Updated: Less Coal, More Natural Gas for Power Generation in Israel as Electricity Price to Rise

Israeli Energy Minister Yuval Steinitz today ordered the Israel Electric Corp (IEC) to reduce its use of coal by 15% in power generation and increase its use of natural gas by the same amount. As a result, according to a press release from the Energy Ministry, that will lead to a 15% reduction in coal emissions. However at the same time, the electricity price will rise by 1.5% in order to cover the additional costs. Generating electricity with gas is more expensive by 25% than with coal as natural gas prices in Israel were unchanged this year, while coal prices have fallen.

The new directive is a temporary one, though it would last a few years until scrubbers (gas pollution filtration devices) can be installed in coal-fired power generation facilities.

The new directive is also expected to increase revenues and profits for Noble Energy, Delek Group, Isramco, and Dor Alon, the four members in the Tamar Partnership.

The increase in natural gas use is expected to help reduce the expected surplus in natural gas that IEC undertook to purchase in its 20-year contract with the Tamar Partnership. According to the ToP contract, IEC was about to pay $800 million for gas it wouldn’t use by 2022. The change in the energy mix would help the corporation to reduce this non-covered expense.

The directive will come into effect on 1 January 2016.

Ya'acov Zalel

Note: This article has been updated to add details of IEC's surplus