H.16)
Figure H.15: Mean Capacity by Fuel for Specific Years, Showing Range as Error Bars
and Standard Deviation as Dots
2500
2000
1500
MW
1000
Average capacity
500
Standard deviation
0
Biogas
CSP
GT
Jordan Impor ts
PV-Area C
Biogas
CSP
GT
Jordan Impor ts
PV-Area C
Biogas
CSP
GT
Jordan Impor ts
PV-Area C
2020 2025 2030
Figure H.16 : Total CAPEX and System Costs for 100 Capacity Plans Tested across
Multiple Scenarios
26
Avg discounted system costs ($bn)
24
22
20
18
16
14
12
0 5 10 15 20 25 30 35
Total CAPEX ($bn)
Note: Installed capacity is increased with increasingly less preferred technology capacities across the 100 capacity plans.
204 | Securing Energy for Development in the West Bank and Gaza
Figure H.17: Robust Capacity Plan and Energy Mix
a) Capacity (MW)
4000
3500
3000
2500
2000
1500
1000
500
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Jordan Imports CCGT CSP
Egypt Imports Diesel Genset PV-Area C
Israel Imports Biogas PV-Other
GT Wind Demand
b) Energy (GWh)
8000
6000
4000
2000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Unserved Energy Israel Imports Biogas
WB-Gaza Exchange GT Wind
Jordan Imports CCGT CSP
Egypt Imports Diesel Genset PV-Area C
Demand PV-Other
The resultant capacity plan performs better than the requirements. System reserve requirements is set
deterministic plan by saving nearly US$1.2 billion over at 15 percent above peak demand and must be
the planning horizon. The net present value of the robust satisfied internally. Import capacity therefore does
plan is US$7.1 billion compared with the deterministic not contribute to reserve requirements. Additionally,
plan at US$8.6 billion. CAPEX requirements in the PV does not provide firm capacity and so does not
robust capacity plan are US$1.3 billion higher than contribute to the reserve margin limits. While the low
the classic case, but unserved energy costs are 47 CAPEX requirements for distributed diesel plants
percent lower and repair costs are less than half the make them an attractive option to meet reserve
results from the deterministic scenario. margins, energy output shows they are low on the
merit order of dispatch because of the relatively higher
Total capacity is 3,484 MW for average expected cost of fuel and utilization is approximately 1 percent.
peak capacity of 1,300 MW (figure H.17). The total PV capacity helps reduce fuel and repair costs.
capacity is high but needed to meet the planning
Securing Energy for Development in the West Bank and Gaza | 205
Figure H.18: Associated Costs for the Self-Reliant Robust Capacity Plan
1600 14
1400
12
1200
10
USD Million
1000
8
800
600 6
400 4
200 2
0 0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
CAPEX
Fuel Reserve Penalties
Unserved Energy Costs
Fixed + Var O&M Average Cost of Production
(US cents/kWh) Repair Costs
Transforming a system with no installed capacity to A power system designed to be operated
one that is self-reliant in a short period of time, as independently misses the benefits of large connected
illustrated in this scenario, is extreme and impractical systems. A major benefit of connecting power
but illustrates the merits of considering uncertainties systems is the ability to distribute reserve margin
in the planning process. US$945 million is required in requirements, thereby reducing total system costs.
2018 alone to avoid the reserve requirement penalty. While this is technically optimal, other nontechnical
considerations may constrain the benefits associated
CAPEX requirements are annualized, and its impact with operating in connected systems.
on the average cost of generation is distributed
across several years. For a self-reliant system, the To evaluate the cost of a completely self-reliant
average cost of generation increases from US$0.092 system for the West Bank and Gaza, the robust plan
per kWh to US$0.124 kWh in 2019 and drops in later is compared with a plan that is not constrained to
years to US$0.114 per kWh (figure H.18). While the satisfy reserve margin requirements internally. The
impact on the average cost is reasonable, raising the same steps outlined in the flowchart (Figure H.1) are
required capital, associated infrastructure, and human followed to develop the alternative plan with the main
capital needs will be more challenging. To reduce the difference being that the need to meet reserve margin
financial burden on consumers, a longer time frame requirements internally is removed.
will be required to develop a capacity mix that is self-
reliant. During this period, imports will continue to play Partially relying on imports reduces CAPEX
a significant role in the energy mix. requirements from US$2.2 billion to US$1.4 billion
(figure H.19). There is some loss of reliability as
How does the average cost of production change unserved energy increases from 0.3 percent to 1.1
by sharing reserve margin requirements with percent. However, the average cost is more stable
neighboring countries? and does not exceed 10.6 US cents per kWh with
nearly US$ 200 million in fuel savings.
206 | Securing Energy for Development in the West Bank and Gaza
Figure H.19: Associated Costs for the Robust Capacity Plan with Shared Reserves
1400 11.0
1200
10.5
1000
10.0
USD Million
800
9.5
600
400 9.0
200 8.5
0 8.0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
CAPEX
Fuel Reserve Penalties
Unserved Energy Costs
Fixed + Var O&M Average Cost of Production
(US cents/kWh) Repair Costs
Comparison of Least-Cost and Policy-Based Across the scenarios, WS7 (the Planned Future) has
Scenarios the lowest combination of CAPEX requirements and
unmet demand. In general, the scenarios with higher
Table H.12 summarizes the results for the West local generation have lower unmet demand.
Bank. Supply from Israel to the West Bank has been
stable in the past, and if this continues, the cost of Additional tests were run to assess the performance
inaction on system reliability (WS9) is modest with 4 of the plans under stability (labelled peace) and
percent unmet demand over the planning horizon as extreme shocks (labelled war). The tests were carried
demand outgrows the pace of system expansion. out over the period 2025–30 for a select number of
By 2030, unmet demand is estimated at 9 percent scenarios. The more diversified scenarios performed
of unmet demand. better under severe shocks than the less diversified
scenarios. For example, WS4 has a low combination
If supply from IEC grows with demand (WS8), unmet of fuel costs and unmet demand under shocks figure
demand estimated at 1.3 percent and the average H.20. Domestic reserves are more expensive both
cost of electricity is approximately US$0.098 per kWh. under stability and during shocks but provides the
highest security of supply (least unmet demand).
PENRA’s current expansion plan is also robust with
unmet demand under 1 percent, but with US$927
million in CAPEX requirements is more expensive
than reliance on IEC. On the other hand, PENRA’s
policy to cap projects below the costs of IEC imports
delays investment and results in 4.2 percent of
unmet demand.
