The audit revealed that over time, it is evident that there has been no substantial change in the scope of R&D in the energy sector, and this, among other things, due to the non-implementation of the recommendations of the Energy Committee
R&D in the field of energy lags behind the fields of high-tech. This is according to a chapter dedicated to this in the State Comptroller's report 71 A published yesterday. This is only one of three chapters dealing with energy. The other two (which we will report on in separate news) deal with Israel's non-compliance in the requirements of the transition to alternative energies and behind in everything related for energy efficiency.
Innovation and technology are a source of economic growth, improvement in the standard of living and increase in life expectancy. Market failures, including a high level of risk, leakage of knowledge between companies and financing difficulties, bring the level of investment on the part of the entrepreneurs in research and development (R&D) to be suboptimal. In the energy sector these barriers are particularly significant. Israel is one of the countries with the highest R&D investments in the Western world in terms of GDP, however, in the energy sector, R&D investments in Israel are among the lowest in the Western world.
In the months of March to December 2019, the State Comptroller's Office examined the R&D activity in the energy sector, including the scope of government aid to R&D, the activities of the government agencies entrusted with the promotion of R&D in this sector, their characteristics and the effectiveness of their operations. The audit was carried out at the Innovation Authority, the Chief Scientist Unit at the Ministry of Energy and the Israel Electric Company Ltd. (HAI) and others.
The audit revealed that over time, it is evident that there has been no substantial change in the scope of R&D in the energy sector, and this, among other things, against the background of non-implementation of the recommendations of the Energy Committee.
In addition, approximately 75% of the Innovation Authority's investments are focused on the hi-tech industries, even though hi-tech has significant sources of financing in the business sector, while the financing sources of other sectors are limited. Also, dispersing the Authority's investments beyond the hi-tech industries to more traditional industries, such as the energy sector, may increase the potential return by approximately 600 million to 1.1 billion NIS per year at the very least.
In addition, it emerged that HAI's investments in R&D activity are low in relation to the scope of its activity and in an international comparison (0.02% of the company's total revenues). Compared to the level of investments accepted by electricity companies in the world, the shortfall in the annual investments of Chai is estimated at approximately NIS 80 million.
The lack of innovation in the energy sector and the electricity sector in particular harms the ability of HAI to recruit engineers and retain them in the company, and this may in the future harm operations that are vital to the economy. Chai is working to reduce manpower problems in the neighborhood.
Positively, it emerged that the investments of the chief scientist at the Ministry of Energy indicate investments in areas that the government sought to promote in the last decade. And according to the chief scientist's data, his investments are very effective, and this is reflected in a significant increase in energy R&D investments on the part of the business sector, a high proportion of ventures that continued to the next stage of life, and more.
The State Comptroller notes, among other things, that the government R&D policy is supposed to address market failures in R&D, such as the high risk in R&D activity, the financing difficulties and the unique barriers in certain industries, however the government policy is neutral and in practice does not bring about a change in the existing situation. The government is required to formulate a policy that will lead to the percolation of innovation to all sectors of the economy and the energy sector in particular and will contribute to increasing productivity in these sectors.
Government investment in research and development in the energy sector in terms of percentage of GDP in OECD countries, 2017
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One response
I don't know about the change in the scope of R&D... What I do know is that the fifth largest company in Israel - Solaredge, is a company engaged in the research, development and production of components in the field of solar energy that are among the most advanced and leading in the world.