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Posts from the ‘Geothermal Power’ Category

Almost 1,000 MW of new large hydro- and geothermal power plants until 2035

If IceLink subsea HVDC power cable will be constructed, it is expected that totally 954 MW of new traditional large hydro- and geothermal plants will be needed in Iceland. These power plants would be constructed during the next two decades.

IceLink-Kvika-Poyry_New-Power-Stations_Askja-Energy-Partners-Twitter-_July-2016According to the Icelandic Master Plan for Nature Protection and Energy Utilization, the Icelandic government would most likely fulfill the increased demand by permitting the development of twelve new large hydro- and geothermal projects (as listed on the table at left). These are two hydropower projects and ten geothermal projects (or nine projects if Þeistareykir I and II would be defined as one project).

The ten geothermal projects are Þeistareykir I and Þeystareykir II in NE-Iceland, Bjarnarflag and Krafla II in NE-Iceland (Krafla I was constructed almost 40 years ago), Gráuhnúkar and Meitillinn in the Hengill geothermal area in SW-Iceland, Eldvörp and Stóra-Sandvík on the Reykjanes peninsula in SW-Iceland, and Sandfell and Sveifluháls in the Krýsuvík area in SW-Iceland. The two hydropower projects would be Blanda II in NE-Iceand and Hvammsvirkjun in Þjórsá in S-Iceland.

Eldvorp-Geothermal-Area-IcelandAll these twelve projects are already defined in utilization-category in the Master Plan for Nature Protection and Energy Utilization. However, some of these projects are somewhat costly to develop when compared to all possible energy projects in Iceland (which means there are several cheaper options available, although today they are not classified as utilization-projects, by either classified as protected or on hold).

Recently, the Icelandic Energy Industry Organization and some of the power companies in Iceland started pushing for changes of the Master Plan, to have the Icelandic government and the parliament (Alþingi) to include several other lower-cost projects in the utilization-category (we will soon explain the cost-issues further, here at the Independent Icelandic and Northern Energy Portal). As several of the cheapest options for harnessing more hydro- or geothermal power are in environmentally sensitive areas, there will without doubt be strong opposition against major changes of the Master Plan.

IceLink-Kvika-Poyry_Increase-in-Power-Generation_2015-2035_Askja-Energy-Partners-Table-Portal_July-2016If/when the IceLink project will go through, the total Icelandic power generation will have to increase enormously. Most of the new generation, or 7,400 GWh of the total increase of 12,800 GWh in annual production. would be added as exported power to the UK. In this same period (2015-2035) Icelandic general consumption of electricity is expected to increase by 1,700 GWh and power consumption by heavy industries in Iceland is expected to increase by 3,700 GWh. In total, Icelandic electricity generation would thus increase 68 percent in the period 2015-2035. For more on this subject, we refer to the table at left, and our earlier post from last July 22nd.

UK-Iceland power cable needs 1,459 MW of new capacity

A subsea HVDC power cable between Iceland and the United Kingdom (UK) would call for proportionally extreme increase in Iceland’s generation capacity. According to a new report by Kvika Bank and Pöyry, Iceland needs to build new power capacity of 2,137 MW to supply both the cable and the domestic demand. The figure for the necessary new capacity for the cable only is expected to be 1.459 MW (as shown on the table below). The rest of the new capacity is to meet expected increase in domestic demand for electricity (until 2035).

IceLink-Kvika-Poyry_New-Capacity_Askja-Energy-Partners-Twitter_July-2016The cable is normally referred to as IceLink. The report by Kvika and Pöyry (available in Icelandic only) claims that high proportion of the needed new capacity for IceLink can be met with wind power (today Iceland has very small wind power industry, as new geothermal- and hydropower projects have been the least costly way to generate electricity in Iceland). The authors of the report expect that 550 MW of new wind power would be constructed to meet demand by the cable.

The second largest increase in Icelandic power capacity would be in the form of hydropower refurbishments (which would probably mostly be new turbines in current hydropower stations). This figure is expected to be 448 MW. However, the report does not explain in a clear manner how these refurbishments would be carried out. From the report it is also somewhat unclear why it is believed that 550 MW of new wind power will be a good opportunity for the business case – instead of for example somewhat less wind power and somewhat more hydropower.

Iceland-Small-Hydro-Power-Bruarvirkjun-Project_9-MWSubstantial part of the expected new Icelandic capacity until 2035 would come from new small hydropower stations. Such new small hydropower stations, each with a capacity less than 10 MW, would in total be close to 150 MW. This would probably mean dozens of new small running-river hydropower projects in Iceland. Such projects tend to be more costly than the traditional large Icelandic hydropower projects. However, high strike price for the electricity make such expensive projects financially viable, according to the report.

