Thanks to a history of scarcity in a hostile region, Israel is poised to lead the world in clean technology.

In Israel’s Arava desert, near Eilat, a ten-story tower with a bulbous top stands like a flower about to bloom. To the north, almost three dozen mirrors track the sun, reflecting the light towards the tower’s crown. Concentrated up there, the sun’s energy heats the air to more than 1,400 degrees Fahrenheit. The expanding air spins a gas turbine, at thousands of revolutions per minute. At this facility, opened last year by a company called Aora, the desert sun produces enough electricity and hot water for about seventy homes. Aora operations manager Yuval Susskind touted the plant as a triumph over Israel’s stubborn bureaucracy. “For twenty years this country had been developing solar technology and no one’s been able to put one peg in the ground.”


Photo by Jurvetson via “Flickr”:

Aora is just one of many Israeli companies angling for a piece of the green future. Amid global concerns over climate change, depleting resources and energy security, “clean” technologies attract interest from governments and, increasingly, major corporations. Because of a unique convergence of history and geography, Israel has a decades-long head start engineering fixes to water and energy shortages, specialties which could grow into huge industries. But for Israel cleantech is more than a business opportunity. It is a chance for allies and enemies alike to look at Israel and see something other than The Conflict. Renewable energy is an opportunity for Israel to strut unarmed on the world stage, to be an (energy-efficient) light unto nations.

Water heaters are as much a symbol of the country’s prickly self-reliance as the kibbutz or the uzi.

In Hebrew school every American Jew learns about Israel’s earliest days. They hear how war-weary refugees fought off the Arab forces and made the desert bloom. After centuries of urban exile, Jews were standing up straight, pioneers who fought for land and worked collectively to build a home. For Israelis, the yeoman Jew as farmer and soldier is a defining image that resonates with many in the Diaspora. But from the state’s earliest days Israel embraced engineering which enabled its more storied agricultural and military successes.

In the early nineteen fifties an engineer named Levi Yissar started selling solar-powered water heaters. In these systems water flowed from a tank into a tilted glass panel where it cooked in the sun. Originally intended to help the young state weather a fuel shortage, the descendants of those rudimentary heaters now warm almost every shower in Israel. Commonly said to account for 3 or 4 percent of the country’s total energy use, the heaters’ white tanks forest the rooftops of Israeli cities. Water heaters are as much a symbol of the country’s prickly self-reliance as the kibbutz or the uzi.

The Israeli Defense Forces also propelled the tech industry. To compensate for the size of its army it invested early in sophisticated communications and electronics. Many of these technologies would eventually have civilian uses in fields from computers to medicine. In effect, the country’s two big projects, building a modern nation and keeping it secure, solidified into a foundation for a cleantech industry.

IBM landed in Israel in 1949, a year after statehood. The tech giant led a parade of the premier American technology firms which arrived less for the negligible Israeli market than to recruit Israeli engineers. Microsoft, Cisco, and Google, among others, operate research and development labs in Israel. Their logos adorn office blocks resembling Silicon Valley’s tarted-up strip malls. Intel’s facility in Jerusalem is covered in stone. The company that has as strong a claim as any to inventing the twenty-first century wears a biblical skin.

Virtually every U.S. state and industrialized nation has tried to nurture its own Silicon Valley and almost nowhere has come close. Silicon Valley titans, when asked why they’re so special, inevitably wax smug about their “culture” or “ecosystem.” What they mean is world class schools, tight professional networks, and a business climate tolerant of risk and even failure. Like a rare tree, this culture rarely thrives in a new habitat. In Israel, which has about the same population and land area as the San Francisco Bay Area—and, if anything, a more radically egalitarian ethos—the tree took root. Canaan Partners is one of several big Silicon Valley venture capital shops to open an Israel office. Eric Young, a general partner at the $3 billion fund, said Israel offers world-class engineering talent in “a miniature Silicon Valley.” That’s not faint praise.

After northern California, Israel is sometimes called the world’s second most important technology cluster. Without haggling over rankings, Israel’s achievement is impressive. Israel had more companies listed on the tech-heavy NASDAQ stock exchange than any nation except the U.S. Israel is a worldwide leader in patents and venture capital invested per capita. It spends almost 5 percent of its gross domestic product on research and development, higher than any other country. If China is the world’s factory and India its back office, then Israel is a disproportionately productive bench in the world’s corporate laboratory.

