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Study on energy security in Iceland

The universities IIT Comillas in Madrid and MIT in Boston have completed a research project on the mechanisms of the Icelandic electricity sector. The project was managed by Mr. Ignacio J. Perez-Arriaga, pro­fess­or at MIT.

The project was twofold. Firstly, the current electricity market regime was examined and suggestions made for improvement. Secondly, a simulation of future operation of the power system was conducted, in which a number of scenarios were evaluated in terms of cost and energy security.

Although it was concluded that the operation of the Icelandic transmission system is in many aspects very good, there are certain things that need to be taken into consideration (as explained in Icelandic on the website of the national power company Landsvirkjun):

  1. There is a lack of clear legislation on acceptable norms in terms of energy security. Also, the legislation needs to be clearer on which agency/department is responsible for how to achieve such criteria for energy security, and what tools the responsible party should have to ensure the criteria can be achieved.
  2. Public energy security is not sufficiently guaranteed by the existing power trading system. In their report, the researchers propose how to improve this situation.
  3. Further delays in strengthening the Icelandic transmission system will make energy security in Iceland unsafe. Thera are bottlenecks in the system between regions. Those bottlenecks may contribute to a local energy shortage. The south-west corner of Iceland is at the greatest risk for such shortages. There are different ways to strengthen the transmission and each of them has its advantages and disadvantages.
  4. Wind power is likely to be a competitive alternative to hydropower and geothermal energy, in order to ensure sufficient supply. Opportunities may also be found in negotiating increased flexibility in delivering power to energy intensive industries.
  5. A submarine power cable between Iceland and Europe would better ensure the energy security in Iceland. To make such a project economical, financial assistance would be needed from outside Iceland [for example in the form of similar framework as the British Contracts for Difference; CfD].

This project by IIT Comillas /MIT was funded by the Icelandic National Energy Authority (NEA), the Icelandic TSO Landsnet, and the national power company Landsvirkjun. Presentations from the project can be found on the website of the NEA.

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Prof. Pérez-Arriaga, who was head of this research project on energy security in Iceland, has been a consultant for governmental agencies or electric utilities in more than 30 countries. Prof. Pérez-Arriaga is a member of the Spanish National Academy of Engineering and a Life Fellow of the IEEE. He has published more than 200 papers, been principal investigator in more than 75 research projects and supervised more than 30 doctoral theses on the aforementioned topics. He is a permanent visiting professor at MIT (2008-present) in the Center for Energy and Environmental Policy Research (CEEPR), where he teaches a graduate course on power system regulation, engineering and economics. He was a review editor of the 5th Assessment Report of the Intergovernmental Panel on Climate Change (IPCC).

It should be noted that in October 2015, Mr. Pérez-Arriaga gave a lecture on “the challenge of Energy Security Supply in Iceland”, at the Reykjavík University Arctic Workshop. In his presentation Mr. Pérez-Arriaga referred numerous times to graphs and data from the Icelandic and Northern Energy Portal / Askja Energy Partners, which of course is the main source on Icelandic energy issues. Video recording of the lecture can be seen on Livestream (the presentation starts at 19m:30s, right after an introduction by the President of Iceland).