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Landsnet strengthening the grid

Demand for electricity in Iceland has grown immensely since the development of the current national transmission grid system, which was mostly constructed during the period 1972-1984. Since 1984 the amount of electricity being fed into the Icelandic grid has quadrupled.


The Icelandic Transmission System Operator (TSO) Landsnet is currently working on an environmental impact assessment (EIA) for a new high voltage transmission line between Southern and Northern Iceland; the South-North-Connection (SNC) over the Sprengisandur highland plateau. This new 220 kV transmission line will improve the current power transmission and increase security of supply and stability in the electric system.

Furthermore, the new line will substantially increase the transmission capacity. Thus, the project will not only be positive for better fulfilling current demand, but also prepare Landsnet to meet increased electricity demand in the coming years and decades. The increased demand will for example come from increased electrification of fish meal plants, and from new industrial production plants and services (such as data centers). Because of its stable energy supply, green energy portfolio, and yet-unharnessed renewable energy sources, Iceland is a very appealing location for companies that need substantial amount of electricity or heat for their production process. Iceland’s main power producer (Landsvirkjun) is currently offering long-term electricity contracts at a fixed price of 43 USD/MWh. Those long-term contracts are probably the most favorable in Europe and even in the whole OECD.

The basic transmission system to become 220 kV

In its Transmission Systems Plan 2014-2023 (TSP), Landsnet has proposed three different options (platforms) for the development of the Icelandic electricity grid.  All three platforms aim to construct stronger connections between the major energy areas in the country, to increase stability in the transmission system and to ensure better delivery of electricity. The TSP is a.o. based on the National Master Plan for Hydro and Geothermal Energy Resources, which is a parliamentary resolution on future development of Icelandic energy resources, and an independent governmental forecast of how the electricity market will develop.


According to Landsnet, the transport capacity of the Icelandic national transmission system will be developed to be at least 220 kV. Presently, 220 kV transmission lines have only been constructed in the southwestern part of the country (between the capital region and hydropower stations in the Þjórsá and Tungnaá region) and between Fljótsdalur power plant and the aluminum smelter in Reyðarfjörðir in Eastern Iceland. The new line between Southern and Northern Iceland (SNC), over the Sprengisandur highland plateau, could become the next major 220 kV connection. This will increase operational security, flexibility and efficiency of the Icelandic transmission.

Four options of North-South-Connection over Sprengisandur will be considered


Landsnet has started the process of examining the option of South-North-Connection more closely, preparing an environmental impact assessment (EIA) of the new transmission line. According to a draft already presented in the preparation for the EIA, Landsnet will compare four options of a South-North-Connection over the Sprengisandur highland plateau.

Special emphasis is placed to minimize the visual impact of the line, as the area is largely untouched (except from gravel summer road). Parallel to this work by Landsnet, the Icelandic Road Administration will perform an EIA of a new road in the area. Of the four options on the transmission line that will be examined, one option is specified as the main advantage (with a total length of 192 km). Interestingly, one of the other options is an underground cable as part of the route.

Iceland is the world largest energy consumer (per capita)

Worlds-largest-energy-consuming-countries_OilPrice-2014Which countries are the largest energy consumers – and why? According to Andrew Topf at the energy-news-site, Qatar has been the world’s largest energy consumer per capita most of the last three decades. Now, however, another country has taken the lead. Today, Iceland is the world largest energy user per capita.

The list is based on the most recent data available from the World Bank on energy used per person, measured in kilograms of oil equivalent (koe). The koe is a measurement of the units of energy equal to what’s generated by one kilo of crude oil per capita (the US Energy Information Agency also present comparison of this kind, but uses British thermal units or Btu). All types of energy can be broken down to koe, no matter what is the source of the energy, such as fossil fuels, nuclear energy, renewable energy etc. Note that when comparing energy consumption per capita, the World Bank refers to to indigenous production plus imports and stock changes, minus exports and fuels supplied to ships and aircraft engaged in international transport-use of primary energy before transformation to other end-use fuels, which is equal.

To most of our readers it is probably a quite well-known fact that people and companies in North America are among the world’s greatest oil and energy consumers (USA has only 5% of the global population but uses close to 20% of the global energy used each year). And it is certainly true that USA and Canada are among the greatest energy users. However, they only come as number eight and nine on the top-ten list of the world’s largest energy consuming nations per capita. The list is as following:

1.   Iceland                                18,774 koe
2.   Qatar                                   17,418 koe
3.   Trinidad and Tobago          15,691 koe
4.   Kuwait                                 10,408 koe
5.   Brunei                                   9,427 koe
6.   Luxembourg                         7,684 koe
7.   UAE                                      7,407 koe
8.   Canada                                7,333 koe
9.   USA                                      6,793 koe
10. Finland                                  6,183 koe


Here we are not going to explain in details the reasons why the top-ten countries consume so much energy. However, it is quite clear that one of the main reason for scoring high on the list is a mixture of abundance of low-cost energy resources and fairly low population (at least this applies to the top-seven countries on the list). And the abundant domestic energy resources are fossil fuels and/or hydropower; the most economic energy sources we have access to here on our planet.