In 1998, America Online paid $400 million for Mirabilis, an instant messaging company funded by entrepreneur Yossi Vardi. “There was a surge of young people who decided they don’t want to learn law, they want to go become entrepreneurs,” Vardi told me last fall, reflecting on the era. Israel’s start-up surge became known as the Mirabilis Effect.

Yossi Vardi wears a walrus moustache and has a slow grandfatherly voice. He occasionally illustrated a point on an old IBM laptop that any Valley honcho would have thrown out years ago. A start-up in Israel, Vardi explained is “a flat organization. Everyone is an owner. The distance between the managers and the employees does not exist.” In the U.S. “you have processes and you have methods, you have systems.” The systems and controls big companies need can slow the inventing process, a few engineers with no sense of hierarchy locking themselves in a lab. “Everything is commando,” Vardi said. “Hoo-ha. You run. You execute.”

Aora’s Susskind was born in Israel but grew up in South Africa, and his accent retains its clipped antipodean consonants. He has a shaved head and speaks rapidly. We drank instant coffee on a patio next to his unwatered lawn. For an Israeli entrepreneur speed and frugality trump perfection, Susskind said. “Otherwise we wouldn’t have got where we got in sixty years,” he said. Aora installed its system in Eilat before it worked flawlessly, because Susskind wanted a demo to attract overseas interest. “We’re so accustomed to getting on with shit when you only have 70 percent of the information,” he continued. “There are some meetings where you meet Germans or Americans when you look like an idiot because you haven’t thought it all out.”

It’s hardly a climate obsessed with customer satisfaction. Indeed much of Israel’s technology industry is engineered to license inventions to large American (and increasingly European and Asian) firms which handle marketing and distribution. It’s straightforward division of labor: Israeli labs can design, say, a sophisticated sensor but they don’t have the workforce, funds, or facilities to manufacture or sell millions of them.

The Israel-U.S. Bi-national Industrial Research and Development (BIRD) Foundation, a group founded by the two governments, plays matchmaker for these alliances. Executive director Eitan Yudilevich said Americans “start thinking about how they make money very, very early in the process.” I repeated to Yudilevich what an Israeli solar entrepreneur had told me he was more concerned with his company making a positive impact than making a huge amount of money. “Believe me, his investors wouldn’t like to hear that,” Yudilevich replied. “It’s nice to hear but I’m not sure it’s good for business.

“Israelis tend to be very romantic,” he continued. “They volunteer to go settle somewhere and volunteer to help each other, and they also volunteer to help the world, but the problem is that sometimes to help the world you need money.”

He has an unusual resume for a garbageman. He’s a rocket scientist, who trained as a physicist and later managed development of Arrow, Israel’s (functional) missile defense system.

To most of us clean energy conjures images of solar panels shimmering in the desert and tri-blade windmills churning the prairie air. But wind and solar power are just the most familiar components of a project to overhaul the last two centuries of infrastructure. Clean technologies could potentially reinvent how we do pretty much everything to emit fewer greenhouse gases and use resources more efficiently. And they’ll be as invisible to most people as a city’s sewers or power plants. The cleantech project is as ambitious as industrialization and could take as long. In Israel I caught a few glimpses into what the future could look like.

Next to Tel Aviv’s Hiriya landfill, trash travels through a Rube Goldberg device of basins, conveyers and tumblers big enough to fill a warehouse. The rig sorts garbage by properties like its density relative to water. The plant, run by a company called Arrow Ecology and Engineering Overseas, divides trash into metals and plastics which Arrow sells for recycling, and breaks down organic waste into fertilizer. In the sort of satisfying closed loop that often arises in cleantech, the leftover biogas produces enough electricity to run the system with some remaining to feed the electric grid. Sorting two hundred tons of trash daily, Arrow says it reduces landfilled waste by about 75 percent. It has a similar plant outside Sydney, Australia and has won bids to build them in southern California and Italy. In a trailer on stilts overlooking the machine but insulated from the unbelievable stink, Arrow’s CEO Yair Zadik looked like an architect, with fashionable glasses and spiky light hair. He has an unusual resume for a garbageman. He’s a rocket scientist, who trained as a physicist and later managed development of Arrow, Israel’s (functional) missile defense system.

