Skip to content

Archive for

Iceland Geothermal Conference 2013

The Iceland Geothermal Conference will take place  in Reykjavík on March 5-8 2013. The venue is the new outstanding conference and concert centre Harpa, at the oceanfront in downtown Reykjavík.

Icelandic-Geothermal-Conference-2013The overall theme of the conference is presented as “to share effective exploration methods, learn how to maximize the utilization of geothermal energy from veterans and explore ways to realize geothermal projects with less risk and higher profitability.” The speakers include dozens of specialists in the geothermal sector. You can see the program here.

The conference is a perfect place to meet for utilities, investors, vendors, regulators and government to take an in-depth look at the major steps in geothermal projects. As the conference is positioned in proximity to a region rich in geothermal activity, most of the attending guests will probably also enjoy the field trips offered to selected geothermal areas close by.

Iceland-Geothermal-Plant-SteamGeothermal energy provides over half of Iceland’s primary energy supply. The principal use of geothermal energy is space heating. Close to 90% of all energy used for house heating comes from geothermal resources (low-temperature). 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.

Harnessing geothermal energy is an area of expertise where Iceland has great strength. The Reykjavík geothermal district heating service started operating on a small scale in 1930. Today, it is the largest of its kind and serves close to 60% of the total population of Iceland. Iceland also produces a substantial share of its electricity by harnessing geothermal resources. Geothermal plants now account for approximately one-quarter of all electricity generated and consumed in Iceland.

Nesjavellir-Geothermal-Power-Plant-IcelandThe use of geothermal energy for industrial uses on a large scale began in Iceland in the late 1960’s. The most recent industrial operation in the country utilizing geothermal energy is the methanol production of Carbon Recycling International in southwestern Iceland. The plant captures carbon dioxide from a geothermal power plant and converts the carbon dioxide into methanol. Currently, the Norwegian company Stolt Sea Farm is constructing a fish farm, that will utilize warm water from a geothermal power plant to produce senegalese sole. In a nutshell, Iceland’s geothermal resources offer numerous interesting opportunities. You are welcome to contact us directly for more information about the Iceland Geothermal Conference and/or with inquiries regarding the Icelandic energy sector.

Gaining from the European green drivers

Electricity prices in Iceland are substantially lower than anywhere else in Europe. While common wholesale prices for electricity in Iceland are equivalent to 25-30 €/MWh, the wholesale prices in Europe are often double that and even more. This winter, for example, the average wholesale price at the European Power Exchange (EPEX SPOT) has been close to 50 €/MWh.

This means that if Iceland would have an electric cable connection with Europe, electricity could be sold from Iceland at a much higher price than being possible in the small Icelandic market. This  makes the European continent, Scandinavia and the United Kingdom a very interesting market for Icelandic generating firms.


Slide21High electricity prices in Europe are not the only driver, creating more demand for Icelandic electricity. Almost all electricity in Iceland is generated by utilizing renewable sources (hydro- and geothermal power). The European Union (EU) has adopted a binding plan to greatly increase the share of renewable energy. According to EU’s Renewable Energy Directive, the Union is going to reach a  20% renewable energy target for 2020 – more than double the 2010 level of 9.8% – as well as a 10% share of renewable energy in the transport sector. The targets will help to cut greenhouse gas emissions and – what may be even stronger incentive – reduce the EU’s dependence on imported energy.

According to the Directive, the member states have taken on binding national targets for raising the share of renewable energy in their energy consumption by 2020. These targets range from 10% in Malta to 49% in Sweden. The national targets will enable the EU as a whole to reach its 20% renewable energy target for 2020 – more than double the 2010 level of 9.8% – as well as a 10% share of renewable energy in the transport sector.


DECC-2011-Figure-2It is noteworthy that to be able to reach the targets, it is expected that for example the United Kingdom needs to add more than 170 TWh of annual renewable energy  by 2020 (UK needs to go from present less than 60 TWh to approximately 230 TWh by 2020). This is according to the 2011 UK Renewable Energy Roadmap (pdf) and the 2012 Update (pdf).