Securing Energy for Development in the West Bank and Gaza | 207
Figure H.20: Performance of Scenarios under Stability and Extreme Shocks in West
Bank
WEST BANK - Share of Unserved Energy (%) WEST BANK - Fuel Costs (US$ bil)
32% High IEC Supply
G
High IEC Supply 3%
G
20% High Area C 0.74
0.23
F
High Area C 1%
F
Shared Reserves
E
Shared Reserves 0%
E
Domestic Reserves
D
0%
D
Domestic Reserves
21% PENRA Vision 0.50 1.1 0
C
C
PENRA Vision 2%
26% 0.20 0.72
Planned Future
B
B
Planned Future 3%
36%
A
Do Nothing
A
Do Nothing 7%
- 0.50 1.00
0% 20% 40% 1.50
War Peace War Peace
208 | Securing Energy for Development in the West Bank and Gaza
TABLE H.12: SUMMARY OF RESULTS FOR THE WEST BANK
CLASSIC DOMESTIC SHARED HIGH PRICE PENRA PLANNED HIGH DO
LCP RESERVE RESERVE AREA C CAP VISION FUTURE IEC NOTHING
WS1 WS2 WS3 WS4 WS5 WS6 WS7 WS8 WS9
1. 2030 total available capacity MW 2,066 3,485 2,440 2,792 2,052 2,641 2,127 1,607 987
PV other MW 22 109 159 39 39 574 147 147 15
PV Area C MW 0 554 554 1,094 0 0 0 0 0
CSP MW 0 7 0 0 0 0 0 0 0
Wind MW 9 10 10 10 10 50 0 0 0
Biogas MW 25 30 30 30 20 30 0 0 0
Diesel genset MW 597 1,190 50 30 0 30 0 0 0
CCGT MW 572 720 720 590 780 730 520 0 0
GT MW 0 0 0 0 0 0 0 0 0
Israel imports MW 699 761 806 887 1,111 1,119 1,430 1,430 942
Egypt imports MW 93 82 82 82 78 77 0 0 0
Jordan imports MW 49 21 29 30 14 31 30 30 30
2. Peak demand MW 1,304 1,304 1,304 1,304 1,304 1,304 1,304 1,304 1,304
3. Domestic capacity: 2030 MW 1,226 2,621 1,523 1,793 849 1,414 667 147 15
4. Domestic cap. as share of % 94% 201% 117% 137% 65% 108% 51% 11% 1%
peak: 2030
5. Average cost of energy U.S. cents/kWh 13.57 11.77 9.94 9.88 9.49 10.16 10.06 9.78 9.79
6. Total CAPEX US$ mill 1,323 2,833 1,982 2,284 1,139 2,133 850 174 0
7. Total OPEX US$ mill 378 464 241 347 100 280 174 102 71
8. Total fuel US$ mill 3,606 869 673 482 374 748 566 0 0
9. Unserved energy costs US$ mill 1,135 169 658 782 2,553 547 222 811 2,645
10. Total penalties (other) US$ mill 5,093 2,908 794 657 363 2,697 1,183 391 482
11. Total system costs U$D mill 11,535 7,243 4,348 4,551 4,530 6,406 2,995 1,478 3,197
12. Total unmet demand GWh 1,513 225 878 1,043 3,404 730 296 1,081 3,527
13. Total energy demand GWh 81,669 81,669 81,669 81,669 81,669 81,669 81,669 81,669 81,669
Securing Energy for Development in the West Bank and Gaza | 209
CLASSIC DOMESTIC SHARED HIGH PRICE PENRA PLANNED HIGH DO
LCP RESERVE RESERVE AREA C CAP VISION FUTURE IEC NOTHING
WS1 WS2 WS3 WS4 WS5 WS6 WS7 WS8 WS9
14. Share of total unmet demand % 1.9% 0.3% 1.1% 1.3% 4.2% 0.9% 0.4% 1.3% 4.3%
(total)
15. Share of energy imports: % 58% 38% 37% 33% 52% 44% 62% 96% 90%
2030
16. Diversity factor: 2030 % 0.37 0.28 0.27 0.25 0.39 0.26 0.49 0.91 0.79
17. 2030 share of energy mix 6,873 6,904 6,906 6,894 6,900 6,892 6,883 6,860 6,869
PV other % 1% 3% 4% 1% 1% 14% 3% 3% 0%
PV Area C % 0% 13% 13% 25% 0% 0% 0% 0% 0%
CSP % 0% 0% 0% 0% 0% 0% 0% 0% 0%
Wind % 0% 0% 0% 0% 0% 2% 0% 0% 0%
Biogas % 3% 3% 3% 3% 2% 3% 0% 0% 0%
Diesel genset % 0% 0% 0% 0% 0% 0% 0% 0% 0%
CCGT % 37% 40% 40% 34% 43% 37% 32% 0% 0%
GT % 0% 0% 0% 0% 0% 0% 0% 0% 0%
Israel imports % 48% 30% 30% 26% 44% 32% 62% 95% 88%
Egypt imports % 6% 7% 7% 7% 8% 9% 0% 0% 0%
Jordan imports % 3% 0% 0% 0% 1% 3% 0% 1% 2%
210 | Securing Energy for Development in the West Bank and Gaza
Unserved energy % 0.3% 0.0% 0.0% 0.1% 1.1% 0.0% 0.0% 0.6% 8.6%
Gaza
Scenario GS4, which allows increased imports
Given the limited supply options, the scenarios in Gaza from IEC, offers the best combination of costs and
focus on various policy options. With the exception unmet demand.
of GS2, all the scenarios are tests of various supply
options under uncertainty. Additional tests were run to assess the performance
of the plans under stability (labelled peace) and
Comparison of Least-Cost and Policy-Based extreme shocks (labelled war). The tests were carried
Scenarios out over the period 2025–30 for a select number
of scenarios. As seen for the West Bank, the more
Table H.13 summarizes the results for Gaza. Unlike diversified scenarios performed better under sever
in the West Bank, the cost of inaction on system shocks than the less diversified scenarios. GS2
reliability (GS6) is severe, with 52 percent unmet (PENRA Vision) has a low combination of fuel costs
demand over the planning horizon. and unmet demand under shocks (figure H.21).
Figure H.21: Performance of Scenarios under Stability and Extreme Shocks in Gaza
GAZA - Share of Unserved Energy (%) GAZA - Fuel Costs (US$ bil)
31% 1.15
Meet demand with Gas Meet demand with Gas 0.57
F
5%
F
High IEC supply 51% High IEC supply (
E
E
31% (
Full Supply w/ GPP 28% Full Supply w/ GPP 1.15
D
D
6% 0.57
PENRA vision 24% PENRA vision 1.10
C
C
4% 0.50
Planned future 29% Planned future 0.72
B
7%
B
0.20
Do Nothing 63% Do Nothing 1.40 1.71
A
A
50%
0% 50% 100% - 1.00 2.00
War Peace War Peace
Securing Energy for Development in the West Bank and Gaza | 211
TABLE H.13: SUMMARY OF RESULTS FOR GAZA
PLANNED PENRA FULL HIGH IEC GAZA DO
FUTURE VISION SUPPLY SUPPLY NOTHING
W/GPP WITH GAS
GS1 GS2 GS3 GS4 GS5 GS6
1. 2030 total available capacity MW 975 1,077 1,395 971 970 190
PV other MW 163 163 163 163 163 0
PV Area C MW 0 0 0 0 0 0
CSP MW 0 0 0 0 0 0
Wind MW 0 0 0 0 0 0
Biogas MW 2 2 2 2 0 0
Diesel genset MW 0 120 0 0 0 0
CCGT MW 560 460 560 0 677 60
GT MW 0 60 0 0 0 0
Israel imports MW 240 199 660 796 120 120
Egypt imports MW 10 73 10 10 10 10
Jordan imports MW 0 0 0 0 0 0
2. Peak demand MW 767 767 767 767 767 767
212 | Securing Energy for Development in the West Bank and Gaza
3. Domestic capacity: 2030 MW 725 805 725 165 840 840
4. Domestic capacity as share of peak: 2030 % 95% 105% 95% 22% 110% 110%
5. Average cost of energy U.S. cents 13.39 15.44 11.41 10.37 15.15 14.68
per kWh
6. Total CAPEX US$ mill 1,035 1,066 1,035 385 1,185 0
7. Total OPEX US$ mill 236 280 205 76 246 173
8. Total fuel US$ mill 2,264 3,471 718 4 3,987 1,588
9. Unserved energy costs US$ mill 2,834 1,630 1,333 2,167 2,390 18,108
10. Total penalties (other) US$ mill 1,644 8,473 1,637 220 1,962 763
11. Total System costs US$ mill 8,013 14,920 4,928 2,851 9,769 20,632
PLANNED PENRA FULL HIGH IEC GAZA DO
FUTURE VISION SUPPLY SUPPLY NOTHING
W/GPP WITH GAS
GS1 GS2 GS3 GS4 GS5 GS6
12. Total Unmet demand GWh 3,779 2,173 1,778 2,889 3,186 24,144
13. Total Energy demand GWh 46,538 46,538 46,538 46,538 46,538 46,538
14. Share of total unmet demand % 8% 5% 4% 6% 7% 52%
15. Share of energy imports: 2030 % 29% 45% 46% 93% 16% 26%
16. Diversity factor: 2030 % 0.54 0.36 0.46 0.84 0.72 0.47
17. 2030 share of energy mix 4,032 4,032 4,032 4,032 4,032 4,032
PV other % 6% 6% 6% 6% 6% 0%
PV Area C % 0% 0% 0% 0% 0% 0%
CSP % 0% 0% 0% 0% 0% 0%
Wind % 0% 0% 0% 0% 0% 0%
Biogas % 0% 0% 0% 0% 0% 0%
Diesel genset % 0% 0% 0% 0% 0% 0%
CCGT % 68% 47% 51% 0% 83% 11%
GT % 0% 1% 0% 0% 0% 0%
Israel imports % 28% 33% 45% 92% 14% 24%
Egypt imports % 2% 12% 1% 2% 1% 2%
Jordan imports % 0% 0% 0% 0% 0% 0%
Unserved energy % 0% 1% 0% 0% 2% 63%
Securing Energy for Development in the West Bank and Gaza | 213
SEQUENCING INVESTMENTS optimal investments in both the West Bank and
Gaza because they are less dependent on external
The analysis identifies options that are robust in factors. In the interim, strengthening imports from
multiple possible future scenarios, but it also clearly Israel also helps keep down average system costs.
