Abstract
The main objective of this paper is to identify the renewable energy (RE) and energy efficiency (EE) policy and regulatory risks and barriers in the Palestinian Territories (PT). An accurate insight into the market structure and normative frameworks for RE and EE investments in the PT is performed. For this purpose, a survey has been conducted through two questionnaires and interviews addressed to public decision-makers and local and foreign sectoral companies to study the market confidence in the field of renewable energy sources (RES) and EE. The questionnaire was designed to investigate the attractiveness of RE and EE in the country by directly involving the various market players and to identify what could encourage or hinder investment. RE and EE are, in fact, a valid response to the needs of the PT to guarantee independence and security of supply, ensure access to energy throughout the territory, and reduce emissions. The climate-related issues are listed in the Palestinian political agenda. National subsidies and grants are offered for investment in RES and EE but are still the main barriers. Developments towards further utilization of RES are in progress continually. Marketing campaigns are stimulating the production of RE and EE promotion. RES and EE laws and regulations are continually issued.
1. Introduction
The energy sector is a key input for countries’ economic development [1]; it affects all aspects of the society. It would be very hard to imagine modern societies without a secure supply of electricity [2], but at the same time, fossil fuel combustion is the largest human influence on climate, accounting for 80% of anthropogenic greenhouse gas (GHG) emissions [3–5], causing one of the biggest challenges of the twenty-first century [1, 3, 6].
To reduce the impact of GHG emissions and avoid the consequences of the expected +2° Celsius threshold which represents the arbitrary threshold set by the international community as a tolerable level of warming [7], it is necessary to realize the decarbonization of energy sector [8, 9]. Any failure in this target means the continued increase in GHG emissions will lead to negative environmental implications that will affect all living beings, including humans, particularly those who live in low-income societies [10].
Even if Miller et al. [9] argue that “the future of energy systems is one of the central policy challenges facing industrial countries,” we suggest a large extension of this sentence, because the energy system or better the accessibility or availability of energy will be more central issues for both industrial and emerging countries, with possible important impacts also to energy infrastructure [1].
Investing in RE and EE is the strategic solution to guarantee energy availability at low prices [11, 12] and, simultaneously, to ensure that emission threshold level will be in line with the objective of the United Nations Framework Convention on Climate Change (UNFCCC) to stabilize GHG emissions at a level that prevents dangerous anthropogenic consequences on the global climate system [13]. RES can be a solution for a transition to a more sustainable economy and helps to achieve economic stability, especially for countries affected by the volatility of oil prices [11, 14]. For all those reasons, aiming at RES means obtaining double benefits: on one hand, to assure sustainable economic growth [10] and on the other hand to realize a fully clean energy transition towards a sustainable system [15].
Despite the great potential and need to use RES and EE for solving energy-related environmental challenges, improving population health, education, and lifestyles, there is a strong link between income levels and energy investment: nearly 90% of energy investment in 2018 was concentrated in high- and upper-middle-income countries and regions [16].
Several barriers could impede the penetration of EE and RE technologies. Aiming for sustainable development requires identifying and overcoming these barriers. As International Energy Agency (IEA) declared “to meet sustainable development goals, more investment is needed in the regions that face the highest economic and financial constraints” [16].
This paper is based on the MeetMED Investment Country Report on RE and EE carried out within the framework of the EU-funded project “Mitigation Enabling Energy Transition in the Mediterranean Region” (MeetMED) and focuses on mapping the investment climate to mitigate the investment risks for EE and RES technologies in the PT. The main objective is to identify the policy and regulatory risks and barriers by gathering updated information from key market players on the investment climate, after an overview of the energy market structure and the legislative framework for investments in the field of EE and RES.
Although previous contributions discussed incentives, obstacles, opportunities, and challenges for the Palestinian sector in general, most of it focused on one field, either EE or RE, and the achieved results were based on the author’s judgmental knowledge and published data only. It did not dig deeply to present a detailed comprehensive analysis, and in most situations, it ignored legislative and energy policy effects.
The availability of data and statistics is of great significance to evaluate and assess the energy demand, clean energy, and sustainable energy development strategies. Studies and analyses with simulation models to forecast energy demand trends and how to cover them (i.e., RE vs. fossil fuel) are important. They offer useful information and support tools for policy and decision-makers and energy-experts in sustainable energy planning [17].
More studies and complex investigations are required on RE potential and energy consumption, access to electricity, energy dependency, and CO2 emissions [18] concerning the specific characteristics of the country under analysis. In the same context, the relations between governance indicators and green growth should be analyzed in detail of each country’s reality to contribute to the achievement of environmental sustainability goals [19, 20].
