How fast will wind energy develop in Iceland?

So far only four large wind turbines have been constructed in Iceland, all of them in the southern part of the country. The first were two 900 kW turbines from Enercon, which started operating in early 2013. The second two were 600 kW used Vestas turbines, set up in Iceland in 2014. The project owners are the national power company Landsvirkjun and private firm Biokraft.

The nature of these first wind energy projects in Iceland is to obtain operational experience with onshore wind turbines in the Icelandic climate. The turbines are connected to the grid and both projects have been quite successful, offering more than 40% capacity factor.

According to a report by Kvika bank and Pöyry, published earlier this year (2016), most if not all upcoming power projects in Iceland will be either hydro or geothermal. Kvika and Pöyry are not expecting substantial wind power to become developed in Iceland unless Iceland will have an interconnector to Europe,

Having regard to the low- and central scenarios, according to the report by Kvika/Pöyry, absolutely no wind power is expected to be developed in Iceland in the next two decades unless the IceLink (or other subsea HVDC cable to Europe) will become reality. On the other hand, Kvika/Pöyry expect quite high investment in Icelandic wind power if IceLink will be developed.

According to the high scenario, 1,600 MW of new wind power capacity may be developed in Iceland if the subsea electricity interconnector will be constructed. This is explained on the graph at left; the wind power is expressed by the green part of the columns. The graph is from a recent presentation by Pöyry.

What is somewhat surprising about these assumptions by Kvika and Pöyry is the extremely low wind power investment expected in Iceland if an interconnector will not be developed. The fact is that Iceland has already harnessed the most economical options in geothermal power (and also in hydropower). The expected new geothermal projects will be quite costly.  According to a recent report published by Samorka (the Federation of the Icelandic electricity industry, district heating, waterworks and sewage utilities in Iceland), the levelized cost (LCOE) of many of the new geothermal projects expected until 2035 is believed to be close to 35-45 USD/MWh.

In addition, Kvika/Pöyry seem to have over-estimated how fast new geothermal power in Iceland can be developed. In fact Iceland does not have a very long history of extensive geothermal harnessing for electricity generation. The experience so far tells us that the geothermal areas are quite sensitive to over-exploitation. Thus, it seems possible if not very likely, that the true LCOE for new geothermal projects in Iceland may in fact normally be more expensive than Samorka claims. At least it is quite possible that to avoid over-exploitation, geothermal power development in Iceland may have to become substantially slower than expected by Kvika/Pöyry. Which would make more space for wind power development.

Iceland has very good wind conditions in numerous locations close to the grid; locations which offer wind capacity between 40-50%. This has been confirmed by the two positive research projects in Southern Iceland, developed by Landsvirkjun and Biokraft, as mentioned above. The project by Landsvirkjun consists of two 0.9 MW Enercon turbines, while Biokraft has relied on two somewhat smaller and older (used) Vestas turbines.

As the cost of wind power technology has been coming down, and is expected to become even lower in the coming years and decades, it seems likely that wind power will be developed in Iceland even without IceLink. One should also have in mind that Icelandic power companies are already buying generation from the first wind turbines in Iceland at a price equivalent to roughly 40-45 USD/MWh.

Due to the positive outcome of the two ongoing experimental wind projects, both Landsvirkjun and Biokraft are now planning the construction of first wind farms in Iceland. The combined capacity is expected to be close to 350 MW. In addition, a company called Arctic Hydro has introduced plans for a wind park of 20-30 MW.

We, at the Icelandic Energy Portal, will be informing our readers more on these projects as they develop (two of the projects are currently in the phase of EIA). At this stage we will leave you with the claim that wind farms located in high-capacity locations in Iceland are likely to offer as low cost as new geothermal plants and even lower. This means a LCOE between 35-40 USD/MWh.

Also, keep in mind that according to most recent report from Lazard, wind farms in Midwest USA offer as low LCOE as 32 USD/MWh. Having regard to Icelandic wind conditions, we should not be surprised if wind farms in Iceland may offer similar cost. And if so, wind power in Iceland is likely to develop a lot faster than predicted by Kvika/Pöyry.