Iceland’s new energy segment

If the IceLink HVDC subsea interconnector between Iceland and UK, will be developed, more than 2,000 new megawatts (MW) of power capacity is expected to be developed in Iceland in the coming two decades. All these capacity additions will all be in renewable power technology. Most of it will be in the traditional types of Icelandic electricity generation, which is hydro- and geothermal power. However, substantial amount of the new capacity will be in wind power, making wind power the fastest growing type of generation in Iceland.

Low-Cost Wind means Slower Growing Geothermal

It is hard to predict with precision how much capacity will be added to each of the three types of renewable generation mentioned above. The table below shows two predictions, one by Kvika/Pöyry and the other by Askja Energy Partners. According to Kvika/Pöyry, IceLink will need approximately 1,459 MW of new capacity, bringing total new capacity in Iceland to 2,137 MW by 2035.

Analysis of Askja Energy shows that Kvika/Pöyry may be over-estimating how fast new geothermal power can be developed in Iceland (and under-estimating the potentials of Icelandic wind power). We at Askja Energy, predict slower growth in new Icelandic geothermal power, and somewhat faster growth in wind power. In addition, it is very likely that new Icelandic hydropower can be developed somewhat faster than Kvika and Pöyry are forecasting in their central scenario.

Note that the Askja Energy scenario assumes faster capacity additions in hydropower and wind power than Kvika/Pöyry, but substantially slower geothermal capacity additions. The result is less generation pr. each new MW (thus, higher new capacity needed in total to deliver same/similar generation). All numbers are an estimation and may vary, such as due to what power projects exactly (in each category) will be developed.

Wind Power the Fastest Growing Segment

No matter if the forecast by Askja Energy or the forecast by Kvika/Pöyry will be closer to the real development, wind power can be expected to become Iceland’s fastest growing energy segment. If IceLink will be constructed, no type of generation in Iceland will grow as fast (in percentages) as wind power. As explained on the graph below.

The question that remains, is if and when the decision will be taken on IceLink. But even without IceLink, it is likely that new wind power will be developed in Iceland in the coming years, as numerous locations in Iceland offer very high capacity factor for wind turbines.