According to the report, 276 MW of new traditional hydro- and geothermal power will be needed to meet demand from the cable. Most of this capacity will be in geothermal (245 MW).

IceLink-Kvika-Poyry_New-Capacity-and-Generation_Askja-Energy-Partners-Twitter-_July-2016-2When also taking increased domestic power demand into account, the total new traditional hydro- and geothermal capacity needed by 2035 is expected to be 954 MW; 124 MW in traditional large hydropower and 830 MW in traditional geothermal power. Today, Iceland has 665 MW of geothermal power (and 1,986 MW of hydropower). So the expected increase in utilization of Icelandic geothermal power is quite enormous. It should be noted that figures on traditional hydro- and geothermal power projects in the report are based on the Icelandic Master Plan for Nature Protection and Energy Utilization.

According to the report, considerable part of the new Icelandic power capacity to be developed is to meet expected increased demand from heavy industries in Iceland. Today, heavy industries in Iceland (which are mostly aluminum smelters) consume close to 80% of all electricity generated in the country. According to the report by Kvika Bank and Pöyry on IceLink, all the three aluminum smelters in Iceland will continue their operations in the coming years and decades. And the authors of the report expect that in the coming years and decades power demand of heavy industries in Iceland will increase. It is noteworthy that such assumptions could change dramatically, if for example one of the aluminum smelters in Iceland would close down.

Iceland-Geothermal-Theistareykir-areaFinally we should mention that if/when IceLink will be constructed, it is expected that the total increased power capacity in Iceland will be around 77% (increase from beginning of 2016). The increase in generation will be somewhat more or close to 68%. According to the above mentioned report, all the projects to meet this increase will be developed in the next 15-20 years. We will soon be revisiting this subject, explaining in more details what power projects will be needed to meet this high increase. Obviously such an increase will/would make Iceland’s position as the world’s largest electricity producer even more pronounced.

Cost of IceLink power cable: 2.8 billion EUR

According to a new report by Kvika Bank and Pöyry, prepared for the Icelandic Ministry of industries and Innovation, a subsea power cable between Iceland and the United Kingdom (UK) will cost EUR 2.8 billion (USD 3.1 billion).

HVDC-Icelink_Cost_Feb-2016-3This central cost scenario includes the 1,200 km long cable with a capacity of 1,000 MW, and the converter stations at both ends of the cable. When adding the onshore transmission installations needed in Iceland for connecting the cable to the power system, the total cost (central scenario) will be close to EUR 3.5 billion (USD 3.9 billion).

The report and additional material on the IceLink-interconnector can be downloaded from the Ministry’s website (the report is in Icelandic only). Note that all cost figures quoted in this article refer to the report’s central export scenario (there are several other scenarios, including a smaller cable of 800 MW).

To realize the project, it will be necessary for the British government to make a commitment of a minimum strike price of approximately 96-99 GBP/MWh (close to 130 USD/MWh).

HVDC-Icelink_strike-prices_Feb-2016-2Such a strike price would be quite similar to the strike price for new nuclear energy in the UK (as explained on the website of the UK government). And it would be substantially lower than recently agreed strike prices for new offshore wind power.

Now it has to be seen if the UK government wishes to pay GBP 115-120 for megawatt-hour of offshore wind power generated in British waters, or pay GBP 96-99 GBP for Icelandic renewable energy.

It should be noted that most of Iceland’s generation is and will be produced by hydropower and geothermal power (wind power in Iceland will increase but still be fairly small share of the total generation). This offers IceLink the possibility of much more flexibility than new British offshore wind power does. We, here at Askja Energy Partners, will soon be explaining further how the Icelandic power for IceLink will be generated.  Stay tuned!

Ireland and United Kingdom are best options for electricity exports from Iceland

It would be a positive step for Europe to become connected with Iceland by a subsea electric cable. Compared to other countries in Europe, Iceland has low electricity generation costs. In addition to the attractive electricity price, the Icelandic hydro- and geothermal resources offer very reliable and stable generation.

With this in mind, it is interesting that Iceland’s next door neighbours are electricity markets where the electricity prices are among the highest in Europe. Here we are referring to Ireland and the United Kingdom (UK). What is also important, is the fact that UK and Ireland are much closer to Iceland than for example Denmark, Holland (the Netherlands) or Germany. It is obvious that a subsea electric cable between Iceland and the European mainland would be substantially more expensive than to UK or to Ireland. There fore there are strong arguments for Iceland to consider Ireland or the UK as the best financially feasible options for such a connection.

