Sunday Energy forges new ground in Israel with Ormat

Israel-based Sunday Energy said this week it inked a deal to build the largest rooftop solar installation in the Middle East.

At just 1 megawatt, the installation isn’t huge by global standards. But in Israel, where total installed capacity at the end of 2008 was 1 MW, it’s the beginning of a new solar market, said Sunday Energy founder and CEO Kobi Dinar.

“Israel is an advanced country, but in solar energy Israel is definitely very late in the game,” he told the Cleantech Group today. “The government announced a feed-in tariff for solar energy only last July.”

Sunday is installing the solar system on about 15,000 square meters on top of a factory owned by Reno, Nev.-based geothermal developer Ormat Technologies (NYSE:ORA) in Yavneh, Israel. The project is expected to be completed in the first half of 2010, generating energy worth NIS 60 million ($15.15 million) during the next 20 years through a power-purchase agreement with Israel Electric Cooperative, the state-owned utility that is the sole supplier of electricity in the country.

Israel Electric will pay NIS 1.98 (50 cents) per kiloWatt-hour for solar installations up to 50 kW—four times the going price of electricity for consumers. The tariff for installations larger than 50 kW but smaller than 5 MW is still being decided, but it’s currently expected to be about NIS 1.6 (40 cents).

Dinar said the opportunities in solar market in Israel aren’t widely known, so players are trying to educate pension funds and hedge funds in order to drum up project financing.

“Solar is still at an embryonic stage,” Dinar said. “It’s not very crowded yet, but we think we’ll see more competition in the future from large holding companies that may develop solar arms, or foreign players getting into the Israeli market. It’s not very big, but it’s quite lucrative.”

The Israeli tariffs guarantee a return of about 12 percent to 15 percent for 20 to 25 years, Dinar said. The National Infrastructures Ministry said the tariffs are designed to help Israel reach 20 percent of energy supplied by renewable sources by 2020.

In March, Israel's National Infrastructures Minister Binyamin Ben-Eliezer gave the approval to issue a license for the country's first solar thermal plant. Yavne, Israel-based AORA, a subsidiary of the Edig Group, is developing the 100-kilowatt solar thermal plant using heliostats and a solar receiver (see Israel to get first solar thermal project).

The country's largest solar installation—just 50-kilowatts—was connected to the grid in December as part of a joint venture of Wuxi, China-based Suntech Power Holdings (NYSE: STP) and Ramat Gan, Israel-based Solarit Doral (see Israel opens largest solar plant with Chinese help).

Sunday has installed less than 1 MW to-date, but has 55 MW of signed deals in the pipeline. Sunday expects to install between 4 MW and 6 MW before the end of 2009, and 15 MW next year.

The self-funded company is seeking about $10 million in Series A financing, and $100 million to $150 million in project financing during the next 18 months. Its projects include rooftop and ground-level solar, and Sunday is technology-agnostic, using polycrystalline, monocrystalline and thin-film solar panels.

Last year, Sunday Energy said it would invest NIS 500 million ($133 million) in the next two years for photovoltaic solar arrays for kibbutzim, communal settlements in which earnings are pooled and divided equally (see Sunday Energy powers Israeli kibbutzim).

In September, Sunday Energy was awarded the contract to erect solar arrays on roofs of municipals buildings in the city of Kiryat Ono in Israel’s Tel Aviv region. The arrays are to be installed on buildings such as the water department, schools and community centers.

Other projects in the pipeline include contracts to install solar systems for the Tel-Aviv’s schools, the Carmei Ovdat winery in Israel’s Negev desert, and Israel’s Dalton Winery.

But the company is also looking outside of Israel for underserved markets, including the U.S., Africa, Palestine and the rest of the Middle East. The Middle East is considered one of the biggest future markets for renewable energy, but few installations are in place today (see UAE: The future of cleantech?).

“We see ourselves as very active in those locations that you didn’t see taking a big piece of the global pie for the last three years,” he said (see Spain leads 2008 solar market).

Sunday, which was founded in 2007, expects to collaborate with Ormat on future projects but is also seeking other strategic partnerships.

Sunday has promised 3 percent of net profits to be invested in the community. Dinar said the expertise his team of 13 employees brings is to decide the most cost-efficient way for solar systems to be installed, located, and monitored. That expertise extends to choosing inverters, mounting systems and subcontractors to install the systems.

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