The Israeli economy is largely fueled by imported coal and petroleum. Prior to 1982, only a small amount of coal was consumed and the country's primary energy source was oil and its derivatives. At present, coal accounts for about 30% of Israel's primary energy. It is almost entirely used in electric power generation.
Central Bureau of Statistics (CBS) data  show that the total primary energy supply to the country for the year 2004 was about 21 million tons oil equivalent (MTOE)—a 50% increase from 1994. Total end use was about 12 MTOE, consisting roughly of 4 MTOE petroleum products and 8 MTOE electric power. Among petroleum products, gas oil and diesel oil comprise the largest category. Electric consumption is about 1/3 for residential and 2/3 for industrial use (goods and services), the latter comprising a significant portion for agriculture and water pumping. Fuel consumption other than for electric power generation is split at 60, 36, and 4% among the transportation, industrial and residential sectors, respectively. The same consumption pattern has been in effect for the last 10 years. According to forecast , it is probable to change in the coming years, with the introduction of natural gas, which will replace heavy oil in the electric power and industrial sectors.
Another component of the energy economy—relatively small in quantity but important in significance—is solar energy, utilized mainly for domestic water heating. As mentioned earlier, it accounts for about 3% of the country's energy demand and saves about 5% of the electric power. Israel is presently the largest per capita user of solar energy in the world, challenging the notion that solar energy is not yet economical.
The Government MNI's stated policy and objectives with regard to Energy are :
• The Energy Policy will guarantee, at any time in the future, the complete supply of energy demand in the country's economy. The price to the consumer will reflect and include all components of the cost for energy use: economic—direct/monetary, environmental, strategic, and that associated with land use.
• The Energy Policy will strive for maximum market competitiveness, reducing the Government's involvement to sectors where market failure exists or where involvement is necessary for security and safety considerations.
• The Energy Policy will endeavor to improve energy efficiency in electric power generation, transportation, and the residential, commercial/public and industrial sectors.
• The Energy Policy will strive to reduce environmental damage resulting from energy production and use. In particular, fuel transmission and storage infrastructures will be controlled to prevent leaks into the ground, sea or ground water, in accordance with international standards, and avoid health hazards or damage to natural resources. Greenhouse gas emissions will be controlled to a level not to exceed, in the long term, similar per capita emissions in OECD countries.
• The Energy infrastructure in Israel will be based on intelligent use of land resources, and exploit land designated for energy infrastructures for future expansion. In particular, sites with existing generation, transmission and/or storage infrastructures are to be utilized to their full operational and expansion capacity, with due consideration to strategic, safety and security issues; technological, physical, and political opportunities are to be explored to the fullest toward utilizing external land resources such as artificial islands. The Policy calls for cooperation with neighboring countries in commercial joint exploitation of land resources.
A number of measures have been initiated to promote renewable energies in electric power generation. A Government resolution dated November 2002 set an objective to produce at least 2% of the total electric power from the renewables by the year 2007. This amount is to increase by 1% every 3 years up to 5% of total electricity production by 2016. Accordingly, the Public Utilities Authority has instituted a set of premiums for licensed electricity producers employing renewables, proportional to the achieved reduction in pollution. Another Government resolution dated March 2002 promotes cogeneration, with the national potential estimated at 1200 MW. Energy conservation by the public is encouraged by market transformation—increasing public awareness of energy efficiency in appliances and the like.
A number of laws, regulations, directives, and legal instruments have been introduced to implement the Energy policy. Most of them regulate the use of petroleum and petroleum products, natural gas and electric power, and deal with licensing and safety issues. Some deal with energy efficiency, minimum standards and labeling. Recent regulations encourage cogeneration and distributed generation. Noteworthy is Article 9 of the Law for Planning and Building (1970), mandating the installation of solar water heating systems in all new constructions . This Article has contributed a great deal to the advancement of solar energy utilization and will be discussed further in the next chapter.
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