UK is an excellent option and Ireland even better

UK-Ireland-Electricity-Prices-Industrial-2013_5-3-1

The two graphs (at left and below) show the electricity prices in 2013 in selected European countries, in USA and in Japan. The blue portion of the bars is the cost of electricity including transmission cost. The white bars show the price of the electricity when all the relevant taxes have been added (such as VAT and environmental taxes).

The first graph (chart 5.3.1) shows the electricity price to industries while the second graph (chart 5.5.1 below) is the price to households  (domestic prices), The average price of electricity (excluding tax) to industries in the UK in 2013 was close to 8 pence pr. kWh in 80 GBP/MWh. And the price to households in the UK in 2013 was close to 15 pence pr. kWh (150 GBP/MWh). In Ireland the prices were substantyally higher.

UK-Ireland-Electricity-Prices-domestic-households-2013_5-5-1

In 2013, wholesale electricity prices in the UK were close to 45% of the total price. Thus, the average wholesale electricity cost for industries in the UK in 2013 was close to 35 GBP/MWh, and for households the cost was close to 65 GBP/MWh. This means that the wholesale price of electricity to industries in the UK in 2013 was being close to equivalent of 55 USD/MWh. And the wholesale price to households was close to 100 USD/MWh.

According to Platts, the average wholesale electricity price in the UK in 2013 was close to 45 GBP/MWh, which is more than 70 USD/MWh. In Ireland the average wholesale electricity price in 2013 was higher or close to being equivalent to 80 USD/MWh.

UK-and-Ireland_-Electicity-Prices-Wholesale-2013

For comparison, in Iceland about 80% of all electricity produced is sold to aluminum smelters and other energy intensive industries, at a price close to 25 USD/MWh. If Iceland could sell electricity to UK, the revenues pr. every sold unit of electricity could be close to triple the current price in Iceland. Of course there would be a high transmission cost via subsea cable; probably close 35-40 USD/MWh. Still, the added profits would be substantial – if the electricity would be sold to UK or Ireland at 70-80 USD/MWh . At the same time, the UK or Ireland would get access to reliable renewable energy.

Will the UK be interested in Icelandic CfD’s?

UK-Decc-Energy-Policy-CfD-Strike-Prices-Cover_dec-2013At first glance, one might consider Ireland more interesting market for Icelandic electricity than the UK. It is indeed so that the price of electricity in Ireland would probably justify a submarine cable between Iceland and Ireland. However, the energy policy of the UK makes the UK more attractive for Icelandic electricity suppliers.

The energy policy of the British government involves ensuring new energy projects, by securing a minimum price for the electricity from new generating projects, in special contracts called Contracts for Difference; CfD’s. The minimum electricity price in such contracts (called strike price) is quite high. For electricity from geothermal and hydro power sources the strike prices are equivalent to 155-220 USD/MWh.

UK-Decc-Energy-Policy-CfD-Strike-Prices-Table_dec-2013It is also interesting that the strike price for electricity from new offshore wind farms is equivalent to 220-240 USD/MWh. It is likely that the UK could negotiate with Iceland for a strike price that would be substantially lower, thus saving Uk’s taxpayers money. What the exact price would be would be decided in negotiations between Iceland and the UK, but it could be somewhere between 155-240 USD/MWh. This option should be interesting to both Iceland and the United Kingdom.

Iceland and Ukraine to cooperate on energy issues

Ukraine-Geothermal-Map-2004The Government of Icelandic has offered Ukrainian authorities to identify opportunities in geothermal development in Ukraine as part of the diversification and integrate renewable energy sources in power generation in the country.

Earlier this summer (2014) the foreign ministers of Iceland, Mr. Gunnar Bragi Sveinsson, was in Kiev where he met a.o. the President of Ukraine, Mr. Petro Poroshenko. The Icelandic minister also met Mr. Vitaliy Hryhorovskyi, Assistant Director General (First Deputy Head) of the Ukrainian State Agency on Energy Efficiency and Energy Saving (SAE). At the meeting with Mr. Hryhorovskyi it was decided to begin preparations for cooperation between the countries in the field of geothermal utilization.

Iceland-Ukraine-Energy-Cooperation-2014Icelandic foreign minister stressed that there may be opportunites for the exploitation of geothermal energy in western Ukraine. Icelandic scientists and experts have very broad knowledge and experience regarding geothermal exploration and utilization, and may be able to assist Ukraine in geothermal development. The minister added that harnessing geothermal energy, as a pure and stable resource, can prove valuable to Ukraine’s inhabitants, especially for heating purposes.