It is not clear how large share new renewable electricity will be of this total renewable energy addition of 170 TWh. However, from the 2011 UK Renewable Energy Roadmap it can be expected that the goal for 2020 may be somewhere between 104-155 TWh of annual renewable electricity generation (as described in a table marked as figure 2 in the Roadmap; shown here above). The current annual renewable electricity generation in the UK is somewhere between 34-38 TWh. Thus, the goal of 104-155 TWh of total electricity from renewable sources by 2020, will call for a new annual renewable electricity production of 66-121 TWh. Possibly, it would be fair to say that the UK needs to add close to 100 TWh to its annual renewable electricity generation. And this is to happen within seven years from now.


EU’s plan for increasing renewable energy allows the member states to import renewable energy from other countries. Iceland can offer substantial amount of electricity from renewable sources at very competitive prices (currently, the Icelandic power company Landsvirkjun offers new 12 year contracts at 43 USD/MWH, which equals approximately 32 €/MWh). It may be totally realistic that some of UK’s new renewable electricity will come from Iceland.

Slide22Iceland’s hydro- and geothermal power is less costly than for example new wind farms in the UK. In addition, Icelandic hydro- and geothermal power is a stable base-load power, unlike wind and unlike solar.

An electric cable between Iceland and the UK might be a win-win project. UK would gain access to reliable base-load renewable electricity. Icelandic power companies would increase their profits and could utilize the cable to import electricity from the UK when prices there are low (for example during the night, when demand is minimal).

Such a high voltage direct current (HVDC) cable is currently being seriously considered by a group of Icelandic power companies and other stakeholders. This would be a technically and financially complicated project and probably it will take a couple years until any decision will be taken on the matter. For more information you are welcome to contacts us at Askja Energy directly with your inquiries.

Future growth of the Icelandic energy industry

Slide20Iceland has substantial renewable and economically attractive options to increase its electricity generation. The National Power Company, Landsvirkjun, has introduced a vision for possible upcoming projects, that could increase the total annual generation from the present 17 TWh to 33 TWh by the year of 2025.

Almost all of this additional generation of  16 TWh would come from new geothermal- and hydro power projects, but a small share might come from wind power. Almost doubling the electricity production in Iceland in a period of less than 15 years would call for massive investment. However, this investment could be fairly stable over the period, as most of the suggested power projects would be medium scale (and, for example, not as large as the 690 MW Kárahnjúkar / Fljótsdalsstöð Hydropower Plant, that was constructed in the first years of the 21st century).

Slide17Electricity prices in Iceland have been much lower than, for example, in most of Europe. This price gap has been increasing, offering the Icelandic power industry the possibility to raise the electricity price and still be very competitive.

Today, most of the electricity generated in iceland is consumed by the aluminum industry and other energy intensive industries. The long term contracts offer the electricity companies fairly stable revenues, but low profits. The increased price difference between Iceland and Europe may change this situation for the better. Today, Landsvirkjun is offering electricity contracts over a 12 year period, where the price is 43 USD/MWh. This is a very good option for small and medium sized companies, where electricity cost is a substantial share of their production costs.

Several new contacts have already been signed. Two new data-centers are already in operation; Verne Global and Thor Data Center, offering services that run on 100% renewable energy. This growing data-center industry is also enjoying  a major upgrade of the international submarine telecom capacity between Iceland and mainland Europe .


Another example of new power contract is an agreement between Landsvirkjun and GMR (Geothermal Metal Recycling), where clean, renewable energy will be supplied to power a new steel and scrap metal recycling plant at Grundartangi in Southwest Iceland. Also, the German industrial holding company PCC and the French construction-materials giant Saint Gobain are considering Iceland as a location for their production.

It is too early to say how fast the Icelandic electricity industry will grow in the forthcoming years. If the electricity prices in Europe will continue to rise, as the consulting and engineering firm Pöyry has been forecasting, Iceland’s competitiveness will increase even further. For more information about these possibilities we recommend a recent analysis by Gam Management; Landsvirkjun’s Renewable Energy Potential and its Impact on Iceland’s Economy.

The largest consumers of electricity in Iceland

Iceland-12-year-electricity-contractsVery few countries in the world offer as competitively priced electricity as Iceland does. Companies that need substantial quantity of electricity (or hot water) and wish to operate within Europe, North America or elsewhere in the OECD, will hardly find better business environment as available in Icelandic. For example, the Icelandic power company Landsvirkjun offers 12 year contracts where the electricity is priced at 43 USD/MWh.

Another fact that makes Icelandic electricity a very attractive option, is that almost 100% of all electricity generated in Iceland comes from renewable sources (hydro- and geothermal power). In addition, the Icelandic power stations and transmission system rank among the world’s best in terms of secure and reliable electricity supply.