shows reliance on external decisions, least of which Imports from Egypt will also help diversify supply
is technical. Without a change, the underlying and increase reliability of supply.
geopolitical conditions, options for power supply that
are directly within the control of the PA are limited. The West Bank and Gaza stand to benefit from
However, we see that these options, while not the evolutions in power systems because there are no
cheapest, are indeed least cost. For example, based locked-in technologies. The cost of PV has dropped
on the assumed likelihood of gas availability, CCGT by over 60 percent since 2010 and costs of storage
is a robust option across all applicable scenarios. technologies such as utility-scale batteries or fuel cells
However, the construction of thermal plants is only are on a downward trajectory. As the unit costs of
least cost when gas is available. Translating any plan storage reach parity with cheapest source of imports,
into reality will require a different approach, where it will be beneficial to consider battery storage as a
decisions are taken as uncertainties resolve over time. means of improving the security of supply (see box
H.1). A list of generation technologies and triggers for
There are, however, options that are optimal with action is presented in table A8.14.
either high or limited imports, and these are obvious
targets for immediate action. The approach used The possibility for off-shore wind in Gaza helps
for the study shows how technology and capacity diversify the sources of generation and the average
that are robust across multiples scenarios can cost of generation is therefore relatively lower as
be determined. For example, the analysis shows shown in Fig B1-b where change in price ranges are
that solar (both rooftop PV and centralized) are much higher.
TABLE H.14: TRIGGERS FOR DECIDING ON VARIOUS TECHNOLOGY OPTIONS
Technology Decision trigger
Solar PV and other small RE (Area A and Gaza) Immediate
Solar PV (Areas B and C) When access is granted
Increased imports from Jordan When Jordan is able to export power
Increased imports from Egypt When Egypt is able to export power
Increased imports from IEC Immediate
Storage When unit cost of storage is close to cost of reserves from
imports
Additional thermal plant in Gaza When there is clarity around gas availability
Additional thermal plant in the West Bank When there is clarity around gas availability
West Bank backbone When access is granted and there is clarity around availability
of gas for centralized self- generation or higher imports from
Jordan especially.
West Bank-Gaza connection When access is granted or Israel is willing to construct and
operate the line and there is clarity around availability of
centralized self- generation or higher imports from Jordan.
especially.
214 | Securing Energy for Development in the West Bank and Gaza
Box H.1: Improving the Security of Supply with Renewable Energy Technologies
The West Bank and Gaza’s ability to generate their own electricity offers relatively higher security than
importing electricity, because, unlike electricity, fuel can be purchased from several markets, which
reduces dependence on a single source. The most secure system will be one unconstrained by fuel
requirements. Renewable energy technologies (RETs), namely solar, wind and battery, offer this potential
for the West Bank and Gaza.
As the costs of RETs fall, certain CAPEX combinations for solar technologies, wind, and batteries yield
overall unit costs that are low enough to merit closer examinations. A simplified exercise was undertaken
to illustrate the concept. The analysis takes 2030 hourly load conditions and meets this demand with
RETs through several combinations of investment costs. Figure H.B1.1 shows combinations of costs
that yield average system costs of US$0.12, 0.13, 0.14, and 0.15 per kWh.
For example, if the cost of storage drops to $263 per kWh, it could be combined with low cost offshore
wind between $2,402 and $3,753 per kW and/or PV between $299 and $790 per kW. These ranges
can be combined to yield US$0.15 per kWh. In other words, if the cost of PV drops by 60 percent,
reaching $790 per kW, and storage, for example, falls to $263 per kWh, it is a combination that could be
attractive for large-scale deployment of RE.
Figure H.B1.1 : Percentage change in capex from 2016 costs that can result in
average costs of generation under 16 UScents per kWh in West Bank
USc/kWh
Storage 42% 82%
73% 75%
~ 15
6hr CSP
10 hr CSP 49% 50%
PV 55% 85%
USc/kWh
Storage 47% 76%
74%
~ 14
6hr CSP B
10 hr CSP 76% 78%
PV 63% 85%
USc/kWh
Storage 65% 83%
51% 78%
~ 13
6hr CSP 0%
10 hr CSP B
PV 78% 85%
USc/kWh
Storage 76% 83%
64% 77%
~ 12
6hr CSP
10 hr CSP 71% 72%
PV 78% 79%
USc/kWh
Storage 79% 83%
6hr CSP 73% 74%
~ 11
10 hr CSP 75% 76%
PV 73% 82%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Securing Energy for Development in the West Bank and Gaza | 215
Fig B1-b: Percentage change in capex from 2016 costs that can result in average
costs of generation under 16 UScents per kWh in Gaza
83%
~ 15 USc/kWh
Wind 69%
12% 82%
6hr CSP 59% 76%
16% 79%
PV 38% 86%
~ 13 USc/kWh ~ 14 USc/kWh
Wind 66% 82%
42% 83%
6hr CSP 56% 77%
43% 78%
PV 39% 85%
Wind 76% 82%
62% 83%
6hr CSP 64% 65%
21% 78%
40% 78%
PV
~ 12 USc/kWh
Wind 70% 83%
65% 83%
6hr CSP 67% 78%
33% 75%
PV 55% 85%
83%
~ 11 USc/kWh
Wind 81%
66% 79%
6hr CSP 73% 74%
67% 68%
73% 82%
PV
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Reference costs (2017)
PV 10 hr CSP 6hr CSP Wind Storage
$/kW $/kW $/kW $/kW $/kWh
1567 6650 5552 5141 375
216 | Securing Energy for Development in the West Bank and Gaza
NOTES
1 Based on the following: overnight CAPEX, $750 per kW; weighted
average cost of capital, 10 percent; plant life, 40 years; half of CAPEX
needed from start of construction.
2 Find the list at http://siteresources.worldbank.org/EXTLICUS/
Resources/511777-1269623894864/FY15FragileSituationList.pdf.
3 Plant capacities are modelled as continuous variables to reduce
computational time, so the capacity plans likely contain different plant
capacities for each of the scenarios (even if by a small number). In
reality, plant capacities are discrete variables rather than continuous.
For example, generation plants are typically commissioned in blocks
equal to the size of the units (for example, 48 MW could be configured
as 12 MW x 4 units). In the model, we assume this to be continuous,
allowing capacity increases that do not necessarily match unit sizes.