Cleantech can also be microscopic and sterile. In a Rosetta Green lab, air bubbles percolated up through tubes of deep green fluid. This part of NASDAQ-listed Rosetta Genomics, is using a platform based on manipulating micro RNA molecules, which help control gene expression, to create a strain of algae that produces oil with high energy content. Rosetta’s technology could be of interest to one of several companies trying to manufacture algae-based fuel for cars. In typical Israeli fashion, Rosetta wants to develop a more power-packed strain of algae and license it to a company that would then manufacture and distribute algae-gas. Once it has uploaded the technology, Rosetta Green’s small staff of PhDs can figure out the next use for microRNA.

Water constitutes another branch of cleantech. For decades, Israel’s national water company, Mekorot built infrastructure: pipelines, reservoirs, and desalinization plants for an arid nation. As climate change threatens widespread drought, Mekorot’s expertise has become more valuable globally. In 2005 it established WaTech, a unit designed to foster the growth of high-tech water start-ups.

Assaf Barnea, a veteran of Israel’s national basketball team and WaTech (and the tallest Jew I’ve ever seen) is CEO of Kinrot Ventures, a business incubator in northern Israel, which supports water-related start-ups. “This is a convergence of so many technologies into something which looked up till now very simple,” water. Humans are good at distributing water. The next generation of water technology is arising as regions from southern Africa to the American southwest anticipate indefinite water shortages. Having wrestled with drought, Israel leads the world by recycling approximately 70 percent of its wastewater (Spain, with less than 15 percent, is second). Kinrot’s company portfolio includes TACount which tests for microorganisms. Another Kinrot company is Aquarius Spectrum which is developing a sensor system for detecting leaks in municipal pipes. A typical industrialized city loses more than a third of its water to leakage.

Some cleantech addresses problems inherent to cleantech. Canaan, the California venture capital fund, has funded the Israeli start-up EnStorage, which uses fuel cells to store energy. EnStorage, or a competitor, could iron out the problem of green power sources like solar and wind not producing power as consistently as burning fossil fuels. Better methods of storing and delivering power—“smart grids”—are essential for cleantech to catch on.

Humans have captured wind power since before Don Quixote. Even solar panels have existed for decades. But it’s only recently that modern variations could compete on cost with burning fuel. Any given product’s adoption usually hinges on whether it works better and more cheaply than existing technology. It may be clean, but does it make economic sense?

Take solar power. As much as the technology has improved, it still usually relies on government subsidies or price guarantees. Some clients will be willing to take a loss to show off—few Prius drivers expected to save money on their hybrids—but status envy isn’t a launchpad for world domination or a meaningful reduction in greenhouse gas emissions.

Solar power works in two main ways. Solar cells are basically semiconductors which convert sunlight directly into electricity. Solar thermal power, an Israeli specialty, uses the sun’s heat to generate power. Aora’s mirror and tower apparatus near Eilat is a solar thermal plant. In general, solar thermal power requires prolonged, direct sunlight. Solar panels don’t need as much sunlight but cost more for the power they produce. Solar energy companies are racing to develop incremental variations to shave down the cost and lost energy to the point where solar can compete on price with conventional power. In almost all cases, solar is not yet there.

In Jerusalem’s Har Hotzvim science park, I visited Arnold Goldman, the chairman of Brightsource Energy. An American engineer end entrepreneur who lives with his family in Israel, Goldman founded a solar thermal company, Luz International, which he says produced a large majority of the world’s solar power before it went out of business in the early nineteen nineties, in market conditions far more difficult for renewable energy. After Luz, Goldman took a break and wrote complex treatises which touch on disparate fields like renewable energy, physics, linguistics, and Jewish thought before starting BrightSource in 2004.

Like many of the larger Israeli cleantech companies, BrightSource is really a Californian-Israeli hybrid, with headquarters in Oakland and a testing facility in Israel’s Negev desert. From the air, Brightsource plants look like arid crop circles: thousands of mirrors, known as heliostats, concentrate the sun’s heat on a boiler at the top of a tower heating water to more than 1,000 degrees Fahrenheit. The rising steam spins a turbine to generate power. The technology resembles Aora’s on a vast scale. Aora’s small, relatively inexpensive plants could serve remote communities without connections to the power grid. Brightsource wants to be the power grid. In February the company received $1.37 billion in loan guarantees from the U.S. Department of Energy to build a plant in the Mojave Desert. Thousands of heliostats surrounding several towers, it would power almost 150,000 homes.