The low-cost and reliable Icelandic electricity has led to a strong power-intensive industry in Iceland. Industrial manufacturing products have become the largest part of Icelandic exports, accounting for close to 55% of the total exports (in fob-value). The largest proportion of these exports is aluminum (40% of total exports), which is produced in large smelters by harnessing Icelandic renewable energy.


Today, the aluminum industry and other power intensive industries consume approximately 80% of all the electricity in Iceland. Although the aluminum industry is a dominating consumer of Icelandic electricity, new energy related industries and services have started to see Iceland as an attractive location. Examples are foils production for electrolytic capacitors and data centers.

This new interest is understandable, especially when having in mind the high electricity prices in many European countries. And Iceland’s cool weather, good capacity in overseas telecom cable connections, and very competitive electricity prices make the country an ideal location for data storage services. Another example of a new industry is aquaculture, utilizing warm wastewater from the Icelandic geothermal stations. This, and other new upcoming projects harnessing Icelandic energy, will be further described here at the Icelandic Energy Portal in next week.

Overview of the Icelandic energy business

There are three main energy companies in Iceland:

Landsvirkjun (owned by the Icelandic state).
Orkuveita Reykjavíkur (owned by municipalities).
HS Orka (owned by Canadian firm Alterra Power and a group of Icelandic pension funds).

Slide12State-owned Landsvirkjun is by far the largest Icelandic energy company, providing approximately 75% of all the electricity produced in Iceland. Landsvirkjun is responsible for more than 96% of all hydro generation in Iceland, and its share in the generation of electricity from geothermal power is around 11% of the total. Most of the electricity Landsvirkjun generates (80%) is sold to energy intensive industries via long term contracts. The remaining 20% is bought by public utilities and the Icelandic Transmission System Operator (TSO); Landsnet.

Today, Landsvirkjun owns eleven hydropower stations and two geothermal power stations with a combined capacity of 1,895 MW.  The stations generate close to 12.6 TWh annually. Landsvirkjun’s hydropower plants generate around 96% of the company’s total production, while geothermal power contributes around 4%. The share of geothermal power may increase in the forthcoming years with the planned execution of several large geothermal projects in the near future. Lansdvirkjun is one of Iceland’s largest companies.

Orkuveita Reykjavíkur (OR) or Reykjavik Energy is a public utility company that provides electricity and hot water for heating. It is by far the largest local provider of electricity and heating to end-users. The main service area of the company is the larger Reykjavik Metropolitan Area, covering two-thirds of the Icelandic population. Besides producing and distributing electricity, OR sells and distributes both hot and cold water (from groundwater reservoirs). Also it operates an extensive sewage system for the Reykjavik area, as well as some adjacent municipalities. OR’s power-generation plants currently have a total capacity of 435 MW. In total, OR now generates around 2.9 TWh of electricity annually.

HS Orka is the third main electricity-generating firm in Iceland. Until 2007 it was a public company owned by the Icelandic state and few municipalities in Southwest Iceland. It was later privatized and today its largest shareholder is the Canadian Alterra Power, which owns two-thirds of the company. The rest is owned by a group of Icelandic pension funds. HS Orka operates two geothermal power stations, with a total capacity of 175 MW and generates around 1.3 TWh annually.

Slide13Iceland’s two largest energy companies are in 100% public ownership. In addition, there are several small publicly owned generating firms around the country.  In total, more than 90% of all electricity in Iceland is produced by public companies.

Public ownership in the electricity sector is also quite common in many other European countries. The largest electricity generating companies of both Norway and Sweden (Statkraft and Vattenfall) are owned by the government of Norway and Sweden, respectively, and the government of Denmark owns close to 70% of the largest energy company in Denmark (Dong Energy). Even in the United States, the main share of the hydropower industry is publicly owned, either by federal departments and/ or state agencies.

The reasons behind the large governmental share in Iceland’s electricity industry are historical. Ever since the early days of electricity generation in Iceland, the state and  the municipalities have always plaid an important role as providing electricity. However, the electricity sector in Iceland is open to private investment and even to foreign private (and public) investors. Couple of years ago, the Canadian private company Alterra Power became the main owner of Iceland’s third largest energy company; HS Orka. Click here for more information about the Icelandic Energy Business.

%d bloggers like this: