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Posts by Askja Energy

Nov 11

Iceland offers unique renewable opportunities

Iceland and Norway are the world’s largest electricity producers (per capita). The reason for this huge electricity production is simple. Compared to the low population, both countries are rich in natural renewable resources that offer good opportunities to produce green electricity at a very competitive price.

Iceland-Renewable-Opportunities-10

Well-Known Business Concept

Like Norway, Iceland has extensive renewable hydropower. Iceland’s geothermal sources are also harnessed for electricity production. In addition, the windy conditions in Iceland may offer interesting possibilities to generate electricity at substantially lower costs than at wind-farms in other European countries.

Norway has numerous electric cable connections with other countries and is a net-exporter of electricity. An important part of the business concept of the cable connections is to be able to use the flexibility of the hydropower to maximize revenues. The Norwegian power companies have the possibility to  “save” the hydropower in the dams during night (when electricity prices tend to be low) and produce electricity at full capacity when prices are high (normally during the day).

This not only maximizes the revenues of the Norwegian hydropower firms, but also opens up the possibility for European power companies to export electricity to Norway during the night. Such exports are especially interesting for European power plants that have high fixed cost and low flexible cost, like wind farms (and nuclear power stations that are operated at a stable capacity).

Iceland-Renewable-Opportunities-12

Win-Win Situation

Iceland has no electrical cable connection with markets outside of Iceland. The country is a closed electric system, but with abundant hydro- and geothermal sources. Thus, heavy industries like aluminum smelters, have been able to access very low priced electricity in Iceland. If Iceland would be connected to a European electricity market, by an electric cable, this would offer European markets access to new sources of reliable renewable energy. At the same time the cable (sometimes referred to as the IceLink) would offer Iceland access to  a market willing to pay substantially higher price for the electricity than the heavy industries are. Thus, an electric cable between Iceland and Europe would create a win-win situation.

Actually, the heavy industries in Iceland would not necessarily close down if there came an electric cable between Iceland and Europe. First of all they have long-term energy contracts (up to 40 years). Secondly, there are numerous unharnessed hydro- and geothermal power options in Iceland. An electric cable to Europe would be like adding a new large consumer that is willing to pay higher price but can only receive a fixed amount of electricity (the capacity of IceLink would possibly be close to 1,000 MW).

Iceland-Renewable-Opportunities-13

The IceLink would mean that new hydro- and geothermal power stations in Iceland would be more profitable than they would be today (by selling the electricity to heavy industries). At the same time the green Icelandic electricity could be offered in Europe at prices that are very competitive. Even despite the long transmission, the Icelandic green  electricity could be a better choice (economically) for the European markets than offshore wind, biomass, coal and/or nuclear. In a nutshell, Iceland is in the position to be the best economic option for other European countries to access more renewable energy.

The illustrations above are from a presentation by Mr. Hörður Arnarson, CEO of Landsvirkjun, presented at the Iceland Energy Summit in London on November 1, 2013.

Nov 4

Successful energy summit in London

The Iceland Energy Summit was held in London on November 1, 2013. The event was organized by the British-Icelandic Chamber of Commerce (BICC) and hosted by Bloomberg.

Iceland-UK-BICC-meeting-Nov-2013-CHThe event provided insight into Iceland’s renewable energy resources, the birth and growth of the data storage industry in the country, as well as the search for offshore oil on the Icelandic continental shelf. Strong focus was on a plan for an undersea power cable to connect the British and Icelandic grids. This plan or proposal is attracting strong investor interest, according to Mr. Charles Hendry, the former Energy Minister of the United Kingdom and current Member of Parliament.

Mr. Hendry, who promoted the project, said that there’s “no doubt that in Britain the political will is there, so if there is a political will in Iceland, we want to work together”. According to Mr. Hendry the project offers low-risk, predictable returns attractive to institutional investors including pension funds. The UK is preparing to change policies needed for the cable, Mr. Hendry said.

In May last year (2012), Mr. Hendry helped spur an agreement between Iceland and the UK to explore proposals regarding the cable (sometimes referred to as the IceLink). The cost of the link is still not clear, but if it will go ahead it could probably be completed within 7-10 years.. It would extend more than 1,000 kilometers,  thus be longer than any of the subsea electrical cables currently in operation.

Iceland-UK-BICC-meeting-Nov-2013-Landsvrkjun-Hordur-Arnarson-slide-7Electric cables like that already connect the grids of Norway and Britain to the Netherlands. The Dutch grid operator (TenneT) is planning links between Germany and Norway and the Netherlands and Denmark. There are already connections of this type between Britain and France, between Vancouver island and Canada, between Sardinia and Italy, and between Tasmania and Australia, to name a few well known examples .

According to Bloomberg, Mr. Andrew Perkins, a partner in energy and environmental finance at Ernst & Young, stresses that these assets are attractive to financiers, suggesting that the capital costs to build the IceLink should be financed by the private sector. As close to 100 percent of all electricity generated in Iceland comes from natural renewable sources, and several promising renewable energy options are still unharnessed, the IceLink offers great opportunity for the UK to access substantial green power at a very competitive cost.

Here, at the Icelandic Energy Portal, we will soon be covering the Energy Summit in more details. Note that the slides (and videos) from the event can be downloaded from the website of the BICC.

Oct 28

Icelandic Energy Summit, London, November 1st 2013

The British Icelandic Chamber of Commerce is introducing the Icelandic Energy Summit, hosted by Bloomberg, in London on Friday, 1 November 2013.

Iceland-Europe-mapAccording to the website of the British Icelandic Chamber of Commerce the event “will provide participants an insight into Iceland´s renewable energy resources, the birth and growth of the data storage industry in the country, the search for offshore oil – and what all this means for the country and its neighbours. The BICC is proud to have assembled some of the most dynamic voices in the developing story of Iceland and its energy potential.” The event, which is free, is said to be of interest “to finance professionals who conduct business with Iceland, or would like to, renewable energy specialists, academics and all those who take an interest in the future development of the Arctic. Feel free to pass on this invitation to colleagues, but  we expect this event to be well attended.”

The Agenda is as following:

10:30 Registration & Coffee
11:00 Welcome
William Symington, BICC
Keynote speech
Olafur Ragnar Grimsson, President of Iceland
11:45 UK-Iceland Interconnector
Charles Hendry, MP
Hörður Arnason, CEO Landsvirkjun
Paul Johnson, National Grid
Mike Lawn, Bloomberg New Energy Finance
13:00 Buffet Lunch
13:45 Data Centres in Iceland
Verne Global – Isaac Kato, CFO
Risk Management Solutions Inc, Robert Muir-Woood, Chief Research Officer
14:45 Geothermal
Sigurður St Arnalds, Senior Energy Advisor, Mannvit
Mark Taylor, Bloomberg New Energy Finance
15:45 Icelandic Oil exploration and the development of Arctic Resources
Michael Evans, Chief Operating Officer, Iceland Petroleum
Heiðar Guðjónsson, author “The Push for the Arctic”
16:30 Closing & Drinks

Here is a link to the registration.

Oct 28

Premature story in the Guardian

Yesterday, the Guardian published a story about Iceland seeking UK funding for subsea cable project. This is a somewhat premature statement by the Guardian. It is certainly true that the possibility of an electric cable between Iceland and the UK is being considered. However, no formal decision on such a project has been taken yet.

UK-Electric-Subsea-Cables-Map

The Guardian correctly states that such a project could possibly deliver 5 TWh’s of green electrity a year to Britain. And the price of the electricity could be very competitive (lower than from British offshore wind farms). It is also correct that all the electricity from Iceland would be generated by harnessing renewable natural sources (especially hydropower, but also geothermal and wind).

The project would most likely strongly appeal to the UK. The Guardian correctly points out that the highly reliable potential energy in Iceland’s hydro dams can be seen as neatly dovetailing with Britain’s expanding, but unpredictable, wind power generation:

“As wind has become an increasing component of UK electricity generation, those tasked with matching UK supply with demand are increasingly facing a difficulty when usage spikes at times of when wind speeds drop. Few sources of generation, other than hydropower, can be brought on-stream at short notice to cover for lulls in wind.”

According to the Guardian, Iceland’s president Mr. Ólafur Ragnar Grímsson is expected this week to call on the British government to provide financial support for the construction of the subsea electricity cable – which will be the longest in the world – linking the electricity grid’s of Iceland and the UK.  Actually, it is more likely that the president will urge the British government to further cooperate with Iceland in necessary research and development that will be necessary if the cable is to be realized.

HVDC-Cable-Iceland-Europe-map-slideAs mentioned in the Guardian’s article, the governments of Iceland and the UK have already stared exploring proposals for a cable, after a ministerial meeting in May last year (2012). It would be a sensible step to strengthen the cooperation between the two countries in preparing to link the countries with an electric cable. Hopefully, the necessary cost analysis and research on for example the sea-bed can take place soon. When this will be finished, the financing of the cable may become a relevant issue.