Have you ever wondered why batteries are the same everywhere? Thank the very geeky International Electrotechnical Commission (IEC), the group charged (so to speak) with determining international standards for electronics.

At the IEC’s annual meeting, held last October in Tel Aviv’s David Intercontinental Hotel, a speaker described unique electric plugs as “interesting” and “very nice” to an overwhelmingly male audience. At one seminar, the presenter spoke in an incomprehensible string of letters and numbers. One of the most anticipated presentations was by Better Place, which blandly describes itself as an “electric vehicle services company.” If Israel’s reputation as a cleantech power depends on any one company, it is Better Place.

Better Place was founded in 2007 by Shai Agassi, an Israeli of Iraqi descent, after he left a top job at the German software firm SAP. Agassi is a handsome dark-haired man in his early forties who often appears to have a slight pout. Better Place has catapulted him from the type of person who attends Davos to one who speaks there. Better Place wants to bring electric cars to the masses, but it isn’t a car company; rather, it makes electric cars practical.

Apparently most Americans would rather swap their kidneys than their car battery.

Electric cars emerged more than a century ago—one model was produced in Denver as early as 1905—before the internal combustion engine steamrolled them. Just as solar power has to be cheaper than coal, a mass market electric car has to do everything a car does to be economically respectable. It has to drive as fast, hold as many people and, probably the most challenging, has to drive hundreds of miles without long stops for charging. In Better Place’s first markets, the company has begun installing what will eventually be thousands of car-charging posts, resembling sleek blue-and-silver fire hydrants. For longer drives, it has developed a battery changing station. When a car pulls in, a robot rises from the floor to unfasten the depleted battery from the chassis before fitting a freshly charged one in its place. The exchange takes less time than filling a gas tank but requires purpose-built cars. The first of these, Renault’s Fluence ZE, a four-door with a dashboard of flowing ovoids like a Zaha Hadid building, should go on sale next year in Israel and Denmark.

Better Place hopes to have 100,000 battery swapping cars on the two countries’ roads by 2016. The company is also developing variations of its model for Hawaii, California, Japan, and elsewhere. (If the IEC and other car companies standardize electric car plugs, electric cars without swappable batteries could charge at Better Place posts.)

After a Better Place executive laid out the company’s vision, the next conference speaker, Greg Monty of product testing firm Underwriters Laboratories, dumped water on it. Monty cited research which “completely discounted electric vehicles as a viable business in the U.S.” He raised safety and cultural concerns; apparently most Americans would rather swap their kidneys than their car battery. Monty was more bullish on hybrids, like the Toyota Prius or upcoming Chevy Volt, which run on a combination of electricity and fossil fuel. Indeed he raised only a few of the big unanswered questions for this bold and cocky company. Here’s another one: With most car manufacturers working on their own electrics, why will they build machines compatible with Better Place swap stations?

Israel and Denmark, small countries where people care about the environment are sensible places to test drive its idea. But to dramatically cut emissions Better Place will have to advance into larger, more complex markets like the U.S. and China. Unlike most Israeli start-ups, hustling for grants, partnerships and small investments, Better Place has received hundreds of millions from investors and has promoted its own brand worldwide. If the company succeeds, Agassi will be the Henry Ford of the electric car. If it fails, Better Place could be the most spectacular automotive misfire since the Edsel.

By reputation, Israel vies with Italy for the distinction of being the developed country with the least functional government. I heard a lot of off-the-record grumbling about the government’s inability to support Israeli cleantech. Techies accuse lawmakers of being too shortsighted to comprehend cleantech’s scope or timeline. While such complaints undoubtedly have some validity, it’s hard to imagine technology entrepreneurs not complaining about red tape.

