An Israeli company started work Monday on the country’s first large-scale solar field, a sign that new government policies may be succeeding in drawing investors to the country’s alternative-energy sector.

Solar power in Israel and the Israeli solar energy industry has a history that dates to the founding of the country. In the 1950s, Levi Yissar developed a solar water heater to help assuage an energy shortage in the new country.

By 1967 around one in twenty households heated its water with the sun and 50,000 solar heaters had been sold. With the 1970s oil crisis, Harry Zvi Tabor, the father of Israel’s solar industry, developed the prototype of the solar water heater now used in over 90% of Israeli homes. Israeli engineers are at the cutting edge of solar energy technology and its solar companies work on projects around the world.

Israel has embraced solar energy. There is no oil on Israeli land and the country’s tenuous relations with its oil-rich neighbors has made the search for a stable source of energy a national priority. Israeli innovation and research has advanced solar technology to a degree that it is almost cost-competitive with fossil fuels.

Its abundant sun made the country a natural location for the promising technology. The high annual incident solar irradiance in the Negev Desert has spurred an internationally renowned solar research and development industry, with Harry Tabor and David Faiman of the National Solar Energy Center two of its more prominent members. At the end of 2008 a feed-in tariff scheme was approved, which immediately put in motion the building of many residential and commercial solar energy power station projects.

The official groundbreaking by Arava Power Co., which is partly owned by Germany’s Siemens AG, came after Israel’s Bank Hapoalim said earlier in the day that it would provide $22 million in financing for the $28 million project. While a relatively small sum, it represents the first significant vote of confidence by a major Israeli financial institution in domestically produced solar energy. "We now feel quite comfortable that the risk is not high," said Tazhi Cohen, the head of Bank Hapoalim’s corporate division.

The deal could boost confidence among investors here that the government is following through on its pledges to streamline regulations and policies that critics have blamed for discouraging alternative-energy investments. The bank approved the loan after the Israeli Electric Corp. committed last week to buying $70 million worth of energy from Arava Power over the next 20 years. It was the first time the state-owned utility had signed such an agreement with a private company.

"This tells investors that Israel is now officially open for business for solar energy companies," said Noam Ilan, head of the Eilat-Eilot Renewable Energy Authority, a group pushing for wider alternative-energy use.

Solar energy now provides less than 0.1% of Israel’s energy demand, which is rapidly outpacing supply. Israel’s government and its bureaucracy have been slow to adapt policies to support renewable energy. Arava Power, for example, had to secure permits and approvals from 17 different, and often reluctant, government authorities to get its project off the ground, said David Rosenblatt, a company founder.

But recently the government has appeared to step up efforts to boost solar power and other alternative-energy technologies. It recently increased financial incentives to prospective solar-power producers.

In September, Prime Minister Benjamin Netanyahu announced a plan to invest $500 million in alternative-energy research and development. And last year, the government set a goal of meeting 10% of its energy needs with renewable energy by 2020. Israel hopes that the same culture of innovation and risk-taking that has made it a global force in high tech can fuel a similar boom in alternative energies.

Announcing the new funds, Mr. Netanyahu said Israel aimed to be "the leading factor, the catalyst for research activity" in renewable energies world-wide.

Like many of Israel’s solar projects, Arava Power’s field will be in the Arava Valley, a sparsely populated tract in southern Israel that gets around 2,200 hours of sunlight a year, about the same as the Sahara. Scores of laboratories have sprung up in the small communities and kibbutzim scattered in the valley.

"We want to make the Arava region the Silicon Valley of solar in Israel," said William Weisinger, a project manager for AORA Solar, a new solar-technology company with a pilot project here that generates thermal-solar power by concentrating the sun’s energy to produce heat.

AORA’s field is occupied by dozens of giant mirrors all trained on an egg-shaped orb perched atop a tower. It is built with what AORA calls its "porcupine in a diaper" technology, according to Mr. Weisinger. Arava Power expects its field—which will consist of 18,000 solar panels on 20 acres of Kibbutz Ketura—to be up and running by mid-2011. Siemens, which owns 40% of Arava Power, will build the field, which will have a capacity of five megawatts, according to company officials. That’s enough energy for 4,000 Israeli homes, but a tiny fraction of the country’s 11-gigawatt power grid.

Still, the project is 10 times as large as any previous solar project in Israel, and it will be the first to feed energy directly into Israel’s grid, which suffered brownouts over the summer.

Perhaps more important, Arava Power’s success navigating regulatory hurdles could pave the way for other investors to enter Israel’s fledgling solar market. Israel’s Public Utilities Authority said it has applications pending for plants that, if approved, would produce a combined 900 megawatts of solar power.

In July, Israel opened a tender worth more than $1.5 billion for a contractor to build, operate and eventually transfer back to the government three solar plants capable of producing a total of 250 megawatts of energy. Government tenders for an additional 150 megawatts worth of solar power are expected to be published in coming months.

"I think all government offices are starting to wake up to the fact that Israel has every interest in the world to move forward in this area and wean us off fossil fuels," said David Lehrer, director of the Arava Institute for Environmental Studies.