NB: The Guardian says that the length of the cable would be 10,000 km. This is of course wrong; an electric cable between Iceland and the UK would be close to 1,200 km (somewhere between 1,000 and 1,500 km). The Guardian also says that the electricity industry in Iceland produces 12 GWh of electricity annually. The correct number is of course much higher or close to 17.2 TWh (17,200 GWh). Hopefully, the Guardian will correct their numbers. More information about the Icelandic power sector can be found here.

Oct 14

Exciting times in the Arctic

Iceland has issued two licenses for oil exploration on its continental shelf and is finalizing a third license. This may lead to massive investment, with relevant projects in Iceland regarding infrastructure and services necessary for the oil industry.

Arctic-Sea-Route-Map

Melting ice is not only making the Arctic more accessible to oil exploration and drilling, but also to shipping through the Arctic Seas. Due to less ice, the Arctic Seas may soon become more navigable in increasingly long periods of the year. This may both apply to the Northeast Passage (off the northern coast of Russia and Norway; sometimes called the Northern Sea Route) and the Middle Passage (straight over the North Pole; sometimes called the Arctic Passage). The third arctic route is the Northwest Passage (north of Canada).

Navigable shipping routes through the Arctic  would be an attractive option for shipping companies, saving them weeks off voyages between Europe and Asia. For example, the Northeast Passage reduces the route from China to Northwestern Europe from approx. 11,000 nautical miles to just 6,500 nautical miles.

Icelandic companies and governmental agencies are closely following the possible increase in arctic shipping. And thinning ice has lead to high interest from foreign countries and companies regarding the construction of transshipment port at the Icelandic coast. This is no surprise, having in mind that the possibility of using the Northeast Passage as a viable alternative to the more and much longer conventional routes (such as through the Suez Canal).

Arctic-Northern-Sea-Route-Northeast-Passage-MapAlthough the Northeast Passage is faced with many obstacles (natural, political and technological) and will probably only be a minor seasonal route for years to come, this is an interesting and a real opportunity. Within a few decades the Northeast Passage may become not only an important sea-route, but even a major year-round transit operation. Wether Icelandic harbors will be an important part of this development is to early to say.

Oct 7

1 GW Iceland-UK electric subsea cable may be close

The governments of United Kingdom (UK) and Iceland may both be interested in a subsea electric connection between the countries.

HVDC-Cable-Iceland-Europe-map-slide

The main purpose of the cable would be to bring electricity from Iceland’s renewable sources to the UK. The UK has ambitious plans to substantially increase renewable energy in UK’s energy mix. According to legally binding goals, set by the member states of the European Union (EU), the UK needs to dramatically increase production and imports of renewable energy. Iceland could become an important player in that green transformation.

Renewable electricity could be provided by Iceland to the UK even at a cheaper cost than offshore wind. In addition the Icelandic hydro- an geothermal power is a very reliable power source. The plans being discussed concern a 1,100-1,200 km subsea cable with a capacity of 1GW. The package might be worth an estimated GBP 4 billion, with the inclusion of related generation and onshore transmission investments and could be operational by within a decade.

bjorgvin-sigurdsson-landsvirkjunMr. Bjorgvin Sigurdsson, executive vice president of Iceland’s main power company (Landsvirkjun), has expressed that the company is now looking at this much more seriously than ever before.  “The technology seems to be there to make it work… the issue is whether this makes sense economically.”

At present, Iceland benefits from some of the most competitive electricity prices in Europe. All the electricity in Iceland comes from renewable hydro- and geothermal sources, which offer the possibility of a very low cost generation. The director general of the National Energy Authority of Iceland (NEA), Mr. Guðni Jóhannesson, has said that the interconnector could provide power to the UK at around 60 to 70 percent of the price of offshore wind.

hvdc-cable-nornedAs Iceland still has numerous options of unharnessed hydro- and geothermal energy, an electrical cable might create a win-win situation for Iceland and the UK. The idea of exporting energy from Iceland to the UK is not a new one, as it was first mentioned decades ago. However, it is not until recently that technological advancement and rising electricity prices in Europe made the idea feasible.

Sep 30

Iceland and Ethiopia in geothermal cooperation

The Icelandic International Development Agency (ICEIDA) and the Ethiopian Government have signed a Partnership Agreement for geothermal surface exploration and capacity building for geothermal development in Ethiopia.

