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Icelandic electricity generation and transmission

The Icelandic electricity generation capacity and production has more than doubled in a decade. Today, the total capacity is 2,669 MW. The annual generation 2011 was 17,210 GWh.


Hydro Power              1,884 MW            12,507 GWh
Geothermal Power       665 MW              4,701 GWh
Fossil Fuels                   120 MW                      2 GWh
Total                            2,669 MW            17,210 GWh

Slide08Close to 100% of the electricity generation in Iceland is produced by harnessing renewable sources. Hydropower is the largest source with close to 73% of the annual generation. Geothermal accounts for about 27% of the generation. In addition, there are a few fossil fuel generating plants.

Several new power stations are under planning (both hydropower and geothermal power). The most recent one (now being constructed in South Iceland) will become operational in late 2013 .

Slide10The power stations in Iceland are located all around the country. The geothermal power plants (marked by red on the illustration at left) are of course to be found where it is easiest to harness the geothermal heat for electricity generation. All the main hydropower stations utilize glacial water, flowing from Iceland’s glaciers.

The largest hydropower system is the Þjórsá and Tungnaá river system in Southern Iceland (marked by a large blue dot on the map at left) . However, Iceland’s largest power station is in the Northwestern part of the country. This is the 690 MW Fljótsdalur / Kárahnjúkar hydropower plant, that started operating in 2007 (marked on the map by the large blue dot north of Vatnajökull Glacier).

Slide09The total annual Icelandic electricity generation of 17,210 GWh (17 TWh) makes Iceland one of Europe’s largest producers of renewable power.

Norway is in a strong first place with its massive hydropower capacity, generating approximately 120 TWh annually. However, the electricity price in Iceland is much lower than in Norway or other European countries. Iceland  has no electricity connections with other countries. Thus, the generating firms in Iceland do not have access to the large electricity markets in Northwestern Europe, where electricity prices tend to be much higher than in Iceland.


Despite Iceland’s isolated electricity market and sometimes severe weather conditions, the electricity supply in Iceland is renown for its reliability (see for example IMD’s and WEF’s World Competitiveness reports). This high reliability is the result of Iceland’s large reservoirs and the solid transmission system, which is operated by the Icelandic Transmission System Operator or TSO (Landsnet). The TSO connects all the large power stations to the Icelandic electrical grid, which runs around the country (all the nation lives in the lowlands, with the majority located in Southwestern Iceland).

New low-cost renewable capacity

The main sources of Iceland’s primary energy are hydropower and geothermal power.

Iceland-Electricity-and-Heating-Sources-Hydro-Geothermal86% OF THE TOTAL ENERGY IS GREEN

Presently, the Icelandic hydro- and geothermal resources supply close to 100% of Iceland’s consumption of electricity and approximately 86% of Iceland’s total consumption of primary energy (of that total, 20% comes from hydropower- and 66% from geothermal sources). This is the world’s highest share of renewable energy in any national total energy budget.

Hydropower is the main source of the country’s electricity production, accounting for approximately three-quarters of all electricity generated and consumed. The remaining quarter is generated in geothermal power stations.


Although hydropower is the main source for Iceland’s electricity production, geothermal heat is the main energy source in Iceland. As mentioned above, geothermal energy makes up around 66% of all primary energy use in the country.

The principal use of geothermal energy is space heating. Close to 90% of all energy used for house heating comes from geothermal resources, thanks to the country’s geophysical conditions and extensive district heating system. Geothermal energy also plays an important role in fulfilling an increasing electricity demand. Other sectors utilizing geothermal energy directly include swimming pools, snow and ice management, greenhouses, fish farming, and industrial uses.


It is expected that demand for Icelandic renewable electricity will grow quite fast over the next few years. Iceland’s main power company, Landsvirkjun, has introduced plans for increasing its electricity production up to 75% within a decade.


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.

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 / Europe, will hardly find better long-term agreements than offered at the Icelandic market (43 USD/MWh in 12 year contracts are being offered by Landsvirkjun).

In addition to attractive electricity contracts, Iceland is a member of the European Economic Area and has a modern business environment based on European standards. For those considering energy-related investments in Iceland, a positive first step is contacting Icelandic professionals on the relevant subjects. At Askja Energy Partners we provide information and access to the most experienced and knowledgeable engineering, legal, tax, and accounting services.