Many of the countries on this top-ten list are among the world’s largest producers of oil and gas. In some of these countries, the prices for the fossil fuel products are very low, resulting in more consumption than in countries were the prices are higher. This may, for example, apply to gasoline prices and to prices for electricity generated by burning natural gas. In addition, many of the counties in the list have major energy intensive industries (like aluminum smelters and LNG industry). These industries use cheap domestic energy resources, like electricity generated by natural gas. The result is very high energy use per capita in countries like Qatar, Trinidad and Tobago, Kuwait, Brunei and UAE (note that when using less recent numbers than Oilprice does, Trinidad and Tobago and Qatar switch the 2nd and 3rd place, as can be seen on the chart from Gapminder below; for other sources note IEA/NationMaster and OECD).


So fossil fuels bring many of the Persian Gulf states on the top-ten list, plus Brunei and Trinidad and Tobago. Luxembourg, however, is one country on the list which is heavily dependent on energy imports. Thus, Luxembourg’s high energy use per capita can not be explained by access to abundant and cheap energy sources. The high ratio of energy use in Luxembourg has been partly explained by the low sales taxes on petroleum products, which encourage motorists and other consumers from neighbouring countries (Belgium, France and Germany) to buy their supplies in Luxembourg.

Interestingly, countries with huge energy resources do not necessarily make it to the top-ten list. This, for example, applies to Norway, which has both enormous oil- and gas resources and is a major producer of hydropower. Still, Norway is not on the top-ten list of the largest energy users per capita (although it comes very close).

USA of course has a long history of being an industrial giant, utilizing its large coal and natural gas resources and is one of the main oil consuming countries in the world (even per capita). For the USA, nuclear power and hydropower is also of great importance as sources of energy. Same applies to Finland, which has very substantial energy intensive pulp and paper industry. The same can be said about Canada, which also has a large aluminum industry.

Icelandic-Energy-Basics-2012Iceland is somewhat unique when it comes to energy. It is the world’s largest hydropower country per capita, the world’s largest geothermal energy producer per capita, and the world’s largest electricity producer per capita. Iceland’s competitively priced electricity (from hydro- and geothermal power) has attracted numerous industries and services. Currently, the aluminum industry in Iceland consumes close to 75% of all the electricity produced in Iceland (of course Iceland’s location result in large amounts of energy being used by logistics, but as already mentioned energy use in international transportation is not included when comparing countries energy use per capita).

This, with Iceland’s large fleet of fishing vessels and high automobile ownership, are the most important reasons for why Iceland is the world’s largest energy user per capita. But keep in mind that very high share of Iceland’s energy comes from renewable sources, making Iceland one of the greenest country in the world with regard to energy consumption. In total, approximately 86% of Iceland’s consumption of primary energy comes from renewable sources. And what is especially interesting, is the fact that Iceland still has access to numerous competitive renewable energy sources yet to be harnessed.

UK energy investors looking towards Iceland

Over the next few years billions of pounds are expected to be invested in new energy projects in the United Kingdom (UK). One of the projects may be a HVDC electric cable between UK and Iceland.

First step: 12 billion GBP for wind and biomass projects

Earlier this year (2014), the UK government made Contracts for Difference (CfD) with eight renewable energy projects, with a total capacity of more than 4,500 MW. Five of these projects are large wind farms (more than 3,100 MW in total capacity) and the three others are biomass projects (close to 1,400 MW).

The list of participants e.g. includes the Danish energy firm Dong, Spanish Repsol, Scottish SSE, and Norwegian Statkraft and Statoil. The eight projects are expected to contribute around 15 TWh annually, which will be 14% of the expected renewable electricity to be added to the British electricity generation by 2020.

Together, these contracts open the door for a private investment of 12 billion GBP in the British renewable energy sector. However, this is only the start of a much larger energy investments in the British energy system. In total, these investments are estimated to be about 110 billion GBP by the year 2020, including 40 billion GBP in renewable electricity generation projects.

Groundbreaking policy and legislation

The investments mentioned above are possible due to the recently approved energy policy and electricity market reform of the UK. The recently adopted Energy Act calls for higher proportion of renewable energy and the strengthening of energy security of the UK by increased access to more diversified energy production.


