A promise of double-digit returns nowadays might seem like just another Ponzi scheme to investors. But a group of solar energy fans from a kibbutz, or collective, in southern Israel believes it can offer just that, by using government backing to turn farmland into photovoltaic fields. With water an increasingly scarce commodity in Israel—and both sun and land in abundance—the band of new-age socialists envisages turning the desert into a vast solar power plant. The first 5-megawatt field at Kibbutz Ketura is expected to be up and running by early next year.
"Within five years we'll have 200 megawatts of photovoltaic fields on more than a dozen kibbutzim in southern Israel," predicts Yosef Abramowitz, president and founder of Arava Power Co. Under a recently announced Israeli government subsidy for electricity produced by solar power plants, that translates into $110 million in revenues. The money would go directly to the kibbutzim and a group of mostly American investors in Israel's first green energy utility.
The subsidy is part of a government initiative approved last month to produce at least 10% of Israel's electricity from renewable sources by 2020. Another recent decision requires the government-controlled Israel Electric Corp. to purchase electricity generated by renewable energy producers under 20-year contracts—a way of ensuring long-term demand and price stability, and thus encouraging investment.
"Southern Israel boasts some of the best solar conditions in the world, and the proximity to the grid makes the venture even more attractive," says Amit Mor, chief executive of Eco-Energy, an Israeli energy consulting firm. Despite its ideal climatic conditions, the Jewish state was until recently slow to jump on the solar electricity bandwagon. This is true even though Israelis for decades have gotten most of their hot water from rooftop solar water systems, not to mention that Israel is home to several cutting-edge solar energy companies including Solel Solar Systems and richly funded BrightSource Energy, which is also working in Southern California's Mojave Desert.
Now, for strategic reasons, Israel is more interested than ever in weaning itself off dependence on traditional fuel sources. Indeed, the country's Defense Ministry is becoming a proponent of alternative energy partly because the recent military operations in Gaza underscored the vulnerability of Israel's large power plants, two of which were in range of Hamas rockets. The military has expressed particular interest in solar power as a means of making electricity production more secure.
ENERGY VS. VEGETABLES
Abramowitz founded Arava Power three years ago after immigrating to Israel and settling in Ketura, situated 30 miles north of Eilat. The recent sharp drop in oil prices isn't apparently a major concern: When the 44-year-old Boston native got started in 2006, oil was at $40 a barrel, just about where it is today. "The volatility of oil prices in the past few years only underscores the need for a country like Israel to sharply reduce its dependency on fossil fuel," Abramowitz says.
The most convincing argument for the 600 members of Ketura was that solar energy could be far more profitable than growing fruits and vegetables—a traditional primary source of income for most of the kibbutzim in the region.