Israel's Energy and Water Ministry said Thursday it will further reduce coal use by Israel Electric Corp, which will be offset by an increase in the use of domestic natural gas.
The ministry's plan calls for an additional 5% cut in coal use from 2017 on top of the 15% reduction imposed this year.
The ministry has also recommended the state-owned utility be allowed to raise tariffs by 2% to compensate for the increased use of natural gas.
Coal imported from Colombia, South Africa, Australia and Russia currently account for 57% of the utility's fuel mix, natural gas 41% and gasoil and fuel oil the remainder. The ministry's target for 2017 is for natural gas to account for 52.4% and coal 45.6%.
Israel Electric in 2015 paid on average $2-$2.50/MMBTU for coal and $6/MMBtu for natural gas supplied by the huge Tamar offshore field.
"When you take into account the contribution to the Israeli economy in the form of taxes and royalties from domestic gas production, the cost of the two fuels is more or less equivalent," said Chen Herzog, chief economist at BDO Consulting and an energy expert. There was also a substantial environmental benefit from using natural gas instead of coal, he added.
Israel Electric consumed almost 13 million mt of imported coal in 2015. This was expected to fall by almost 2 million mt this year and by a further 650,000-700,000 mt in 2017.
Herzog said the greater use of natural gas would also resolve the company's surplus gas issue resulting from its long term take or pay contracts signed with the Tamar consortium.
Israel Electric's demand for gas has grown at a slower pace than forecast, resulting in a substantial surplus.
The country's energy and finance ministries last year agreed to allow Israel Electric to sell surplus gas to other consumers, including the private power sector, which is run almost exclusively on natural gas.
Energy and Water Ministry sources said the further cut in coal use next year should minimize the surplus.
Israel's finance, economy and energy ministries have also announced a doubling of the subsidy given to companies converting factories from fuel oil to natural gas after the sharp drop in global oil prices all but halted the process on economic grounds.