This article discusses the investment climate of RES and EE in PT. It provides a transparent and comprehensive analysis of the legal and regulatory framework, electricity, market and institutional structure, EE, RE, and foreign investment legislation. It shed the light on the country’s information, political system, economic situation, national financial institutions, and international investment flows. It describes the significance of the energy sector on the national economy, energy supply and consumption, national energy plan, and strategy. To do so, the PT market confidence in the RES had been analyzed using two questionnaires. The first one is directed at public authorities on FDI attractiveness in RES. The stockholder’s list includes PERC, Ministry of Finance and Planning, Ministry of National Economy/Standards and Metrology Association, Environment Quality Authority (EQA), DisCos, Palestinian solar and sustainable energy society, PIPA, and PETL. The second questionnaire is directed to entrepreneurs/companies potentially interested in investing in RES in the PT. The results of this research will highlight investment risks and barriers, taking into account the experience of domestic and foreign market players. In addition, it will provide a deep knowledge that will enable promoting energy investment through identifying potential opportunities and recommending new policies.
The remaining parts of this article are organized as follows: Section 2 presents the country’s background and literature review. Section 3 presents the method and data, while Section 4 provides the results and discussion. Finally, Section 5 reports the main conclusions and recommendations.
2. Country Background and Literature Review
PT includes two land areas: the West Bank 5949 km2 (including East Jerusalem) and the Gaza Strip 365 km2 [21]. The population according to census 2017 [22] is 4.78 million inhabitants for an area of 6020 km2 with a population density of 484 and 5203 people/km2 in the West Bank and Gaza Strip, respectively. It is worth noting that population density in the Gaza Strip is among the highest population densities in the world [22]. PT is divided into three administrative regions: Areas A, B, and C. In Area A, the full civil and security control belong to PT. In Area B, PT has civil control, but security control is a joint between Israel and PT. In Area C, full civilian and security control are provided by Israel. Approximately 60% of the land regions in the West Bank are classified as Area C [23].
The PT is a very complex area with a fragile and unclear political situation reflected in the slowdown of the economic performance of recent years. The GDP is different in the two administrative territories: West Bank and Gaza Strip. In 2017, the GDP in PT grew by 3.1%; the GDP per capita in the West Bank increased by 2.4%, whereas it declined by 2.9% in Gaza Strip [24].
Also, the different situation limits the potential development of infrastructures and the development and implementation of policies related to the energy sector: the energy situation is severe in the Gaza Strip, and it is improving in the West Bank. This complex energy situation is due to the substantial dependence of Palestinians on Israel; the physical separation of Gaza and West Bank, energy sources, and the associated high costs are the driving force for finding alternative sources. RE and EE are the most promising solutions to the problem of the energy crisis in PT. In 2018, oil and gas represented about 58% of the total national balance; imported and generated electricity is about 28%, and RE (solar energy, wood, etc.) is about 12% [25].
The electricity supply meets only half of the demand in Gaza, which leads to frequent blackouts. Although the West Bank generally has around-the-clock electric power, a deficiency appears during winter and summer. PT relies primarily on its electricity needs on the import flow from Israel, Egypt, and Jordan; however, the costs of energy are higher than in neighbouring countries [26].
Since 2010, PENRA has embarked on a comprehensive program for restructuring and developing the energy sector, including the legal, legislative, regulative, and institutional aspects within a clear strategic vision. In 2012, the Palestinian cabinet adopted the overall RE strategy [27] that set a target of 130 MW from different RES for electricity generation by 2020.
In 2012, an initiative launched by PENRA called PSI is established. Under the PSI plan, households’ owners purchased the solar systems from developers or installers, possibly through “green loans” and then sell energy produced back to the grid in return for a FIT.
PENRA set out a sectoral energy strategic framework for developing the energy sector for the period 2017-2022. It takes into account the new agreements with Israel regarding the transfer of energy distribution sector to the Palestinian government; the government plans to exploit and develop oil and natural gas in PT, the supply of the Gaza Strip with natural gas, and the legislation for the development and the exploitation of RES.
The overall national strategy of the sector is to build an integrated Palestinian energy sector that achieves the concept of sustainability and continuity of development. It also provides energy demand by raising the percentage of clean energy in the total energy supplied to the market and by reducing the negative environmental impacts of energy supply and consumption in addition to the production and the consumption of energy as efficiently as possible, while ensuring the realization of the concept of security of energy supply, which is essential to achieve the principle of sustainability of the sector [27].