This is a very interesting step by the UK. The new energy policy introduces special Contracts for Difference (CfD) to replace earlier system of incentives. The CfD sets certain strike prices for electricity, which is a pre-defined long-term price. This system will substantially limit the risk of new power projects and be an important driver for projects giving access to more reliable power.

This may offer a variety of opportunities, such as for Icelandic engineering firms with geothermal expertise. Even more interesting, may be the possibility of a submarine electric cable between Iceland and Great Britain.

Nordic companies among the first to benefit

The new British energy policy and electricity market reform is already being implemented. It is an interesting fact that energy firms from the Nordic countries are the main players in four of the first eight projects involving CfD’s. These are the Danish Dong Energy and the Norwegian Statoil and Statkraft (the latter company is wholly owned by the Norwegian state).

All of the four “Nordic projects” are new offshore wind power parks, with a total capacity of close to 2,600 MW (CfD has also been awarded to a fifth wind park – Beatrice – with a capacity of 664 MW). The projects have gained authorization by the EU Commission, thus fully in consistency with competition and state aid rules. And the fixed strike price is 140-155 GBP/MWh (equivalent to approximately 220-250 USD/MWh).

New power plants and new submarine cables

The new investments, according to UK’s energy policy, will primarily be in new power plants and development of electricity transmission and distribution systems. In the coming months, the policy will be further developed and the UK Department of Energy & Climate Change (DECC) will continue to prioritize projects.


The CfD-system applies to energy projects in Britain. However, the British energy policy also focuses on special arrangements to increase UK’s access to energy and electricity from abroad. This will e.g. happen with new cable connections (submarine electric cables) between the UK and its neighboring countries.

For the UK it will be especially important to gain access to flexible hydropower, to balance the electricity system. A HVDC cable between Iceland and UK could be an important part of such balancing and create high value to both countries. Such a project would also attract the interest of private investors, as already can be seen on the website of Disruptive Capital.

IceLink offers high increase in social and economic welfare

ENTSOE-HVDC-Iceland-2014-coverThe European Network of Transmission System Operators for Electricity (ENTSO-E)  has submitted the final draft of the community-wide Ten-Year Network Development Plan (TYNDP) to the Agency for the Cooperation of the Energy Regulators; ACER. Following reception of the ACER opinion, the final TYNDP 2014 will be published by end of December 2014.

The TYNDP 2014 explores the evolution of the electricity system until 2030 in order to identify potential system development issues and to be able to address these proactively. The objectives of the TYNDP are to ensure transparency regarding the electricity transmission network and to support decision-making processes at the regional and European level.

IceLink would result in highly increased social and economic welfare

The report from ENTSO-E includes analysis and evaluation of numerous possibilities for new electric cables interconnecting different electricity markets in Europe. One of the possible cables is a submarine HVDC cable (High Voltage Direct Current) between Iceland and the United Kingdom (UK); sometimes referred to as IceLink. The cable is expected to have a capacity somewhere between 800-1,200 MW, and be close to 1,000 km long.

ENTSOE-HVDC-Iceland-2014-mapAccording to ENTSO-E the IceLink could offer an increase in social economic welfare of up to 470 million EUR annually. This is higher SEW than most other of the interconnectors evaluated by ENTSOE-E in the new report. The social and economic welfare (SEW) is characterized by the ability of a power system to reduce congestion and thus provide an adequate transmission capacity so that electricity markets can trade power in an economically efficient manner. In addition, the IceLink offers much more flexibility or steerability than for example the numerous large scale wind power projects, evaluated in the report.

ENTSO-E presents four different scenarios

The 2014 version of the TYNDP covers four scenarios, known as the 2030 Visions. The visions were developed by ENTSO-E in collaboration with stakeholders through the Long-Term Network Development Stakeholder Group, multiple workshops and public consultations. The four visions are contrasted in order to cover every possible development foreseen by stakeholders. The visions are less forecasts of the future than selected possible extremes of the future so that the pathway realized in the future falls with a high level of certainty in the range described by the visions. The span of the four visions is large and meets the various expectations of stakeholders. The four visions for IceLink have a span of 290-470 million EUR annually in increased social and economic welfare.

Top-down, open and constantly improving process

The first Ten-Year Network Development Plan was published by ENTSO-E on a voluntary basis in 2010. The 2012 release built on this experience and the feedback received from stakeholders, proposing the first draft of a systematic cost benefit analysis. In the last two years, ENTSO-E has organized exchanges with stakeholders to ensure transparency as much as possible.

ENTSOE-HVDC-Iceland-2014-1For the 2014 release, ENTSO-E launched a large project, where the expertise of the members of ENTSO-E; the Transmission System Operators (TSO’s). This included the Icelandic TSO; Landsnet. Having regard to the high SEW of IceLink and its highly flexible power production, it can be expected that the project will attract strong political interest and positive financing.

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