In 1949 prime minister David Ben-Gurion sent a letter to England to offer Harry Zvi Tabor a job on the ‘physics and engineering desk’ of the Research Council of Israel, which he accepted. His first task was to create the Israeli National Physical Laboratory to create standards amongst the different measurements in use in the country, primarily British, Ottoman and metric. Once the laboratory was established, he first focused on solar energy for research and development.

Solar energy was particularly attractive for two reasons. First was the abundance and strength of the sun’s rays on Israeli land. Israel’s geographic latitude location is on the 30th parallel north, where the annual incident solar irradiance is 2000 kWh per sq.m. Second, Israeli land lacks oil, and the conflicts with its neighbors made the procurement of a stable source of energy a national priority. In particular, it is argued that the best defense against missile attack felling the national power grid would be to build a distributed power network, which would mean solar fields of 25–50 megawatts across Israel.

Early in the 1950s, Harry Tabor began to examine why solar installations were inefficient. He eventually devised ‘selective black surfaces’, which his team at the National Physical Laboratory modified using nickel and chrome methods to blacken metals. These surfaces, which became known as Tabor surfaces, are particularly effective at trapping heat for use in solar water heaters.

Tabor and French immigrant Lucien Bronicki developed a small solar power unit, the Organic Rankine Cycle turbine, for developing countries with problematic power grids. It was designed to neutralize the maintenance issues of reciprocating engines so it had only one moving part, the rotor. A 3 kWe prototype was exhibited at the 1961 United Nations Conference on New Sources of Energy in Rome, but it failed to find commercial success.

In 1965 Lucien Bronicki established Ormat Industries to commercialise the Organic Rankine Cycle turbine concept. In the 1970’s and 1980’s Ormat built and operated one of the world’s first power stations to produce electricity from solar energy; the plant was located just north of the Dead Sea in Israel.

The plant utilised a technology known as solar pond, a large-scale solar thermal energy collector with integral heat storage for supplying thermal energy. It was the largest operating solar pond ever built for electricity generation and operated up until 1988. It had an area of 210,000 m² and gave an electrical output of 5 MW.

On June 2, 2008 the Israeli Public Utility Authority approved a feed-in tariff for solar plants. The tariff is limited to a total installation of 50MW during 7 years, whichever is reached first, with a maximum of 15 kWp installation for residential and a maximum of 50kWp for commercial. The National Infrastructures Ministry announced on December 2009 on expanding the feed-in tariff scheme to include medium-sized solar-power stations ranging from 50 kilowatts to 5 megawatts, though only one project was approved correct for June 2010.

The Negev Desert and the surrounding area, including the Arava Valley, are the sunniest parts of Israel and little of this land is arable, which is why it has become the center of the Israeli solar industry. David Faiman, a world expert on solar energy, thinks the energy needs of Israel’s future could be met by building solar energy plants in the Negev. As director of Ben-Gurion National Solar Energy Center, he operates one of the largest solar dishes in the world.

A 250 MW solar park in Ashalim, an area in the northern Negev, was in the planning stages for over five years, but is not expected to produce power before 2013. In 2008 construction began on three solar power plants near the city; two thermal and one photovoltaic.

In the Rotem Industrial Complex outside of Dimona, Israel, more than 1,600 solar mirrors focus the sun’s rays on a tower to heat a water boiler to create steam. BrightSource Industries (Israel), Ltd., uses the solar array to test new technology for the three new solar plants to be built in California for Pacific Gas and Electric Company and Southern California Edison.

Israel’s first solar power station opened in August 2008. Moshe Tenne built the 50 KW plant on his Negev farm for NIS 1.3 million, and he expects to earn NIS 220,000 a year from selling excess electricity to the national power grid. After the National Infrastructures Ministry announced it would expand its feed-in tariff scheme to include medium-sized solar-power stations ranging from 50 kilowatts to 5 megawatts, Sunday Solar Energy announced that it would invest $133 million in photovoltaic solar arrays for installation on kibbutzim.

In December 2008, the Sunday company announced that it would make Kibbutz Reim, in the western Negev, the first community in the world to rely entirely on solar energy. The Reim installation’s cost is estimated at NIS60-100 million and will generate at least 2.5 megawatts during peak consumption. Excess energy will be sold to the Israel Electric Company. The investment is expected to pay for itself in 10 years, and the costs and revenues will be divided evenly between the kibbutz and Sunday.

The largest solar installation in Israel to date was built by Sunday Solar Energy at the Dalton Winery. The installation is 100 KWp, hence twice the size of other projects in Israel. The panels are made by American manufacturer Sunpower. The Aora’s Solar "Flower" Tower is the world’s first solar hybrid power plant, comprising 30 heliostat solar reflectors. The plant switches to natural gas-powered turbines after dark so that it can continue producing power 24 hours a day.

Arava Power Company, one of Israel’s largest solar companies, announced in November 2008 that it had entered an agreement for solar fields that will generate at least 500 MW, and eventually one gigawatt (GW), which could have a deep impact on Israel’s energy market. Israel Cleantech Ventures is a venture capital fund that invests in the Israeli clean technology sector.