Cablegate: Water - Energy Link Explored at Pm's Conference

DE RUEHTV #2572/01 3241316
P 191316Z NOV 08 ZDK



AMMAN for ESTH - Bhalla

E.O. 12958: N/A

TEL AVIV 00002572 001.2 OF 002

1. (U) Summary: The Prime Minister's Conference on Export and
International Cooperation on November 12 devoted a quarter of its
program to the link between water and energy issues, in the context
of green technologies and the business opportunities these present
for Israeli exports. Israel's ongoing water shortage and drive for
developing alternative energy sources have merged into a
"clean-tech" business focus that is attracting global investor
attention. Both public and private sectors in Israel hope this
investment trend will help the country solve its projected shortfall
of both critical resources. Meanwhile, those projections are
worsening, and water rationing may be needed if conservation is
insufficient. End Summary

2. (U) The Prime Minister's Conference on Export and International
Cooperation was strongly focused this year on energy and water
issues. Although the global financial crisis and its impact on
Israel formed the backdrop of the discussions, the country's
critical needs in these two areas drew high-level attention.
Israeli Ministers of Environment and Infrastructure both spoke, as
did the environment ministers from Korea, Romania, Hungary, and
Serbia. The Israeli ministers dwelled on the nexus between water
and energy: with water one can create power (hydropower), with power
one can create freshwater (desalination). Poorly used water wastes
energy, while recycling water can save energy. In effect, each
cubic meter of water is valued at 4 kilowatts of electricity, thus
leaving the tap running for five minutes, for example, is equal to
14 hours use of a 60 watt light bulb. The ministers urged that
water and energy be thought of as interchangeable, and conservation
be sought for both. Infrastructure Minister Ben-Eliezer restated
his target of obtaining 15-20 percent of Israel's electric power
from alternative energy by 2020, chiefly through solar technology.
He intends to issue a tender each year for a new solar power plant,
and has had the Negev Desert declared a reference region for
alternative energy research to facilitate access to land. (Note:
Bureacratic delays in designating land in the Negev as suitable for
solar power has slowed Israel's adoption of this alternative energy
source; IDF, National Parks and bedouin use also compete for space.)
Ben-Eliezer wants to increase Israel's energy independence for both
strategic and economic reasons.

3. (U) Environment Minister Gideon Ezra noted a cumulative deficit
of 940 million cubic meters (mcm) of water over the last four years.
This is nearly a year's worth of consumer demand for fresh drinking
water. Already 43 percent of all agricultural water used is treated
wastewater (greywater), but Israel's total of 1,175 mcm of water
available for recycling is not being fully utilized. Within four
years fully a third of Israel's water (including most consumer
drinking water) is expected to come from desalination, but this will
place a tremendous burden on the installed power generating
capacity. Desalination will add 3 percent to total national
electricity demand, on top of the 6 percent (expected to grow to 9
percent) of national demand used for pumping water around the
country. Electricity demand is already growing by 1.2 percent each
year. This could mean nearly 15 percent growth in electricity
demand over the next five years. If the higher demand is satisfied
through existing power generation methods (business-as-usual
scenario) using coal and some natural gas, Ezra noted that Israel's
Greenhouse Gas emissions will increase by 45 percent before 2030.
Israel is constrained by environmental imperatives, by energy
imperatives, by consumer demands, and now by global financial market

4. (U) The good news at the conference was the high rate of "clean
tech" enterprise creation and investment Israel is experiencing.
Israel boasts 270 water treatment and technology companies, over 100
alternative energy companies, and dozens of environmental technology
firms. An estimated USD 100 billion in alternative energy was
invested globally in 2007, and the global market for water
technology is estimated at USD 450 billion in the coming five years.
These are the growth markets Israeli firms are targeting, according
to private sector participants at the conference. Local clean-tech
firms received over USD 100 million in venture capital funds in
2007, according to industry sources. Private sector participants
from both business and academia urged further investment in new
technologies, and in combining technologies to resolve both energy
and environmental problems at once. Cogeneration plants that
reclaim thermal energy for desalination are an example, as is
utilizing solar power for desalination energy needs. Business
participants at the conference expressed confidence that global
venture capital resources would rise to the challenge of finding the
needed technologies, and in doing so would fund the research needed
to keep Israel's green technology export sector expanding. Reports
claim that Israeli water technology firms alone generated USD 1
billion in export sales in 2007. Equally important, foreign venture
capital investment will help find the solutions to Israel's domestic
water/energy constraints.

TEL AVIV 00002572 002.2 OF 002

5. (U) The up-beat investment picture contrasts sharply with the
worsening projections of Israel's water/energy predicament. This
year's rainy season got off to a strong start, but the forecast is
not optimistic. In a special Cabinet meeting November 16, Israel
Water Authority Director Uri Shani noted the decline of natural
freshwater resources by 175 mcm, and said the forecast for the
coming two years was for continued sub-normal rainfall. Savings of
30 mcm through government-promoted conservation measures were
touted, but saving another 100 mcm would require drastic action,
including the possibility of household rationing by Autumn 2009 and
cutting a further 100 to 150 mcm from the share devoted to
agriculture. The Infrastructure Minister warned that this could be
a death blow to parts of the agricultural sector. Prime Minister
Olmert blamed "unacceptable bureaucratic errors" for the delays in
moving forward on new desalination plants, and led the Cabinet in
action to waive the standard tender process for national water
company Mekorot to facilitate quick construction of another desal
plant in Ashdod. While desalination may be considered the ultimate
solution, desal water consumes four times more energy than natural
freshwater. Nonetheless, Israeli technology has helped the price of
desal water drop from $4.00 per cubic meter in 1965 to $0.60 per
cubic meter in 2008. The cost of energy, the chief component in the
desal water price, has varied so wildly in the past year that long
term water prices are hard to target, which complicates investment


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