Natural Gas and Israel's Energy Future
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Min Supported by the Y&S Nazarian Family Foundation Environment, Energy, and Economic Development A RAND INFRASTRUCTURE, SAFETY, AND ENVIRONMENT PROGRAM The research described in this report was supported by the Y&S Nazarian Family Foundation and was conducted under the auspices of the Environment, Energy, and Economic Development Program within RAND Infrastructure, Safety, and Environment. The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address the challenges facing the public and private sectors around the world. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. R® is a registered trademark. © Copyright 2009 RAND Corporation Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND documents to a non-RAND Web site is prohibited. RAND documents are protected under copyright law. For information on reprint and linking permissions, please visit the RAND permissions page (http://www.rand.org/publications/ permissions.html). Published 2009 by the RAND Corporation 1776 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 4570 Fifth Avenue, Suite 600, Pittsburgh, PA 15213-2665 RAND URL: http://www.rand.org To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] Preface This report assesses the opportunities and risks that the government of Israel faces in shifting to an energy mix that is increasingly dominated by domestic and imported natural gas. The goal of the analysis is to explore elements of robust strategies for exploiting the use of natural gas to minimize potential consequences from such risks. This report applies newly developed methods for strategic planning and decisionmaking under deep uncertainty for these assess- ments. The analysis also considers broader issues related to energy in Israel. The funding to support this study was generously provided by the Y&S Nazarian Family Foundation in the interest of contributing to the further development of Israeli society. The intent is to do so by making objective analyses available to Israel’s officials and to the Israeli public so as to support public-policy decisionmaking and to enhance the level of public discus- sion on such national issues. This report will be of interest to decisionmakers and the staff of several offices of the government of Israel as well as its lawmakers. It will also be of interest to those wishing to understand how it may be possible for planners and decisionmakers to determine strategies and courses of action when all of the relevant information is not only unknown but, to a certain degree, unknowable. Finally, those both inside and outside Israel who have an interest in that country’s energy, economic, and environmental future will find this report to be of value. The RAND Environment, Energy, and Economic Development Program This research was conducted under the auspices of the Environment, Energy, and Economic Development Program (EEED) within RAND Infrastructure, Safety, and Environment (ISE). The mission of RAND ISE is to improve the development, operation, use, and protection of society’s essential physical assets and natural resources and to enhance the related social assets of safety and security of individuals in transit and in their workplaces and communities. The EEED research portfolio addresses environmental quality and regulation, energy resources and systems, water resources and systems, climate, natural hazards and disasters, and economic development—both domestically and internationally. EEED research is conducted for govern- ment, foundations, and the private sector. Questions or comments about this report should be sent to the project leader, Steven W. Popper ([email protected]). Information about the Environment, Energy, and Eco- nomic Development Program is available online (http://www.rand.org/ise/environ). Inquiries about EEED projects should be sent to the following address: iii iv Natural Gas and Israel’s Energy Future: A Strategic Analysis Under Conditions of Deep Uncertainty Keith W. Crane, Director Environment, Energy, and Economic Development Program, ISE RAND Corporation 1200 South Hayes Street Arlington, VA 22202-5050 703-413-1100, x5520 [email protected] Contents Preface . .......................................................................................................... iii Figures . .......................................................................................................... ix Tables . ..........................................................................................................xiii Summary . .......................................................................................................xv Acknowledgments . ......................................................................................... xxxv Abbreviations . ............................................................................................. xxxvii CHAPTER ONE Introduction . .................................................................................................... 1 Background . ...................................................................................................... 1 Energy, Competing Needs, and Risk in Israel . ............................................................... 4 National Security . ............................................................................................. 5 Physical Security . .............................................................................................. 5 Market and Economy . ........................................................................................ 5 Health and Environment . .................................................................................... 6 Regulation and Land Use . .................................................................................... 7 Decisionmaking Under Deep Uncertainty . .................................................................. 8 Report Outline . .................................................................................................10 CHAPTER TWO Natural Gas and Energy in Israel . ..........................................................................11 History and Development of Natural Gas in Israel . ........................................................11 Options for Expanded Use of Natural Gas . .................................................................14 Israel’s Energy Balance . ........................................................................................17 Demand for Electricity in Israel . ............................................................................18 Israel’s Electricity-Generating System . ...................................................................... 20 Natural Gas in Israel’s Electricity-Generating System................................................... 20 Markets and Regulation . ...................................................................................... 23 CHAPTER THREE A Framework for Identifying