“In a nation with only 320,000 people, the state-owned power company, Landsvirkjun, which operates the Krafla facility, sells just 17 percent of its electricity to households and local industry. The rest goes mostly to aluminum smelters owned by the American giant Alcoa and other foreign companies that have been lured to this remote North Atlantic nation by its abundant supply of cheap energy.”
These words are from an article published by the New York Times (NYT) a few days ago. The article describes how electricity generated by harnessing Iceland’s extensive renewable energy sources may possibly be exported to consumers in the European Union (EU). Such an export could result in a very substantial increase in profits for the generating companies in Iceland. The aluminum smelters are paying prices believed to be less than 30 USD per MWh. Which is, according to the NYT, less than half the going rate in the EU and barely a quarter of what, according to the Renewable Energies Federation, a Brussels-based research unit, is the average tariff, once tax breaks and subsidies are factored in, for renewable electricity in the EU.
Currently, Landsvirkjun is conducting a research into the possibility of a submarine electric cable (a High Voltage Direct Current cable or HVDC) to connect the electricity markets of Iceland with the European market. The cable would be approximately three times longer than the link between Norway and the Netherlands, which is currently the world’s longest submarine electricity cable. It is to early to say what would be the preferable connecting point in the EU; it could be Scotland, the Netherlands, Germany, or even Norway.
A connector between Iceland and Europe would not only offer the Icelandic electricity generating companies the possibility of substantially higher price for their product. Such a cable would also make it possible to import electricity to Iceland in periods of low electricity prices at the other end of the cable (such as during the night). The connector would also increase the energy security in Iceland, as the country would be less dependent on keeping large emergency reserves, as it does now. For the EU this would also be an attractive project – not least as the Union’s 27 member states agreed in 2009 to a mandatory target of deriving at least 20 percent of its energy from renewable sources by 2020.
Landsvirkjun’s CEO, Mr. Hörður Arnarson, has described the possible cable as a very promising project. “We have a lot of electricity for the very few people who live here.” Compared with the rest of the world, he said to the NUT, Iceland produces “more energy per capita by far, and it is very natural to consider connecting ourselves to other markets.”
It is expected that final decision on the cable will be taken within two years or so. For more information about the cable and the importance of EU’s energy policy for Iceland, please check out our earlier post on the issue.