CCGT capacity of 1.1 MW could be added, for example, which is not
realistic. However, the objective of this exercise is to develop a sense
of the generation mix going forward. The error introduced by this
approximation is therefore not important.
4 Within the scope of the project, all imports are modeled as generators
connected to the relevant zones. This mathematically yields similar
results as the primary focus is on the impact of energy imports into the
West Bank and Gaza and not necessarily energy exchange between.
5 General Algebraic Modeling System (GAMS) is a fully documented
model and has been used for other World Bank assignments in Ukraine,
Bangladesh, Bulgaria, and South Africa.
6 The cost per kW to repair a plant depends on the extent of damage. To
simplify the problem, we assume a single cost amortized over 12 years.
This has been estimated from past World Bank projects that refurbished
or rehabilitated thermal plants, mostly to improve efficiency.
7 The system advisor model (SAM) is a performance and financial model
for RE planning from the U.S. National Renewable Energy Laboratory
(NREL), https://sam.nrel.gov/.
8 Weather data overview are available at https://www.nrel.gov/analysis/
sam/help/html- php/index.html?weather_format.htm.
9 Solar resource data obtained from EnergyPlus, https://energyplus.net/
weather. EnergyPlus is a tool funded by the U.S. Department of Energy’s
Building Technologies Office, and managed by NREL.
10 Wind speed data from weather stations was obtained from the Iowa
Environmental Mesonet program of the Iowa State University of Science
and Technology. It collects environmental data from cooperating
members with observing networks, http://mesonet.agron.iastate.edu/
ASOS/.
11 World Bank Global Economic Monitor Commodities (http://databank.
worldbank.org/data/reports.aspx?source=Global-Economic-Monitor-
(GEM)-Commodities).
12 Capacity range is based on National Electric Power Company (NEPCo)
annual reports.
13 The Green Corridor Project is a major grid upgrade to the north-south
transmission corridor in Jordan.
14 See annual technology costs from NREL at http://www.nrel.gov/docs/
fy16osti/66944.pdf.
15 See the International Energy Agency’s World Energy Outlook model,
http://www.worldenergyoutlook.org/weomodel/.
16 The cost of repairs is based on the rehabilitation of thermal plants
carried out by the World Bank.
Securing Energy for Development in the West Bank and Gaza | 217
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International Energy Agency. power system planning: Bangladesh Case study.
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Systems Planning.
APPENDIX I:
Financial Sector Model
Methodology
OVERALL APPROACH The financial model was used to explore the financial
impacts on the sector based on three scenarios from
The financial model of the Palestinian Authority (PA) the robust planning model that covered the entire
power sector will be built on three levels: range of power production costs from lowest to
highest. For the West Bank, these included Planned
1. Level 1: Simple cash flow models of the six Palestinian Future, Maximum Cooperation, and PENRA Vision
power distribution utilities DISCOs: Gaza Electricity scenarios, and for Gaza, these included Planned
Distribution Company (GEDCO), Hebron Electricity Future, Maximum Independence, and Maximum
Distribution Company (HEPCO), Jerusalem District Cooperation. The detailed description of the scenarios
Electricity Company (JDECO), Northern Electricity is provided in the planning model section of the main
Distribution Company (NEDCO), Southern Electricity report under Part II.
Distribution Company (SELCO), and Tubas Electricity
Distribution Company (TEDCO) The financial model assumes the following:
2. Level 2: A simple cash flow model of the new
Palestinian transmission utility Palestinian • PETL will act as a single buyer. PETL will import all
Electricity Transmission Company (PETL) the electricity that is available from Israeli Electric
3. Level 3: A simple characterization of the net Corporation (IEC), Jordan, and Egypt and will buy
impact of the power sector on the budget of the all the electricity produced in the PA (combined
Palestinian Authority in the form of subsidies cycle gas turbine, solar, wind, biomass, and so
forth).
The financial model uses as its historical reference • PETL will act also as a single supplier to the DISCOs
period the years 2011–15. The financial model using the IEC transmission infrastructure or its
projects forward for the period 2016–30. own transmission infrastructure. (Transmission
costs are included in PETL tariffs shown in the
The objective of the financial modeling is to evaluate financial model.)
the tariffs setting and the creditworthiness of the • The DISCOs invest in their own distribution
distribution companies (DISCOs) and especially infrastructure (distribution costs are included in
of PETL as an off-taker for a series of major new DISCOs tariffs shown in the financial model).
commercial term commitments for the bulk purchase
of power into the Palestinian territories and to identify Level 1: Distribution Utilities
a series of measures that could be taken to improve
this creditworthiness. In particular, these measures Output Variable: Electricity Average Equilibrium Cost
could include the following: and Retail Tariff in Each Distribution Utility as Well
as Aggregate
• Improvements in the commercial and operational Based on data projections and the chosen levels
performance of the DISCOs for input parameters, the model solves for the
• Increases in the retail tariff to the end consumer retail electricity price level that ensures the financial
• Injection of additional public subsidy to the sector equilibrium of each utility. This should initially be done
at the utility level. However, Palestinian Electricity
The financial model uses PA electricity physical Regulatory Council (PERC) currently has a policy of
demand projections from the robust planning model charging a single uniform tariff throughout the West
and transmission and distribution costs forecast Bank and Gaza, so the model will also calculate the
based on the various planning scenarios. average cost recovery tariff across the five distribution
220 | Securing Energy for Development in the West Bank and Gaza
utilities, as well as computing the transfers that would The projection of the wholesale power price over time
be needed across utilities to ensure their individual will be an output of the Level 2 model covering PETL.
financial sustainability should the uniform tariff be
applied. Those whose financial equilibrium tariff is Affordability Check: How Power Bills Weigh on
above the sector average would need to receive a net Household Budgets
compensatory transfer, and vice versa. As an add-on to the financial analysis of the DISCOs,
the model includes a module that will allow checking
Input Variables: Distribution Losses and Revenue for affordability and computing the potential value of
Collection Ratio consumer subsidies. The affordability check is based
The financial model will be set up to allow the user on data for the average household income across
to choose target values for distribution losses and 10 deciles of the Palestinian income distribution that
revenue collection ratios for the year 2030. These two is derived from the PCBS Labor Force Survey for
parameters reflect the overall operational and financial 2013. These will need to be rolled forward to reflect
performance of the utility and can be improved over anticipated real income growth through 2030.
time through management effort. Given that there
are measures under way to improve the poor current Subsistence electricity consumption can be estimated
performance in these areas, the model assumes that as the amount of electricity needed to provide a basic
the full benefit of these measures will be achieved by package of energy services in the household. Such
2030. The user should be able to input more or less information was derived from the PCBS Household
ambitious targets for both of these variables to see Energy Surveys. Based on an estimate of subsistence
what impact this has on the equilibrium tariff. electricity consumption the weight of the power bill
associated with the equilibrium retail tariff can be
Data Projections: Characterizing the Revenues calculated as a share of household income. When
and Expenditures this share exceeds 5 percent, an affordability issue
Basic data on the revenues and expenditures of the is presumed to arise. On this basis, it is possible to
utilities is collected by PERC for the purposes of calculate the total amount of government demand-
determining the revenue requirement for the cost- side subsidy that would be needed to keep the
plus-tariff-setting process. cost of subsistence consumption below the 5
percent threshold.
On the revenue side, the model takes historical data on
billings and collections in both physical and financial The model calculates and displays two distinct
terms. The difference between power purchased and subsidies. The first is the subsidy requirement to
power billed will give distribution losses. The difference maintain financial equilibrium if retail tariffs are not
between power billed and power collected will give adjusted as additional power-supply options come
the collection losses. The projection of the revenue online. The second is the subsidy requirement to
side will be based on physical demand projections provide targeted subsidies to the poorest, who
provided by the robust planning model and on return cannot afford increases in tariffs. The subsidies are
on equity set by the regulator (PERC). The tariff to be then compared in scenarios where DISCO efficiencies
applied to the demand projections will be based on are, and are not, improved to provide a sense of the
the solution of the model as noted above. impact of DISCO inefficiencies on the PA budget.
On the expenditure side, the model uses data from Level 2: PETL
the DISCOs financial annual reports on operations
and maintenance (O&M), taxes, debt service, planned Output Variable: Average Wholesale Price of Electricity
investments, and power purchase costs. O&M are to Be Charged by PETL to Discos
projected based on demand projections and on Based on data projections and the chosen levels for
efficiency factor to be set by the regulator. Debt input parameters, the model solves for the average
service and planned investments are projected based wholesale power price level that ensures the financial
on information about the repayment profile of currently equilibrium of the PA power sector, and for Gaza and
held debts, interest rate on debt, and investment for the West Bank separately.
plans for the period. The distribution utilities’ most
significant expenditure is power purchase.
Securing Energy for Development in the West Bank and Gaza | 221
Input Variable: Average Unit Subsidy to the Wholesale obtainable from the PETL Price Waterhouse Coopers
Price of Electricity to Be Applied by PA (PWC) Business Plan or from PETL itself.
The financial model allows the user to choose the
percentage of the wholesale electricity price that would On the revenue side, PETL’s future revenue will be the
be subsidized by the PA. The value of this supply-side wholesale power tariff multiplied by the total amount
subsidy is initially set to zero to understand the full tariff of energy demanded by the DISCOs.
implications of the proposed investment plan. If the
resulting retail tariff proves to be unaffordable (based Level 3: Palestinian Authority
on the affordability check), then the problem can be
addressed either through incorporating a supply-side Data Projections: Characterizing Fiscal Flows to the
subsidy at the level of PETL or a demand-side subsidy Power Sector
directly to consumers of the distribution utilities, The model will take stock of all the ways in which the
or a combination of the two. Although in practice, energy sector results in revenues or expenditures to
supply-side subsidies are more commonplace, the public budget.
demand-side subsidies are far preferable from an
economic standpoint. On the revenue side, the power sector contributes tax
revenues through the application of value-added tax
Data Projections: Characterizing Revenues and (VAT) and corporation taxes (VAT is not calculated in
Expenditures the model at this stage). It is not clear whether there
On the expenditure side, PETL’s expenditures can are any other positive fiscal contributions at present,
be divided between those associated with wholesale but the future development of Gaza Marine would
power purchase and those associated with operating potentially provide an important revenue source,
the transmission system. although certainly not earmarked to the power sector.
In terms of wholesale power purchase, in the future On the expenditure side, the power sector draws
PETL will be the holder of various power purchase several implicit and explicit subsidies from the public
agreements (PPAs) signed with different suppliers budget, for which we do not yet have a comprehensive
that may include IEC, Israeli Independent Power inventory. The ones that we do know about include
Producers (IPPs), gas-fired IPPs in the West Bank net lending, subsidy to DISCOs to compensate for
and Gaza, solar IPPs in the West Bank and Gaza, higher IEC prices, and potentially a pass-through of
and power import contracts with Jordan and Egypt. capital grants and concessional finance from donors.
The output of the planning model will give the total
amount of power from each source that PETL will Furthermore, the demand and supply-side subsidies
need to purchase in any given year. The planning calculated in Levels 1 and 2, respectively, enter the
model will also have unit cost information for each Level 3 model as a projected subsidy expenditure for
of these projects. On the basis of this information, a the sector. The impact of this subsidy on the overall
financial PPA price will need to be estimated bearing fiscal balance of the PA would need to be gauged to
in mind the potential financing conditions for power- identify a level of public subsidy that is affordable in
generation infrastructure in the West Bank and Gaza, fiscal terms. Since power is only one of the sectors
particular for domestic IPPs. Multiplying each power- handled through the budget, it would be important to
purchase price by the corresponding volume of power know the overall revenue and expenditure balance of
will give the total wholesale power purchase bill in the PA and how this is projected to evolve over time.
any given year. The overall volume of supply should
be compatible with the demand projections used in In summary, the schematic chart of figure I.1 illustrates
the planning model and also feed into the Level 1 the flows into and between the different entities
DISCOs model. of the PA power sector presented in the financial
model. Tables I.1 to I.6 provide the input and output
PETL also faces other costs associated with operating variables used in the financial model for each
and developing the transmission system. These distribution company.
include transmission losses, O&M expenditures,
taxes, debt service, and any investments needed
to upgrade the transmission network. These data is
222 | Securing Energy for Development in the West Bank and Gaza
Figure I.1: Flow of Activities among the West Bank and Gaza Power-Generation
Entities
Part I: Current Cash Flow
JDECO
(East Jerusalem)
Power Import
HEPCO Egypt
(Hebron) Municipalities
& other
NEDCO Power Import
(Nablus) Jordan
IEC
SELCO Power Import
(South WB) Israel
PETL
TEDCO (TSO & single Renewable
(North WB) buyer) Energy IPP’s
GEDCO
(Gaza)
Part II: Capital Cash Flow
IPP
Gaza
TAMAR
LEVIATAN
IPP
Banks & Financial Jenin
Institutions
IPP
Hebron
Gaza Marin
(Gas field)
Part III: Government Take
PA
(Palestinian Authority)
Legend
Power cash flow (Kwh x predicted electricity tariff)
1
Taxes, net lending2, capital subsidies or guarantees and royalties
Net capital investments3
O&M and financial expenses
Loans
Principal payments
Gas purchase
1. Power cash flow includes repayments of debts to ICE.
2. DISCOs (and some municipalities) are currently paying directly to IEC for the purchased power
distributed to Palestinian customers. Since DISCOs do not pay 100% their electricity supplies,
namely IEC, the PA is indirectly subsidizing the DISCOs due to the monthly sums taken by the
Israeli Ministry of Finance from Palestinian taxes collected on their behalf (”clearance
revenues”) to compensate from the Palestinian DISCO’s non-payment for purchased
electricity from IEC (”Net lending”)
3. Capital investments minus return on capital
Securing Energy for Development in the West Bank and Gaza | 223
TABLE I.1: FINANCIAL MODEL INPUTS AND OUTPUTS—GEDCO
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
GEDCO purchases and sales
Purchase of electricity from IEC and GWh 1,763 1,642 1,730 1,385 1,432 1,486 1,504 1,724 2,036 2,328 2,612 2,996 3,149 3,297 3,471 3,649 3,749 3,900 4,035 4,170
Jordan/ PETL
Total losses % 30.0% 30.0% 30.0% 26.5% 26.2% 26.0% 25.8% 25.6% 25.4% 25.2% 24.9% 24.7% 24.5% 24.3% 24.1% 23.9% 23.6% 23.4% 23.2% 23.0%
Total power sales GWh 1,234 1,149 1,211 1,018 1,056 1,099 1,116 1,283 1,519 1,742 1,960 2,255 2,377 2,496 2,635 2,778 2,862 2,986 3,099 3,211
Collection rate % 65.0% 68.0% 71.0% 64.0% 65.0% 66.7% 68.5% 70.2% 71.9% 73.7% 75.4% 77.1% 78.9% 80.6% 82.3% 84.1% 85.8% 87.5% 89.3% 91.0%
Total power paid by consumers GWh 802 781 860 652 686 734 764 900 1,093 1,283 1,478 1,739 1,874 2,012 2,170 2,336 2,456 2,614 2,766 2,922
Operating income (power sales) NIS mill 615 599 632 509 518 592 575 717 832 942 1,039 869 1,391 1,494 1,587 1,618 1,723 1,680 1,788 1,832
Other income NIS mill NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA
Total income NIS mill 615 599 632 509 518 592 575 717 832 942 1,039 869 1,391 1,494 1,587 1,618 1,723 1,680 1,788 1,832
GEDCO operating costs
Electricity purchase from IEC and NIS mill 701 817 911 916 795 808 760 932 1,054 1,133 1,219 951 1,581 1,665 1,731 1,720 1,799 1,704 1,781 1,786
Jordan/ PETL
O&M expenses NIS mill 53 56 54 58 63 66 66 76 90 103 115 132 139 146 153 161 166 172 178 184
Depreciation expenses NIS mill NA NA NA 13 13 13 13 13 13 22 22 22 22 22 22 22 22 22 22 22
Running cost NIS mill NA NA NA NA NA 0 0 0 0 16 16 16 16 16 16 16 16 16 16 16
Financial cost NIS mill NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA
Return on equity NIS mill NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA
Total electricity costs NIS mill 755 873 965 986 872 887 840 1,021 1,157 1,273 1,372 1,121 1,758 1,848 1,921 1,919 2,002 1,914 1,997 2,008
GEDCO income
Annual income/loss before income tax NIS mill -139 -274 -334 -477 -354 -295 -265 -304 -325 -331 -333 -252 -367 -354 -335 -301 -280 -234 -210 -176
Income tax - 15% NIS mill NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA
Net Annual income NIS mill -139 -274 -334 -477 -354 -295 -265 -304 -325 -331 -333 -252 -367 -354 -335 -301 -280 -234 -210 -176
GEDCO purchase, sale, and equilibrium tariff
Average purchase cost / PETL tariff NIS/kWh 0.398 0.497 0.527 0.661 0.555 0.544 0.505 0.541 0.518 0.487 0.467 0.318 0.502 0.505 0.499 0.471 0.480 0.437 0.441 0.428
Average retail tariff NIS/kWh 0.498 0.521 0.522 0.500 0.490 0.807 0.753 0.796 0.761 0.734 0.703 0.500 0.742 0.743 0.731 0.693 0.701 0.643 0.646 0.627
Electricity average equilibrium cost NIS/kWh 0.941 1.117 1.123 1.513 1.270 1.209 1.099 1.134 1.058 0.992 0.928 0.645 0.938 0.919 0.886 0.822 0.815 0.732 0.722 0.687
*Assuming Planned Future planning scenario from 2016 to 2030.
224 | Securing Energy for Development in the West Bank and Gaza Securing Energy for Development in the West Bank and Gaza | 225
TABLE I.2: FINANCIAL MODEL INPUTS AND OUTPUTS—JDECO
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
JDECO Purchases and Sales
Purchase of electricity from IEC GWh 1,797 1,943 1,902 1,935 2,114 2,084 2,142 2,199 2,186 2,391 2,511 2,446 2,548 2,509 2,563 2,677 2,796 2,918 2,913 3,012
and Jordan/ PETL
Total losses % 27.7% 26.4% 26.2% 24.9% 23.9% 23.8% 23.8% 23.7% 23.6% 23.6% 23.5% 23.5% 23.4% 23.3% 23.3% 23.2% 23.2% 23.1% 23.1% 23.0%
Total power sales GWh 1,299 1,431 1,403 1,454 1,609 1,588 1,633 1,678 1,670 1,827 1,920 1,872 1,952 1,923 1,966 2,055 2,148 2,244 2,241 2,320
Collection rate % 95.9% 96.6% 83.4% 95.0% 90.5% 90.5% 90.6% 90.6% 90.6% 90.7% 90.7% 90.7% 90.8% 90.8% 90.8% 90.9% 90.9% 90.9% 91.0% 91.0%
Total power paid by consumers GWh 1,245 1,381 1,171 1,381 1,444 1,437 1,479 1,520 1,513 1,656 1,742 1,698 1,772 1,746 1,786 1,867 1,952 2,040 2,039 2,111
Operating income (Power sales) NIS mill 695 875 889 951 949 946 943 970 975 1,129 1,184 1,223 1,246 1,205 1,214 1,248 1,278 1,065 1,285 1,309
Other income NIS mill 54 57 83 72 68 67 68 70 70 76 80 78 81 80 82 85 89 93 93 96
Total income NIS mill 749 932 971 1,022 1,017 1,012 1,012 1,041 1,045 1,206 1,265 1,301 1,328 1,285 1,296 1,334 1,368 1,158 1,378 1,405
JDECO operating costs
Electricity purchase from IEC NIS mill 563 800 832 886 871 741 731 756 762 909 960 1,011 1,030 991 999 1,030 1,056 814 1,058 1,079
and Jordan/ PETL
O&M expenses NIS mill 146 148 163 172 188 185 190 195 194 212 223 217 226 223 228 238 248 259 259 267
Depreciation expenses NIS mill 24 21 20 30 37 36 36 36 35 37 36 36 36 35 35 35 34 34 34 33
Interest rate on debt % 2.75% 3.52% 2.10% -1.04% -0.64% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25% 6.50% 6.75% 7.00%
Financing expenses NIS mill 22 34 28 -15 -11 59 62 63 64 64 64 63 63 62 61 60 59 58 57 56
Running cost NIS mill NA NA NA NA NA 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1
Other expenses NIS mill NA NA 4 4 6 4 5 5 5 5 5 5 5 5 5 6 6 6 6 6
Return on equity NIS mill NA NA NA NA NA 23 22 21 20 19 17 15 13 11 9 6 4 1 0 -2
Total electricity costs NIS mill 754 1,004 1,046 1,076 1,091 1,045 1,041 1,071 1,076 1,242 1,302 1,344 1,369 1,323 1,332 1,370 1,402 1,167 1,408 1,434
JDECO income
Annual income/loss before NIS mill -5 -71 -75 -54 -74 -14 -13 -14 -16 -22 -25 -32 -33 -32 -33 -35 -37 -14 -36 -38
income tax
Income tax - 15% NIS mill 3 0 0 3 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net annual income NIS mill -8 -71 -75 -56 -82 -14 -13 -14 -16 -22 -25 -32 -33 -32 -33 -35 -37 -14 -36 -38
JDECO purchase, sale, and equilibrium tariff
Average purchase cost / PETL NIS/kWh 0.313 0.412 0.437 0.458 0.412 0.356 0.341 0.344 0.349 0.380 0.382 0.413 0.404 0.395 0.390 0.385 0.378 0.279 0.363 0.358
tariff
Average retail tariff NIS/kWh 0.535 0.612 0.633 0.654 0.590 0.658 0.638 0.638 0.644 0.682 0.680 0.720 0.703 0.690 0.680 0.669 0.655 0.522 0.630 0.620
Electricity average equilibrium NIS/kWh 0.606 0.727 0.894 0.779 0.755 0.727 0.704 0.705 0.711 0.750 0.747 0.791 0.773 0.758 0.746 0.734 0.718 0.572 0.691 0.680
cost
*Assuming Planned Future planning scenario from 2016 to 2030.
