Lior Gallo of the Bank of Israel Research Department presented a study today to the Israel Energy and Business Conference on demand for electricity.  The study examines the factors that have affected the development of demand for electricity in Israel in recent decades, including the increase in GDP, the price of electricity, the changes in the structure of the economy, and their effects on the intensity of electricity use (volume of electricity consumption per output unit), the expansion of the use of air conditioners, and the reform in the use of fuels for industry.
A statistical model estimated in the study was used to predict the pace of growth in electricity consumption in the Israeli economy in the coming decades.  According to the model, electricity consumption is expected to grow by 2.7-3 percent per year, a slower pace than the 3.3 percent growth in the past decade.  The projected slowdown in the pace of growth is mainly derived from the assessment that the pace of output growth will slow in accordance with expected demographic changes in Israel. It is also a result of the expected structural changes in the composition of output in Israel, including the continued increase in the proportion of non-energy-intensive high technology industries, further to similar processes that took place in past decades and in other advanced economies.  In addition, the forecast is based on the assessment that the penetration of air conditioners into households will be maximized in the next few years, which will slow the increase in the intensity of electricity consumption by households.  The projected was prepared on the basis of a working assumption that the average price of electricity in the coming decades will be similar to its average in the past year, but the model also enables an examination of alternative assumptions.
The Bank of Israel explains that the forecast presented today does not take into account the full potential effect of specific changes such as expanded use of electric trains in Israel or the construction of new water desalination facilities.  An examination of these components shows that they may add a few tenths of a percent to the average pace of growth.  The study shows that the expected decline in the pace of growth of electricity consumption is in line with the decline in the average intensity of electricity consumption among other advanced economies in recent decades, which has been accompanied by narrowing gaps in intensity levels.