Israel to Slash Solar Roof Payments, Urging Faster Installation

Israel's Electricity Authority is set to significantly reduce payments for electricity generated by new home solar roofs, a move aimed at encouraging earlier installations. Under a draft decision, the fixed payment rate for new domestic solar roof owners will drop from the current 48-54 agorot per kWh to approximately 35 agorot per kWh starting in 2030, subject to foreign currency exchange rates. Homeowners who have already installed solar roofs are guaranteed the current higher rate for 25 years. Those who submit a connection request by the end of 2026 and complete installation within a year will also secure this rate for 25 years. However, from 2027 to 2030, the payment for new roofs will decrease by 5% annually, with a new policy to follow. The "urban premium" of an additional 6 agorot per kWh is also expected to be abolished.

The new payment structure will also incorporate a currency linkage mechanism, where 40% of foreign currency fluctuations will directly impact the price. This means a 10% drop in the dollar and euro could reduce the price by an additional 4%. While currency appreciation could mitigate the decrease, the base calculation is different from current market rates, accelerating the price reduction. For instance, by mid-2027, the price could fall to around 43 agorot per kWh, with the payment guarantee reduced to 20 years.

The rationale behind these changes is to reduce the subsidy burden on consumers, which currently accounts for about 10% of electricity bills (approximately NIS 3 billion annually). The Electricity Authority aims to partially reduce this subsidy, especially as the Ministry of Energy targets an additional 100,000 solar roofs. The authority is promoting a shift from a fixed feed-in tariff to a market-based model, where homeowners can sell electricity to private suppliers. Under this model, homeowners would receive a "premium" subsidy from the electricity sector, with the remainder paid by private electricity suppliers. For example, a small home roof (up to 15 kW) might receive a 23.5 agorot per kWh premium in 2027, requiring a private supplier to offer at least 19.5 agorot more for the deal to be worthwhile.

Starting in 2028, a competitive pricing mechanism will be introduced for medium to large roofs (over 15 kW), where those offering the lowest price will be connected first, incentivizing lower subsidized prices. Small roofs will be exempt from this. Industry experts have mixed views on the potential impact. Adam Kromer, CEO of GreenDays, notes a significant increase in demand due to the anticipated rate reduction, though he hasn't observed dramatic price hikes yet. He also points to installers becoming more selective with clients. Eitan Parans, CEO of the Association of Green Energy Companies in Israel, expresses concern that the rate reductions could cool the market and hinder growth, citing a significant drop in new installations this year compared to government targets. He advocates for increased incentives rather than reductions.