There are few papers and reports that shed the light on the opportunities and challenges of the RE and EE in PT. This report [28] discussed the opportunities and challenges of developments in Palestinian rural areas. In reference [29], the authors analyzed the opportunities and challenges of RE in PT. Specifically, it discussed the energy situation and assessed the potential of RE in the PT. In [30], the researchers discussed promises for decreasing the importation of energy sources from neighboring countries. The paper concluded that there is a great potential to invest in RE and EE. In [31], the authors assessed the potential of solar energy in the Gaza Strip in PT and concluded that solar energy can strongly reduce the dependency on conventional energy. The report securing energy for development in PT [32], published by the World Bank, analyzes accurately the energy situation in PT and the potential for further utilization of RE. In [33], an RE assessment study is implemented and sponsored by PENRA aimed to assess the potential of REs in the PT. PIPA published a report in 2020 [34] showing the reasons and motivations behind investing in PT in the RE sector in PT. The report discussed the incentives, success stories, and PT’s obligation to investors. In 2016, the World Bank, PENRA, and AFD prepared a national energy efficiency action plan for 2020-2030 [35]. The National Energy Efficiency Action Plan (NEEAP) introduces more ambitious EE goals.
3. Research Methodology
As mentioned before, attracting investment is crucial for achieving sustainability and the respect of the international commitments to fight climate change (i.e., Paris Agreement). To do this, it is necessary to discuss and involve relevant stakeholders in identifying those hurdles that impede stable growth.
The best tool to have a broader point of view is by conducting exploratory surveys, with the main purpose of framing the economic and institutional context in which companies and potential investors are aiming to invest in RES and EE, both considering the relevant barriers and areas of excellence.
In this research, the confidence in the EE and RES markets in the PT had been analyzed using two questionnaires and interviews that targeted two different stakeholders: local public authorities and Palestinian and foreign companies interested in RES and EE investments.
The first questionnaire targeted public authorities and is aimed at studying the FDI attractiveness in RES and EE. This questionnaire research questions that are intended to be answered are as follows: (i)Do climate-related issues receive growing attention on the Palestinian political agenda?(ii)Do financial incentives for RES and EE exist?(iii)Are the standardization, licensing, and planning regulated for both small- and large-scale RE producers?(iv)Is the local market mature for electricity production and consumption?(v)Do marketing campaigns promote the production of RE in PT?(vi)Are required related technical expertise and advice available?
Table 1 shows clearly how the data was collected, how many questionnaires were sent and how many were received, and who were the respondents.
The second questionnaire targeted entrepreneurs/companies potentially interested in investing in PT on RES and EE. The method used for conducting the questionnaires is Google link, personal interview, email, and telephone call. Thirty questionnaires were sent, and twenty-five were received. The companies preferred their names to be confidential.
The research questions that are intended to be answered are as follows: (i)Is the technological scope of the local enterprises related to PV and SWH?(ii)What is the range of revenues and assets of local enterprises working in the field of RE?(iii)Are suppliers of RE and EE equipment both national and international?(iv)Where is the investment in RE concentrated?(v)Are economic and financial barriers significant for the promotion of the RE?(vi)Are technological and infrastructural barriers significant for the promotion of the RE?(vii)Are institutional and regulatory barriers significant for the promotion of the RE?(viii)Are public awareness and information barriers significant for the promotion of the RE?
For the data analysis and the research question investigation, the researchers followed a simple approach. Cross tabulation, frequency, and percentage demonstration are used to understand and discuss the RE and EE barriers and opportunities.
4. Results and Discussions
As introduced in the research methodology, to study the market confidence in the field of RE and EE, two questionnaires were conducted with two different target groups.
4.1. Questionnaire for Public Authorities on FDI Attractiveness in RE and EE
A questionnaire for public authorities on FDI to assess the effectiveness and adequacy of national and local policies to increase FDI in RES and/or EE was conducted. The target group of this questionnaire was the following institutions and corporations: (i)PENRA, PERC, PEC, PETL, PIPA, PIF, SUNREF, and EQA(ii)Private and nonprivate research centers in the field of energy and Palestinian solar and sustainable energy society(iii)Academic institutions represented by professors specialized in the field of RES and EE and working as consultants: An Najah University, Birzeit University, and Palestinian Polytechnic University
To test the scientific assumptions related to the government institutions’ point of view about investments in RES and EE, the following items were invoked in the questionnaire.
4.1.1. Climate Governance
Table 2 summarizes the responses of the public authorities about climate governance. A large proportion of surveyed sample indicated that climate-related issues are a scheduled item in the political agenda. And international corporations resulted in several related projects.
4.1.2. Financial Incentives for RES and EE
Table 3 summarizes the responses of the public authorities about the financial incentives for RES and EE.