226 | Securing Energy for Development in the West Bank and Gaza Securing Energy for Development in the West Bank and Gaza | 227
TABLE I.3: FINANCIAL MODEL INPUTS AND OUTPUTS—NEDCO
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
NEDCO purchases and sales
Purchase of electricity from IEC GWh 414 474 480 502 549 576 1,125 1,193 1,232 1,274 1,289 1,470 1,498 1,668 1,763 1,799 1,842 1,882 2,051 2,122
and Jordan/ PETL
Total losses % 19% 17% 12% 14% 17% 17% 17% 18% 18% 19% 19% 20% 20% 20% 21% 21% 22% 22% 23% 23%
Total power sales GWh 337 392 420 435 458 478 928 979 1,007 1,035 1,042 1,182 1,198 1,327 1,395 1,416 1,442 1,465 1,588 1,634
Collection rate % 79% 70% 87% 86% 98% 99% 99% 100% 100% 101% 101% 102% 102% 103% 103% 104% 104% 105% 105% 106%
Total power paid by consumers GWh 266 274 365 376 450 472 922 978 1,010 1,044 1,056 1,204 1,226 1,364 1,441 1,470 1,504 1,535 1,672 1,728
Operating income (power sales) NIS mill 189 223 232 245 242 252 452 493 521 589 606 734 744 811 852 867 878 706 939 976
Other income NIS mill 2 6 24 40 NA 46 48 51 53 55 55 63 64 72 76 77 79 81 88 91
Total income NIS mill 191 230 256 285 NA 298 501 544 574 643 661 797 808 883 928 944 957 787 1,027 1,067
NEDCO operating costs
Electricity purchase from IEC and NIS mill 179 200 230 250 247 205 384 410 430 484 493 608 606 659 687 692 696 525 745 760
Jordan/ PETL
O&M expenses NIS mill 10 17 12 13 NA 15 29 30 31 32 33 37 38 42 45 46 47 48 52 54
Depreciation expenses NIS mill 1 2 2 2 NA 1 2 3 4 6 6 6 6 6 6 6 6 6 6 6
Interest rate on debt % NA NA NA NA NA 4% 4% 4% 4% 5% 5% 5% 5% 6% 6% 6% 6% 7% 7% 7%
Financing expenses NIS mill NA NA NA NA NA 10 11 17 19 21 22 22 26 25 26 25 22 19 5 13
Running cost NIS mill NA NA NA NA NA 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1
Other expenses NIS mill 1 NA 1 5 NA 6 12 13 13 14 14 16 16 18 19 19 20 20 22 23
Return on equity NIS mill NA NA NA NA NA 17 18 20 22 25 27 30 33 36 40 45 49 54 59 65
Total electricity costs NIS mill 191 219 245 269 NA 254 455 493 519 583 596 720 726 788 824 834 841 673 890 922
NEDCO Income
Annual income/loss before income NIS mill 0.5 11 12 15 NA 60 63 70 77 85 92 107 115 131 144 155 166 168 195 210
tax
Income tax - 15% NIS mill 0.4 2 5 7 NA 9 9 11 12 13 14 16 17 20 22 23 25 25 29 32
Net annual income NIS mill 0.1 9 7 9 NA 51 54 60 65 73 78 91 98 112 123 132 141 143 166 179
NEDCO purchase, sale, and equilibrium tariff
Average purchase cost / PETL NIS/kWh 0.348 0.410 0.444 0.487 0.450 0.356 0.341 0.344 0.349 0.380 0.382 0.413 0.404 0.395 0.390 0.385 0.378 0.279 0.363 0.358
tariff
Average retail tariff NIS/kWh 0.561 0.569 0.551 0.563 0.528 0.533 0.490 0.504 0.516 0.564 0.573 0.610 0.607 0.594 0.591 0.590 0.584 0.460 0.561 0.565
Electricity average equilibrium cost NIS/kWh 0.716 0.797 0.671 0.717 NA 0.539 0.493 0.504 0.514 0.558 0.565 0.598 0.592 0.577 0.572 0.568 0.559 0.438 0.533 0.533
*Assuming Planned Future planning scenario from 2016 to 2030.
228 | Securing Energy for Development in the West Bank and Gaza Securing Energy for Development in the West Bank and Gaza | 229
TABLE I.4: FINANCIAL MODEL INPUTS AND OUTPUTS—TEDCO
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
TEDCO purchases and sales
Purchase of electricity from IEC and GWh 71 81 85 96 104 118 213 226 234 242 245 279 284 317 334 341 350 357 389 403
Jordan/ PETL
Total losses % 3% 16% 14% 15% 16% 17% 17% 17% 18% 18% 19% 19% 20% 20% 21% 21% 22% 22% 23% 23%
Total power sales GWh 69 68 73 81 87 99 177 187 192 197 198 225 228 252 265 269 274 278 301 310
Collection rate % 97% 105% 97% 85% 76% 77% 78% 79% 80% 81% 82% 83% 84% 85% 86% 87% 88% 89% 90% 91%
Total power paid by consumers GWh 67 72 71 68 67 76 139 148 154 160 163 187 192 215 228 234 241 248 271 282
Operating income (power sales) NIS mill 30 35 39 46 46 42 73 80 84 96 99 121 123 136 144 148 151 125 165 173
Other income NIS mill 0 3 5 6 8 9 16 17 17 18 18 20 21 23 25 25 26 26 29 30
Total income NIS mill 30 38 44 52 54 51 89 96 102 113 117 141 144 159 168 173 176 151 194 202
TEDCO operating costs
Electricity purchase from IEC and NIS mill 27 33 38 45 42 42 73 78 82 92 94 115 115 125 130 131 132 100 141 144
Jordan/ PETL
O&M expenses NIS mill 3.7 4.9 5.1 6.3 7.4 8.4 15.1 16.0 16.5 17.1 17.3 19.7 20.1 22.4 23.6 24.1 24.7 25.2 27.5 28.5
Depreciation expenses NIS mill NA NA NA NA NA 0.0 0.0 0.0 0.0 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Interest rate on debt % NA NA NA NA NA 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Financing expenses NIS mill NA NA NA NA NA 2.0 2.2 3.7 4.4 5.1 5.9 6.5 7.9 8.5 9.5 10.2 10.5 10.8 9.2 11.0
Running cost NIS mill NA NA NA NA NA 0.0 0.0 0.0 0.0 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Other expenses NIS mill 0.6 0.6 0.8 0.7 0.7 0.8 1.5 1.6 1.6 1.7 1.7 2.0 2.0 2.2 2.3 2.4 2.5 2.5 2.7 2.8
Return on equity NIS mill NA NA NA NA NA 1.6 1.5 1.3 1.1 1.0 0.8 0.6 0.4 0.3 0.3 0.4 0.7 1.0 1.8 2.5
Total electricity costs NIS mill 31.1 38.7 44.1 51.8 50.4 55.0 93.1 100.4 105.3 117.5 120.0 144.7 146.0 159.1 166.8 169.2 171.0 139.8 183.2 189.7
TEDCO income
Annual income/loss before income NIS mill -1.0 -1.1 0.1 0.2 3.4 -2.2 -3.1 -2.9 -2.5 -3.2 -2.5 -3.1 -1.7 0.0 1.8 3.8 6.1 12.1 12.2 15.1
tax
Income tax - 15% NIS mill 0.0 0.0 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 1.8 1.8 2.3
Net annual income NIS mill -1.0 -1.1 0.1 0.1 2.9 -2.2 -3.1 -2.9 -2.5 -3.2 -2.5 -3.1 -1.7 0.0 1.8 3.8 5.2 10.3 10.4 12.9
TEDCO purchase, sale, and equilibrium tariff
Average purchase cost / PETL tariff NIS/kWh 0.378 0.407 0.447 0.468 0.407 0.356 0.341 0.344 0.349 0.380 0.382 0.413 0.404 0.395 0.390 0.385 0.378 0.279 0.363 0.358
Average retail tariff NIS/kWh 0.432 0.506 0.527 0.563 0.529 0.556 0.526 0.538 0.549 0.597 0.606 0.644 0.641 0.631 0.630 0.629 0.625 0.503 0.608 0.612
Electricity average equilibrium cost NIS/kWh 0.465 0.539 0.619 0.756 0.757 0.720 0.672 0.678 0.684 0.733 0.736 0.773 0.761 0.740 0.730 0.722 0.709 0.564 0.675 0.672
*Assuming Planned Future planning scenario from 2016 to 2030.