Iceida-logoThe Ethiopian government is currently implementing a strategy to develop its renewable energy resources, including geothermal side by side with hydro, in order to increase energy production. The cooperation between iceland and Ethiopia is the second project initiated under an agreement on geothermal energy between Iceland and the World Bank (the first agreement of this kind is already under way in Rwanda). The immediate objective of the project is to identify potential sites for exploration drilling in the target areas and develop capacity in Ethiopia to advance geothermal energy production in the country.

The overall objective is to assist the Government to increase renewable energy production through low emission geothermal energy development for social and economic benefit. ICEIDA will assist the implementing agencies with finalizing geothermal surface explorations and associated geophysical and geochemical studies to identify locations for drilling of exploration and production wells in target sites.

Ethiopea-Dallol-GeothermalEthiopia is considered to have geothermal potential up to 5,000 MW. The Ethiopian Government has now decided to prioritize geothermal development as a key area in energy development. The geothermal surface exploration activities in Ethiopia will focus on the areas of Tendaho Alalobeda and Aluto Langano, both considered to have great potential for energy production. A capacity building project for geothermal exploration will also be initiated in the area of Gedemsa. The implementing agencies in Ethiopia are the Geological Survey of Ethiopia and the Ethiopian Electric Power Corporation.

Sep 23

Positive attitudes towards wind energy

According to a survey recently conducted by Capacent Gallup, the overwhelming majority of the Icelandic public is in favour of utilizing wind energy in Iceland.

Wind-Power-IcelandUntil now almost 100 percent of all electricity in Iceland is been generated by hydro- and geothermal power plants. However, Iceland recently took the first steps towards harnessing its wind resources for electricity generation. The operation of two research wind turbines, which were constructed in December 2012 in South Iceland, has so far been successful and has highlighted the potential for energy generation, via wind energy, in Iceland.

Positive Attitudes in Iceland

According to a new survey conducted by Capacent Gallup, the overwhelming majority of the Icelandic public is in favour of raising a wind farm in Iceland (around 81% of respondents were positive). Support is overwhelming with over half of the respondents stating that they were either very supportive or completely supportive of the idea. Only 7% were against the idea.

Now the Icelandic national power company Landsvirkjun intends to continue its research and has hopes that wind energy could become the third pillar in Landsvirkjun’s operations. The next step includes the assessment of the Hafið area and neighbouring areas to ascertain the feasibility of a wind farm. The generation capacity of the area must also be assessed and differing proposals for wind farms put forward. Considerations would include social and environmental implications and the feasibility of such a development and its operation.

Wind Energy As the Third Pillar

Hydropower and geothermal power will continue to be the two main pillars of electricity generation in Iceland, offering very stable production. However, wind energy is an interesting third option for Landsvirkjun as it offers the possibility of utilising the flexibility of hydropower to balance the fluctuations that accompany wind power. 

Landsvirkjun-Wind-Power-Station-erected-1The possibility of raising a wind farm in Iceland has not been analysed before with any precision and requires pioneering work including an environmental impact report, an assessment of the need for organisational changes, an assessment of the value of a wind farm for the electricity system as a whole and the opportunities afforded by the interaction of hydro and wind power. The goal of the project is to ensure that Landsvirkjun is able to rely on detailed analyses and data with regard to decisions on the development of wind power as the third pillar in the electricity system

The project is twofold; consultancy services for the project design and consultancy services for an environmental impact assessment. The Icelandic engineering company Mannvit will provide consultancy services pertaining to the environmental impact assessment. Mannvit is working in cooperation with the Norwegian consultancy agency Ramböll Ltd. and Icelandic firm Landslag Ltd. The project design is under the auspices of another Icelandic engineering company (Efla) which is in cooperation with the Swedish consultancy agency Pöyry SwedPower Ltd. and the Belging institute for meteorology.  The project will be executed between 2013 and 2015.

Lower Costs are Creating International Trend

The evolution of wind energy has been rapid worldwide and extraordinary progress has been made within a relatively short period of time. At the end of 2012, over 3% of the world’s electricity supply was sourced from wind energy. At the same time, financing and operational costs have decreased significantly and this trend promises to continue. The World Wind Energy association (WWEA) predicted that the installed capacity of wind turbines would double worldwide before the end of 2016 and that installed wind capacity could reach one million MW, matching the installed capacity of hydropower today.