4.1.3. Standardization, Licensing, and Planning
Table 4 summarizes the responses of public authorities about standardization, licensing, and planning.
4.1.4. The Market for Electricity Production
Table 5 summarizes the responses of the public authorities about the market for electricity production.
4.1.5. Electricity Consumption
Table 6 summarizes the responses of public authorities about energy consumption.
4.1.6. Promotion and Information
Table 7 summarizes the answers of public institutions about promotion and information.
4.2. Survey for Entrepreneur/Company Potentially Interested in Investment in PT on RES and EE
The target group of this questionnaire is private companies working in the field of RE. More than 20 surveys were distributed. To have a deep understanding of the domestic enterprises in the West Bank, the following points summarize the answer to the questions and inquiries submitted to the stakeholders either through a questionnaire or direct interview.
The questionnaire pays special attention to factors, such as the following: (i)The companies working in the field of renewable energy and energy efficiency(ii)Overview of the activities, revenues, and assets of the companies working in the field of RE and EE(iii)The investments made and planned in the production of RE from biomass, wind, PV, and solar thermal(iv)The investments made and planned in EE in buildings, industrial processes, lighting, heating, and air conditioning(v)Investigate the Main Barriers. Financial and economic, technological and infrastructural, institutional and regulatory, and public awareness and information(vi)Risk transfer mechanisms(vii)Reasons for the international expansion of the company in the RE and/or EE sector
4.2.1. Introductory Information about the Domestic Enterprises Working in the Field of RE and EE
There are no domestic enterprises working in the field of RE and EE before the year 2006. Table 8 shows introductory information about domestic enterprises.
Figure 1 shows the revenues and assets of the questioned domestic enterprises working in the field of RE.
(a)
(b)
Figure 2 shows the classifications of the customers of the questioned domestic enterprises in addition to the number of employees in each category. The questioned enterprises reveal that most of the employees are electrical, mechanical, and energy engineers as well as technicians.
(a)
(b)
It is good practice to mention that the structure of the PV systems is locally fabricated. Most of the flat SWH collectors are imported from international suppliers with a small percentage fabricated locally or come from the Israeli second-hand market. The other components, like structures, storage tanks, pipes, and fittings, are available in the local market. No domestic enterprises working in the field of EE as PENRA performs auditing services in the industrial and commercial sectors in addition to the motivations and supports offered from funded projects.
4.2.2. Investments in Renewable Energy and Energy Efficiency
Table 9 summarizes investments made and planned in PV, SWH, wind, biomass, and EE from 2016 until 2020 according to the interviewed questioned enterprises. The interviewed enterprises reveal that biomass energy is utilized in PT, but just individually and no specialized companies are working in this field.
4.2.3. Barriers to Investments
According to the questionnaire, the barriers to the investment in RES and EE in PT are divided into economic and financial barriers, technological and infrastructural barriers, institutional and regulatory barriers, and public awareness and information barriers. Figure indicates the significance of the economic and financial barriers to the promotion of RE and EE.
Figure 3 indicates the significance of the technological and infrastructural barriers to the promotion of RE.
Figure 4 indicates the significance of the institutional and regulatory barriers to the promotion of RE.
Figure 5 indicates the significance of public awareness and information barriers to the promotion of RE.
5. Conclusion
The main objective of this paper was to identify the RE and EE policy and regulatory risks and barriers in PT. Future research may be directed towards finding solutions to the barriers and obstacles. The market structure and normative frameworks for RE and EE investments are another objective of the study. The study is limited to the West Bank only, and Gaza Strip was not included.
