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Strong Icelandic electricity growth

The recent growth in electricity generation and transmission in Iceland has been impressive.

Between 2005 and 2010 the Icelandic electricity generation doubled. It is important to keep in mind that all this increase was in low cost renewable generation (mostly hydropower). And remember that almost 100% of all electricity generated in Iceland comes from renewable sources (hydro- and geothermal power).

This rapid increase in Iceland’s green electricity generation is shown on the histogram at left / above. Most of the increased production is supplied to new industries and services. One of the main explanation behind this growth is the competitive electricity price Iceland offers.

The abundant natural hydro- and high temperature geothermal resources make the Icelandic power industry able to offer electricity at substantially lower prices than for example can be found in any other European country. Even the present low spot-price for electricity in the USA (due to extremely low price of natural gas) are no threat to the Icelandic electricity industry. Companies that need substantial quantity of electricity and wish to operate within the OECD, will hardly find better long-term agreements than offered at the Icelandic market (43 USD/MWh in 12 year contracts are being offered by the Icelandic power company Landsvirkjun).

It is expected that demand for Icelandic renewable electricity will grow quite fast over the next few years. The fact that Iceland still has numerous very competitive unharnessed hydro- and geothermal options, makes the country an interesting location for all kinds of energy intensive industries and services. This may for example apply to data centers, aluminum foils production, several silicon production facilities etc.

When having in mind the probable high growth in Icelandic electricity generation in the forthcoming years, it is not surprising that Landsnet (the Icelandic Transmission System Operator; TSO) is considering major investments in the electricity transmission system. The diagram at left is from Landsnet. It is interesting that even the major increase in transmission investments during 2005-2010 is fairly small compared to what may be expected in the next 10-15 years.

This plan for new transmission projects is not final yet. But it gives a clear view of the opportunities Iceland has regarding new and competitive green energy projects. No other western country enjoys similar economic possibilities based on 100% renewable energy.

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