World-Wind-Installed-capacity-region_2004-2012

Conditions in Iceland are unusually favourable for the utilisation of wind energy. Wind research shows high levels of wind power at a relatively low height above sea level. This increases the feasibility of utilising wind energy as the masts could be lower than usual, which would in turn lower costs. Construction takes a short period of time and wind farms can be built in phases (according to need and market demand). The environmental impact of wind turbines is relatively low and completely reversible. The visual impact is a reality and the choice of location is therefore an important consideration. Wind velocity is at its highest during the winter period when there is a decrease in flow to the Landsvirkjun’s reservoirs; the possible synergy of wind and hydropower is therefore high. More information about the project can be seen on the website of Landsvirkjun.

Aug 12

Significant milestone reached on HVDC cable

Connecting with another electricity market in Europe could provide Iceland with a unique opportunity to maximise the return from the country’s natural resources:

  • Surplus energy already within the system and presently unutilised by industry could be sold.
  • Further energy generation methods could be introduced.
  • The flexibility of hydropower could be better utilized.
  • Risk distribution could be increased.
  • Iceland’s energy supply security could be increased by opening up the presently isolated system.
  • A number of new and exciting employment opportunities could become a reality and the value created by such a project could be significant.

Iceland-Europe-HVDC-cable-map-LandsvirkjunEarlier this summer an advisory group on a subsea HVDC electricity cable between Iceland and Europe handed over its recommendations to the Icelandic Minister of Industries and Innovation. The report shows that there are indications that such a HVDC cable between Iceland and the United Kingdom could prove macro-economically profitable if certain conditions were to be fulfilled; i.e. if negotiations with the counterparties should prove successful, procuring favourable energy prices and secure long term contracts.

The recommendations of the advisory group are a significant milestone in assessing the feasibility of connecting Iceland with the European electricity market. The advisory group was unanimous in its opinion that work should continue on mapping out the various aspects of the project domestically whilst concurrently seeking out answers on potential operational and ownership models from the counterparties in the UK.

The risk of domestic electricity prices multiplying, with a connection with European markets, seems to be minimal. The Norwegians have set a successful precedent for achieving the consensus of stakeholders whilst utilising the opportunity to sell electricity to the European market. This has been done without threatening the existence of industry within Norway.

Iceland-Landsvirkjun-Sigalda-HydroThe Minister of Industries and Innovation will assess the recommendations of the advisory group and come to a decision as to the next step. It is estimated that the preliminary findings will be released by the end of this year (2013). This will include a decision on if and when expensive and extensive detailed research on the project will begin.

Aug 6

Canadian Methanex invests in Iceland

The Vancouver-based Methanex has announced an initial USD 5 million investment in Icelandic Carbon Recycling International (CRI), a privately held company with headquarters in Reykjavik, Iceland. Methanex becomes one of the key shareholders of CRI, with Board representation.

Methanex-CRI-investment-2013In Iceland, CRI operates the world’s first renewable methanol plant, which utilizes CRI’s emissions-to- liquids (ETL) technology, utilizing renewable energy to convert carbon dioxide emissions to methanol. CRI markets this product in Europe as renewable methanol, under the registered brand name Vulcanol. The Vulcanol can be blended with gasoline and can also be used for production of biodiesel. Vulcanol is certified by the International Sustainability and Carbon Certification system (ISCC) as an ultra-low carbon advanced renewable transport fuel with no biogenic footprint.

According to press announcements, Methanex and CRI intend to collaborate on large scale projects based on CRI’s ETL technology by leveraging Methanex’s operational experience and global reach and CRI’s unique expertise in the production of ultra-low carbon renewable methanol. The companies say they are targeting to expand the use of methanol blended fuels in Europe.

Methanex-logoMethanex is the world’s largest supplier of methanol to major international markets. It is a publicly traded company; Methanex shares are listed for trading on the Toronto Stock Exchange in Canada under the trading symbol “MX” and on the Nasdaq Global Market in the USA under the trading symbol “MEOH“.

Mr. John Floren, President and CEO of Methanex, says that the fastest growing markets for methanol are in the energy sector and that Methanex believes renewable methanol will play an important role in future applications. Mr. Floren has also pointed out that the team at CRI has demonstrated the ability to develop this technology, operate a production plant and successfully market renewable methanol, which further reinforces the value of this investment by Methanex.

The investment of Methanex in CRI shows that the Icelandic energy- and technology sectors are becoming increasingly interesting for foreign investors. Currently, several other foreign companies are considering investments in for example oil exploration on the Icelandic continental shelf and in silicon production in Northeast Iceland.

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