However, the government has made a few smart moves: it nurtured excellent universities and when skilled immigrants from the Soviet Union flooded in it founded business incubators to employ them. More recently Israel instituted a tax break for installing solar panels. Susskind, of Aora, which has yet to install its second commercial plant, criticized the incentive for supporting foreign solar panel manufacturers over domestic solar thermal companies. The only local beneficiaries, he said, are “five importers that are bringing this shit from China.”

Even as they distance themselves from the government—and, by extension, the Palestinian conflict—Israeli cleantech entrepreneurs aren’t unpatriotic. Rather they seemed to think of themselves as more capable of advancing the national interest than the government. Israeli companies see themselves almost like teammates. When he receives a call from an investor who’s not quite right for Aora, Susskind points them to another solar company. “I just pass them over and I get the same the other way around,” Susskind said. “We’re competitors and we’re exchanging investors! I think that’s cool.”

This sense of shared purpose might stem from the last time they were improvising under pressure, in the army. Susskind sketched out a scenario: A teenage soldier is guarding a checkpoint in the West Bank when an ambulance arrives. Inside a Palestinian woman is going into labor. The soldier might check her papers or search the ambulance but he’ll have to choose between the human instinct to accommodate a pregnant woman and the knowledge that ambulances have been used to smuggle explosives and terrorists. In the army, “the culture of decision making is profound,” Susskind said.

“Running a solar start-up is far less complicated.”

Cleantech could be a coup for the country’s often hapless public relations machinery.

The government’s biggest failure is the same as most environmentally minded governments; it hasn’t incorporated cleantech into its energy plan. Renewable energy skeptics could do worse than to say Israel is exhibit A of why cleantech is a passing fad. Due to less than warm relations with its neighbors, Israel is an “energy island” uncomfortably dependent on importing fossil fuels. If a small, motivated country with a domestic cleantech industry doesn’t use renewable energy then who will?

Shlomo Wald, the chief scientist of the Ministry of National Infrastructures, essentially concurred with the entrepreneurs. While he supports research into cleantech he added that “My budget for energy projects is so small I’m ashamed to say it.” Wald, who looks like a younger, kinder Philip Roth, tilted his head skyward from the shabby conference room, as if looking for assistance. He said he has a few million dollars to throw around on research projects by Israeli companies and academics, and for international collaborations. Like a lot of my interviews, this one ended with a plea for American Jews to invest in Israeli cleantech: “It can really be profitable for Israel and to humanity as a whole.”

Israel’s wars, hot and cold, are so consuming that plenty of ardent Zionists don’t know the extent of Israel’s technological achievements in areas like microchips, cardiac stents, and cell phone components. Along with emergency relief—see Haiti—cleantech could be a coup for the country’s often hapless public relations machinery. Mina Goldiak, a deputy chief scientist at the Ministry of Industry, Trade, and Labor, arranges international research collaborations, sometimes in places where Israel is a dirty word. “I bring to them the nice view of Israel, being in front in many areas of research and development,” Goldiak said. R&D collaboration has been a recent highlight in sometimes bumpy Israeli-Turkish relations, she said. Science is also an entry point for courting new allies. Israel has an industrial research partnership with South Korea, a country not known for engagement in the Middle East.

Israel isn’t the only Middle Eastern nation aware of cleantech’s diplomatic potential. In 2006, the United Arab Emirates, which has striven to diversify its petroeconomy into technology and finance, announced it would build a $22 billion showcase called Masdar outside Abu Dhabi. Designed by the British architect Norman Foster, Masdar promises to be the world’s first carbon-neutral, zero-waste city. Masdar’s planners boasted that it would be the “Silicon Valley for clean, green, and alternative energy,” housing a world-class degree-granting research institute, in partnership with MIT, and a staggering 1,500 cleantech companies. Because the country lacks Israel’s engineering base (in most recent years Israel receives more patents annually than the entire Arab world has to date), Masdar, at least at first, will have to lure research talent from abroad.

Following the financial crisis, UAE appears to be reigning in its ambitions for Masdar. A scaled back version could emerge as a signifigant technology cluster but it remains to be seen whether the UAE can innovate by fiat and blank check. Israel’s technological achievement emerged from a culture of contentiousness and scarcity. Cleantech is an effort to reengineer society to ensure that the world remains a suitable place to live. At least Israel and its neighbors can agree on something.

Alex Halperin is a freelance reporter and a senior editor at Guernica.

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