Israel Awards License for 200-Megawatt Haifa and 300-MW Mount Gilboa Pumped-Storage Power Plants

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Researched by Industrial Info Resources (Sugar Land, Texas)--Clal Industries and Investments Limited (TLV:CII) (Tel Aviv, Israel), an electricity producer and a subsidiary of IDB Holdings Corporation Limited (TLV:IDBH) (Tel Aviv), recently secured a tentative license from the National Ministry of Infrastructures to develop a 220-megawatt (MW) pumped-storage power project in Haifa. The proposed project is estimated to cost $250 million and is scheduled for completion by 2015.

The pumped-storage technology refers to power generation from the potential energy of a water reservoir that is located at a high altitude. The potential energy is converted to kinetic energy as water flows down to another reservoir at a lower altitude and drives a turbine en route. The difference in altitudes between the two reservoirs is in the range of 656 to 1,969 feet. The amount of water required depends on the difference in altitudes and the power generation capacity of the facility. A 20-MW pumped-storage power plant is estimated to require about 160,000 cubic meters of water.

The upper water reservoir of the Haifa project will be located near the Kishon rivulet on Mount Carmel at a quarry owned by Nesher Israel Cement Industries Limited (Tel Aviv), a 75% subsidiary of Clal Industries and the sole producer of cement in Israel. The power plant has an estimated water requirement of 1.3 million cubic meters. The firm has not yet decided whether it will use fresh water or treated sewage water for the power plant.

Clal Industries has yet to receive building and other permits for the project from the government. Nesher, which is a huge consumer of power, is reportedly required to meet certain milestones for Clal Industries to be awarded a permanent license for the power project. Clal Industries is also required to make arrangements for financing the project.

A similar license for pumped-storage power generation was recently granted to a consortium of Electra Limited (TLV:ELTR) (Ramat Gan, Israel), Merhav MNF Limited (Herzliya, Israel) and Ortam Sahar Engineering Limited (Ramat Gan), a part of the Ortam-Malibu Group (Ramat Gan), for setting up a 300-MW power plant on Mount Gilboa. The upper reservoir of the project would be located to the southeast of Kibbutz Ma'aleh Gilboa and connected through a tunnel with the lower reservoir near the Reshafim reservoir. An underground hydroelectric power station would also be developed near the reservoir.

According to a presentation made in July 2007 by the Ortam-Malibu Group, Ortam Projects Development (Ramat Gan) had entered into an agreement with Electra and ARZ Electricity Limited for the project on Mount Gilboa. Ortam Sahar Projects is a 50:50 joint venture between Ortam Sahar Engineering Limited and Milchen Brothers Limited. ARZ Electricity Limited is owned by Ra'anan Aloni, Chief Executive Officer of Ampa Group Limited (Herzliya). At the time, construction of the project was estimated to cost $310 million. The three firms set up the joint venture company PSP Investments Limited, in which Ortam and Electra own stakes of 38% each and ARZ Electricity owns a stake of 24%.

The presentation also refers to a draft published in 2007 by Israel's Public Services Authority for Electricity pertaining to tariffs for pumped-storage facilities in the country. According to the draft, the developers are required to first secure project finance. Subsequently, they would enter into agreements with the government under which they would receive a fixed annual payment based on the available power generation capacity of the facility. The developers are required to guarantee operational availability of the entire facility. The Israel Electric Corporation Limited (Haifa) would undertake the responsibility of integrating the facility with the national power grid, determine the power generation schedule of the plant, operate the facility according to the requirements of the grid and bear the costs of pumping water. According to the agreement, the developers of the Mount Gilboa pumped storage power project would receive $120,000 per megawatt of power generated per year.

The pumped storage technology is rendered economically viable because of the difference in electricity rates between peak and off-peak hours. Water is pumped to the reservoir for storage during off-peak hours at night when surplus power is available on the grid for usage. The stored water is allowed to flow downwards for power generation during the peak hours in the daytime, thereby enabling low-cost power generation during peak hours, helping reduce the load on the electricity grid during peak demand. This concept is referred to as "peak shaving." A pumped-storage power generation facility also has the advantage of flexible power generation in response to the requirements of the power grid. As of 2007, approximately 350 pumped-storage power plants in operation worldwide with a combined generation capacity of 85,000 MW. Israel is looking to address 5-8% of its power requirements from pumped storage facilities in the coming years.

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