The main results of the questionnaire for public authorities on FDI attractiveness in RE and EE are summarized in the following. The results include answers to the research assumptions. (i)The climate-related issues are scheduled in the Palestinian political agenda, and they are integrated into governance mechanisms as RES assessment in PT, awareness campaigns, overall RE strategy, RES and EE laws, NEEAP, INCR, and NAP. A bilateral and multilateral cooperation agreement on climate change mitigation action exists in the field of RE and EE as SPEED and SUNREF projects sponsored by AFD(ii)A large proportion of the surveyed sample indicated that national subsidies and grants are available for investment in RES and EE and that there is clear information related to the readily available financial support. Moreover, 100% of the surveyed sample agreed that the guaranteed FIT had encouraged the implementation of RES and EE projects(iii)The procedure for grid connection and transmission access is regulated for small-scale producers but needs further modifications. The RES equipment characteristics are sufficiently standardized(iv)Some private RES companies complain about the procedure for licensing the PV power systems and connecting them to the grid. Nonetheless, they have a strong tendency to invest in PV electrification(v)The small-scale RE producers have priority in selling the energy with a guarantee from PETL and DisCos. The competitive bedding is not accomplished in PT yet. The PPA is applicable and is influenced by capacity. The PPA is signed between the developer and DisCos or the village council if the capacity is less than 1 MW(vi)The competitive bidding is still not available in PT. Currently, consumers could not choose the source of electricity. The electricity prices are not transparent, and the consumers do not recognize accurately the subcosts included in the energy price(vii)Marketing campaigns are stimulating the production of RE and EE promotion. The technical expertise is available and easy to access, but exterior support is essential in grid impact assessment(viii)DisCos and some stakeholders complain about the possible damage to the electrical equipment due to the bad quality of the power supply injected from some PV power systems. More accurate grid impact assessments should be performed by professional and experienced people(ix)The accurate review of the laws and regulations issued by PNA and PENRA indicates significant interest from PNA towards further improvement of RES and EE sectors. This is also noted thanks to the activities carried out by PIPA as well as to projects carried out by PIF through investments in school buildings, rooftops, PSI, and others. The government has also established a special regulatory framework favorable to investors(x)The selling, installing, and maintaining of PV systems is growing, and the commercial feasibility in this sector is increasing due to the increased awareness, promotion, investments, and available projects as well as to reducing the cost of the system over the past few years. This is not true for SWH, even if it is more feasible than PV systems(xi)Most of the PV equipment is purchased from Europe and China. The power electronic components are mostly purchased from Europe, while PV modules are mostly purchased from China. The flat plate SWH system collectors are sold from the Israeli second-hand market or locally manufactured, and some are imported from China. The evacuate tube SWH collectors are mainly imported from China(xii)The lack of subsidized loans for large- or small-scale facilities is one of the obstacles that further investments in the RES and EE are facing. The payback period of PV power stations is not considered an obstacle as it does not exceed 5-6 years
The results and conclusions of the survey for entrepreneurs/companies potentially interested in investment in PT on RES and EE are summarized below. The results include answers to research assumptions. (i)No domestic enterprises working in the field of RE and EE before the year 2006. The activity of the RE and EE enterprises in PT is specialized in installation and operation. The main scope of RE is PV and SWH(ii)About 70% of the revenues of domestic enterprises working in the field of RE are in the range of 100,000$, while 50% of the assets are in the range of 100,000$(iii)Biomass energy is utilized in PT, but just individually and no specialized companies are working in this field. The amount in investment in PV from 2016 until 2020 is about 135 M$ while it is about 37 M$ in SWH(iv)The main barriers of investments in RE and EE are classified into economic, financial, technological, institutional, and regulatory. Figures 3–5 show the significance of each barrier in detail(v)The study showed that local opposition to the development projects, lack of awareness campaigns, and technical skills are not significant barriers. This is indicated in Figure 6
Nomenclature
| AFD: | French Development Agency (Agence française de développement) |
| DisCos: | Distribution companies |
| EE: | Energy efficiency |
| EQA: | Environment Quality Authority |
| FDI: | Foreign Direct Investment |
| FIT: | Feed-in-tariff |
| GDP: | Gross domestic product |
| GHG: | Greenhouse gas |
| IEC: | Israel Electric Corporation |
| INCR: | Initial National Communication Report |
| PEC: | Palestinian Energy and Environment Research Center |
| PENRA: | Palestinian Energy and Natural Resources Authority |
| PERC: | Palestinian Electricity Regulatory Council |
| PES: | Palestinian National Environmental Strategy |
| PETL: | Palestinian Electricity Transmission Company |
| PIF: | Palestine Investment Fund |
| PIPA: | Palestinian Investment Promotion Agency |
| PNA: | Palestinian National Authority |
| PPA: | Power Purchase Agreement |
| PSI: | Palestinian Solar Initiative |
| PT: | Palestinian Territories |
| RE: | Renewable energy |
| RES: | Renewable energy sources |
| SUNREF: | Sustainable Use of Natural Resources and Energy Finance |
| SPEED: | Sustainable Energy Efficiency Development in Palestine |
| SWH: | Solar water heaters. |
Data Availability
The data used to support the findings of this study are included within the article.
Disclosure
The content of the paper is the sole responsibility of its authors and does not necessarily reflect the views of the EC.
Conflicts of Interest
The authors declare that they have no conflicts of interest.
Acknowledgments
This paper depends on some findings of meetMED country report. The report was realized by the Mediterranean Association of the National Agencies for Energy Management (MEDENER) and by the Regional Centre for Renewable Energy and Energy Efficiency (RCREEE), with the participation of ENEA.