Icelandic energy basics

Today, we publish the first post in a special introductory series about the Icelandic energy sector.

This series will include the following seven headings:

–  Icelandic Energy Basics (today)
–  New Low-Cost Renewable Capacity (December 17th)
–  The Icelandic Electricity Generation and Transmission (December 24th)
–  Overview of the Icelandic Energy Business (January 2nd 2013)
–  The Largest Consumers of Electricity in Iceland (January 7th 2013)
–  Future Growth of the Icelandic Energy Industry (January 14th 2013)
–  Gaining from the European Green Drivers (January 21st 2013)



Iceland-Electricity-Production-Per-Capita-ComparsionNatural hydro- and geothermal resources have made Iceland the world’s largest green energy producer per capita.

Last year (2011) the electricity industry in Iceland produced 17,210,000 MWh (17.2 TWh) of electricity, which is close to 54 MWh per capita. In comparison, the average electricity production per capita by the countries within the OECD and EU is close to 9 MWh and 6 MWh, respectively.

What makes the Icelandic energy profile even more interesting, is the fact that all the electricity is produced by harnessing renewable sources only. Renewable energy sources (hydro and geothermal) supply almost 100% of Iceland’s consumption of electricity. Furthermore, geothermal district heating provides almost 90% of Iceland’s heating needs.

Iceland-Energy-Independence-Primary-EnergyIn total, approximately 86% of Iceland’s consumption of primary energy comes from renewable sources. Of that total, 20% comes from hydropower- and 66% from geothermal sources. This is the world’s highest share of renewable energy in any national total energy budget.

Although hydropower and geothermal power offer the lowest cost opportunities, Icelandic wind energy may also be harnessed in the near future. The first large wind turbines in Iceland are expected to become operational in 2013.


Iceland-Primary-Energy-Use-History_1940-2010The high share of renewable energy in Iceland’s energy portfolio (86%) is despite the fact that Iceland imports almost all its transport fuel. Today, imported carbon fuels and other oil products account for 14% of the gross energy consumption in Iceland. This number may soon become somewhat lower, as oil exploration is about to start at the continental shelf deep Northwest of Iceland’s shore.

Iceland’s renewable energy sources are not only abundant, relative to the size of the nation as a whole, but they are also available at a comparatively low cost. The cost issue will be discussed further in next week, here at Icelandic Energy Portal. Read more

Important step towards Icelandic oil exploration

Today, the National Energy Authority of Iceland (NEA) finished processing two applications for licences for exploration and production of hydrocarbons in the Dreki Area, Northwest of Iceland.

Iceland-Oil-Exploration_Faroe-Petroleum-Valiant-Petroleum-litud-areas-DrekiFor the last six months NEA has been evaluating of the technical and geological and financial capacity of the three applicants that handed in their applications earlier this year (2012). According to Icelandic law, the applicants must be able to handle extensive activities and have sufficient financial strength to conduct the activities for the long-term and handle the corresponding environmental and safety elements.

Following this evaluation, the NEA has made a decision to grant two licences. One to Faroe Petroleum Norge and Iceland Petroleum, and other to Valiant Petroleum and Kolvetni. Furthermore, the Norwegian Ministry of Petroleum and Energy has notified the NEA of their decision to participate in both licences to a 25 per cent share, in accordance with an agreement between Iceland and Norway from 1981.

The areas covered by the two licenses are shown on the map above. Areas awarded to Valiant Petroleum and Kolvetni are marked with blue color. Areas awarded to Faroe Petroleum Norge and Iceland Petroleum are marked with red.

Dreki-Area-hydrocarbon-licenses-mapHowever, the licences will not by issued until the Norwegian Parliament has approved the decision on the participation by Norway through the State-owned fund Statens direkte økonomiske engasjement (the State’s Direct Financial Interest or SDFI), administrated by the Norwegian firm Petoro. Following this and the signing of the parties to the licences of their joint operating agreements, NEA will grant the licences. This is expected to take place in early next year (2013).

We will soon be offering more information about hydrocarbon activities on the Icelandic continental shelf on our special petroleum pages.

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