Icelandic researchers transforming the geothermal industry?

“The worldwide market is moving towards double-digit growth,” said Karl Gawell, executive director of the Geothermal Energy Association (GEA) during the organization’s recent International Geothermal Showcase in Washington, DC. “There’s lots of exciting things going on. Several years ago there were projects in 24 countries, this year almost 700 projects are under development in 76 countries across the globe.”

Iceland_Geothermal_Deep_Drilling_ExplainedWhat is especially interesting in this context, is how researchers in Iceland have found a new way to transform the heat generated by volcanic magma into electricity. The advancement could be especially valuable in Iceland, that has capitalized to derive a quarter of its electricity production and around 90 per cent of household heating from geothermal energy.

The Icelandic know-how may be creating interesting possibilities for high-growth in utilization of geothermal resources worldwide. Currently, the main interest seems to be from the United States (USA). In the western USA, geothermal prospects are on the rise, especially in Nevada and California. California already has the largest geothermal field in the world, the Geysers, which contains 22 geothermal power plants amid 45-square miles in the Mayacamas Mountains north of San Francisco.

With greenhouse gases rising just as sharply as energy production, climate change is creating a similar global push for a paradigm shift to clean, sustainable sources in the electricity sector. In all this, geothermal has a powerful role to play. Unlike intermittent renewable power sources, such as wind and solar, geothermal can provide consistent energy 24-hours a day, making it an appealing baseload replacement for coal and nuclear power that are responsible for keeping the power supply stable and reliable.

Krafla-geothemal-power-stationWhile electricity-generating geothermal technology is advancing, the bulk of the time and cost expended goes to exploration and drilling for the resource. Recent advances in oil and gas drilling, which can translate over to geothermal sensing, exploration and drilling techniques, are helping to facilitate innovation in the area. And because geothermal energy is not intermittent like wind or solar power, which generate when the wind blows or sun shines, it can fill the role that has long been played by fossil fuels and serve as a baseload power source. That not only helps to lower emissions but provides needed stability to the electric grid.

Internationally, the geothermal industry is growing fast. The new GEA report (pdf) released at the recent GEA showcase found that there were almost 700 projects under development in dozens of countries across the globe. With the international power market booming, geothermal showed a sustained growth rate of around five per cent. And the best thing about this expansion of geothermal energy, is that it competes with other energy sources on a pure cost basis.

Upcoming silicon plant and new hydropower station

The National Power Company of Iceland, Landsvirkjun, will provide electricity to a new power a metallurgical grade silicon metal production plant being, built by German PCC Group. The plant is to be constructed in Bakki near Húsavík on Northeast Iceland.

PCC-Silicon-logoPCC Group is a privately owned industrial holding and participation company based in Duisburg in Germany. The group operates in 16 countries with a total workforce of around 2,800 employees. PCC’s silicon plant in Iceland will be a 32,000 ton facility and is scheduled to start operating in early 2017. It will require 58 MW of power, which will be derived entirely from the renewable energy sources of Icelandic hydro and geothermal power. The contract is subject to certain conditions set to be finalised later this year. These include the appropriate licensing and permit requirements, financing for the project, as well as the approval of the Boards of both parties.

The Icelandic Landsvirkjun is one of Europe’s leading renewable energy companies. Landsvirkjun is Iceland’s largest generator of electricity, currently operating 16 renewable hydro- and geothermal power stations, producing approximately 75% of all electricity in Iceland. The company has for over 45 years generated renewable electricity from hydro, geothermal and onshore wind power sources.

Budarhals-Landsvirkjun-Hydropower-Iceland-WinterRecently, Landsvirkjun was also starting up its newest hydropower station in Iceland. This is the Búðarháls Hydropower Station, and the official start-up ceremony was on March 7th (2014). The Búðarháls Station is Landsvirkjun’s 16th power station and the seventh largest power station owned and operated by Landsvirkjun. This new station utilises the 40 metre head in the Tungnaá River from the tail water of the Hrauneyjafoss Hydropower Station to the Sultartangi Reservoir. The installed capacity of the Búðarháls Hydropower Station is 95 MW and it will generate approximately 585 GWh of electricity per year for the national grid. Most of the electricity added by Búðarháls has already been purchased by long term agreement with Rio Tinto Alcan’s smelter in Straumsvík in Southwestern Iceland.

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.

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.

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.