230 | Securing Energy for Development in the West Bank and Gaza Securing Energy for Development in the West Bank and Gaza | 231
TABLE I.5: FINANCIAL MODEL INPUTS AND OUTPUTS—HEDCO
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
HEPCO purchases and sales
Purchase of electricity from IEC and GWh 362 369 373 379 411 419 650 673 695 720 744 729 719 738 733 732 792 810 850 901
Jordan/ PETL
Total losses % 22% 19% 20% 19% 20% 21% 21% 21% 21% 21% 21% 22% 22% 22% 22% 22% 22% 23% 23% 23%
Total power sales GWh 282 300 299 306 328 333 516 532 549 567 585 571 563 576 571 569 614 627 656 694
Collection rate % 74% 74% 70% 82% 81% 82% 83% 83% 84% 85% 85% 86% 87% 87% 88% 88% 89% 90% 90% 91%
Total power paid by consumers GWh 209 222 209 251 267 273 427 443 461 480 499 491 487 502 501 503 547 562 593 632
Operating income (power sales) NIS mill 154 181 181 193 193 175 246 260 274 307 322 339 334 339 338 338 359 300 376 399
Other income NIS mill 14 13 16 15 16 16 25 26 26 27 28 28 27 28 28 28 30 31 32 34
Total income NIS mill 167 194 197 208 209 191 270 285 300 335 350 367 362 367 365 366 389 330 408 434
HEPCO operating costs
Electricity purchase from IEC and NIS mill 136 160 170 176 164 149 222 231 242 274 285 301 291 292 286 282 299 226 309 323
Jordan/ PETL
O&M expenses NIS mill 13 17 19 15 16 17 26 27 28 29 30 29 29 29 29 29 32 32 34 36
Depreciation expenses NIS mill 9 9 9 10 10 10 10 9 9 11 11 11 10 10 10 10 10 10 10 10
Interest rate on debt % NA NA NA NA NA 4% 4% 4% 4% 5% 5% 5% 5% 6% 6% 6% 6% 7% 7% 7%
Financing expenses NIS mill 2 12 1 3 7 25 26 31 34 37 41 44 47 50 53 55 57 61 59 66
Running cost NIS mill NA NA NA NA NA 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1
Other expenses NIS mill NA 0 0 1 1 1 1 1 1 1 2 2 1 2 2 2 2 2 2 2
Return on equity NIS mill NA NA NA NA NA 12 12 12 11 11 10 8 7 6 5 4 3 2 2 1
Total electricity costs NIS mill 160 197 199 206 198 214 297 311 326 362 377 394 386 388 384 381 403 333 415 438
HEPCO income
Annual income/loss before income NIS mill 7 -3 -2 2 11 -10 -15 -15 -15 -18 -18 -20 -18 -16 -14 -13 -11 -2 -6 -4
tax
Income tax - 15% NIS mill 1 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net annual income NIS mill 6 -3 -2 2 9 -10 -15 -15 -15 -18 -18 -20 -18 -16 -14 -13 -11 -2 -6 -4
HEPCO purchase, sale, and equilibrium tariff
Average purchase cost / PETL tariff NIS/kWh 0.377 0.433 0.456 0.464 0.398 0.356 0.341 0.344 0.349 0.380 0.382 0.413 0.404 0.395 0.390 0.385 0.378 0.279 0.363 0.358
Average retail tariff NIS/kWh 0.545 0.604 0.605 0.630 0.590 0.641 0.576 0.585 0.594 0.640 0.645 0.692 0.687 0.675 0.674 0.671 0.657 0.533 0.634 0.632
Electricity average equilibrium cost NIS/kWh 0.766 0.889 0.952 0.821 0.743 0.782 0.696 0.702 0.707 0.755 0.756 0.804 0.792 0.773 0.766 0.758 0.736 0.592 0.701 0.694
*Assuming Planned Future planning scenario from 2016 to 2030.
232 | Securing Energy for Development in the West Bank and Gaza Securing Energy for Development in the West Bank and Gaza | 233
TABLE I.6: FINANCIAL MODEL INPUTS AND OUTPUTS—SELCO
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
SELCO purchases and sales
Purchase of electricity from IEC and GWh 121 125 124 124 131 178 207 214 221 229 237 232 229 235 233 233 252 258 271 287
Jordan/ PETL
Total losses % 37% 30% 29% 28% 27% 27% 26% 26% 26% 26% 25% 25% 25% 25% 24% 24% 24% 24% 23% 23%
Total power sales GWh 76 88 88 89 96 131 152 158 164 171 177 174 172 177 177 177 192 197 208 221
Collection rate % 54% 59% 58% 71% 79% 80% 81% 82% 82% 83% 84% 85% 85% 86% 87% 88% 89% 89% 90% 91%
Total power paid by consumers GWh 41 52 51 63 76 104 123 129 135 142 148 147 147 153 154 156 170 176 187 201
Operating income (Power sales) NIS mill 48 56 54 76 67 73 93 98 102 112 116 120 118 119 118 117 124 104 130 136
Other income NIS mill 2 5 6 4 9 9 11 11 11 12 12 12 12 12 12 12 13 13 14 15
Total income NIS mill 50 61 60 80 77 82 103 108 113 123 128 132 129 131 129 129 137 117 143 151
SELCO operating costs
Electricity purchase from IEC and NIS mill 43 54 53 71 49 63 71 74 77 87 91 96 93 93 91 90 95 72 98 103
Jordan/ PETL
O&M expenses NIS mill 8 9 18 15 19 20 23 24 25 25 26 26 25 26 26 26 28 29 30 32
Depreciation expenses NIS mill 5 5 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
Interest rate on debt % NA NA NA NA NA 4% 4% 4% 4% 5% 5% 5% 5% 6% 6% 6% 6% 7% 7% 7%
Financing expenses NIS mill 2 2 2 2 3 15 14 15 15 14 14 13 12 11 11 10 9 9 8 8
Running cost NIS mill NA NA NA NA NA 0 0 0 0 0.23 0.23 0.23 0.23 0.23 0.23 0.23 0.23 0.23 0.23 0.23
Other expenses NIS mill -2 0 -2 0 -7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Return on equity NIS mill NA NA NA NA NA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total electricity costs NIS mill 56 71 78 95 71 105 115 120 123 134 138 142 137 138 135 133 140 116 144 149
SELCO income
Annual income/loss before income NIS mill -6 -10 -18 -15 5 -22 -12 -11 -10 -11 -10 -10 -8 -7 -5 -4 -3 1 0 1
tax
Income tax - 15% NIS mill 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net annual income NIS mill -6 -10 -18 -15 5 -22 -12 -11 -10 -11 -10 -10 -8 -7 -5 -4 -3 1 0 1
SELCO purchase, sale, and equilibrium tariff
Average purchase cost / PETL Tariff NIS/kWh 0.356 0.433 0.426 0.570 0.373 0.356 0.341 0.344 0.349 0.380 0.382 0.413 0.404 0.395 0.390 0.385 0.378 0.279 0.363 0.358
Average retail tariff NIS/kWh 0.639 0.636 0.610 0.851 0.703 0.804 0.754 0.756 0.752 0.789 0.781 0.818 0.800 0.778 0.764 0.751 0.728 0.591 0.692 0.676
Electricity average equilibrium cost NIS/kWh 1.375 1.368 1.544 1.495 0.940 1.005 0.934 0.927 0.913 0.947 0.929 0.964 0.934 0.900 0.876 0.854 0.820 0.660 0.766 0.742
*Assuming Planned Future planning scenario from 2016 to 2030.
234 | Securing Energy for Development in the West Bank and Gaza Securing Energy for Development in the West Bank and Gaza | 235
Securing Energy for
Development in the
West Bank and Gaza