LIANE HANSEN, host:

Israelis often say they live in a difficult neighborhood to explain why they make the policy choices they do. The one you will hear about in this next report is no exception. Israel is trying to be at the forefront of innovation and alternative energy or, as it's known today, clean tech.

NPR's Lourdes Garcia-Navarro traveled to the southernmost part of Israel where the government is investing hundreds of millions of dollars in a new venture.

LOURDES GARCIA-NAVARRO: Israels south is one of the most inhospitable places on the planet - one inch of rainfall per year, soaring temperatures that bake its sandy, mountainous landscape. But when Noam Ilan looks at Israel's arid southern Arava region, he sees opportunity - solar power, among other things.

Mr. NOAM ILAM: The dependency on oil is huge to Israel because that makes the enemies of Israel much stronger because the European countries and the U.S., if this dependency on oil increases, will start rethinking their support of Israel.

GARCIA-NAVARRO: He's an executive at Capital Nature, a research and development center that is pushing renewable energy here. He says Israel's government is now investing money in the burgeoning clean tech sector. The thinking goes that if the world can be weaned off oil, then that will make oil-producing countries, like Israel's archenemy Iran, weaker.

Last month, Israel's Prime Minister Benjamin Netanyahu announced a $500 million investment plan in supporting research and development in alternative energy, with the intention of - as he put it - Israel becoming the leader, the catalyst in research activity.

Ilam is standing at a new alternative energy hub that's being built with the help of government funds and a host of companies dealing with projects devoted to all kinds of alternative energy are moving down here, lured by incentives.

Mr. ILAM: Don't go away.

GARCIA-NAVARRO: Nearby, huge mirrors point towards the sun in a dusty field located at the back of the kibbutz. There is one thing that this part of Israel has a lot of, and that's sun.

Aero Solar is a new Israeli company that's taking advantage of that, pushing a solar hybrid technology. William Weisinger is the project manager.

Mr. WILLIAM WEISINGER (Project Manager): This is the highest amount of radiation you find on the planet, the best environmental conditions, so we're bringing in pilot projects, we're bringing in academia, we're bringing in the engineers. And that's what we're headed to, to make the Silicon Valley of Israel.

GARCIA-NAVARRO: Becoming the Silicon Valley of Israel is a lofty goal, and one that Israel isn't even close to achieving yet. Israel already has a booming high-tech industry. It has more companies on the technology-focused NASDAQ exchange than any place outside of North America but it's been slow to get on the alternative energy bandwagon.

At the moment, less than two percent of Israel's energy needs are serviced by alternative energy, solar and thermal power. That's really low. The goal is to get that to 20 percent in the next 10 years.

It's a long way off, says David Lehrer with the Arava Institute for Environmental Studies.

Mr. DAVID LEHRER (Arava Institute for Environmental Studies): Israel is far, far away. Part of the reason is because the regulation system within Israel was not in place in order to encourage renewable energy and therefore many Israeli entrepreneurs went abroad and Israel was in a sense left behind.

GARCIA-NAVARRO: Jack Levy is a partner in Israel Cleantech Ventures. He says Israel can't compete with huge countries like the U.S. and China, which invest billions of dollars in clean tech, but it can succeed by focusing on being an incubator of cutting edge technology.

Mr. JACK LEVY (Partner, Israel Clean Tech Ventures): What you're seeing here is the opportunity for Israel to be the laboratory. What we have are the abilities and the technologists and the intellectual property and the know-how to help that happen.

GARCIA-NAVARRO: David Lehrer says already Israeli companies, entrepreneurs and scientists are moving back here.

Mr. LEHRER: Israel has every reason in the world to utilize its natural resource of sun and to wean itself and the rest of the world off fossil fuels. And therefore, we should not be the ones following everybody else but we should take the lead.

GARCIA-NAVARRO: Lourdes Garcia-Navarro, NPR News.

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