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Posts from the ‘Silicon Industry’ Category

Þeistareykir geothermal station in operation

Iceland’s newest power plant is the 45 MW Þeistareykjavirkjun in Northeast Iceland. The owner and operator of the plant is the Icelandic national power company Landsvirkjun.

The silicon-metal plant of PCC.

The construction of this first phase of the power plant started in the spring of 2015. Most of the generation will be transmitted to a silicon metal plant of PCC. The PCC silicon plant will utilize a total of 52 MW in the start. According to the power contract with Landsvirkjun, PCC will gradually increase its power demand up to 58 MW. Annual energy delivery is expected to start at 456 GWh and then gradually increase to 508 GWh per annum within the next 4 years (article 3 of the power contract).

As the 45 MW phase of the Þeistareykir plant will only generate 360-370 GWh annually, Landsvirkjun must also deliver power from other power plants to PCC. However, Landsvirkjun is already constructing next phase of Þeistareykir, adding another 45 MW. This second phase of the geothermal plant is scheduled to become operational in next April (2018), making the total capacity 90 MW. At this stage, the additional capacity can only be utilised by power consumers in the Northeastern part of Iceland, as the national transmission grid has several bottlenecks.

Þeistareykir geothermal plant.

This most recent geothermal project is believed to be the most economical of all the upcoming geothermal power projects in Iceland. According to information from Landsvirkjun, the cost of this first 45 MW phase is close to USD 200 millions, which accounts for approximately USD 4.5 millions pr. MW. With a second phase, the total cost for the 90 MW plant is expected to be close to USD 330 millions. Then the cost of each MW will be close to USD 3.7 millions.

Power revenues from smelters declined in 2016

The average price of aluminum in 2016 was lower than the previous year (2015), resulting in lower average revenues per sold MWh for the Icelandic power firms selling electricity to the aluminum industry. In this article we present updated information on the power tariffs paid by each of the three aluminum smelters located in Iceland. Note that readers should presume a confidence interval (uncertainty limits) of 5% regarding all the tariffs presented.

One of the three smelters, the ISAL / Rio Tinto Alcan (RTA) in Straumsvík, pays a fixed base-tariff which is linked to the US Consumer Price Index (CPI). The RTA smelter in Straumsvík (green column on the graph below) receives all its electricity from the national power company Landsvirkjun. The power contract of RTA and Landsvirkjun is from 2010, with additions in 2014. Before the new agreement in 2010, the RTA-smelter at Sraumsvík was paying very low tariff, which was linked to the price of aluminum. The power contract from 2010 was extremely important for Landsvirkjun, having very positive effects on its revenues and return. This contract reflects a start of Landsvirkjun’s new pricing policy, moving away from the risky price-connection with aluminum.

electricity-price-tariffs-to-aluminum-smelters-in-iceland_2007-2016_draft-feb-2017The other two smelters in Iceland – the Norðurál smelter of Century Aluminum at Grundartangi (red on the graph) and the Fjarðaál smelter of Alcoa at Reyðarfjörður (black on the graph) – have power contracts based on the old pricing-model. Both of these two smelters have contracts with Landsvirkjun, where the power tariffs are linked to the price of aluminum at the London Metal Exchange (LME). Thus, the power tariffs of Norðurál (Century) and Fjarðaál (Alcoa) fluctuate with the price of aluminum, As the price of aluminum has been low during the last few years, the power tariffs of Norðurál and Fjarðaál have also been on the downside, as can clearly be seen on the graph at left.

Landsvirkjun’s power contract with Fjarðaál (Alcoa) is the original contract signed in 2003. The current contract Landsvirkjun has with Norðurál (Century) is a re-negotiated contract from 1999 (original contract was from 1997). As we explained in a recent article, Landsvirkjun and Norðurál have reached an agreement on new power tariff for the period 2019-2023. The new tariff will be aligned to the Elspot tariff on the Nordic power market (Nord Pool Spot; NPS), replacing the current price-link with aluminium price.

This new contract with Norðurál was concluded in 2016 and becomes effective in 2019. The contract is likely to be an important step in bringing the Icelandic power market more in line with the power market in the other Nordic countries. The next step in this development is likely to be a new contract Landsvirkjun is currently negotiating with the Chinese owned Elkem, which owns and operates a ferro-silicon plant in Southwestern Iceland. The current power contract with Elkem, where the tariff is based on price development of ferro-silicon and the exchange rate of the Norwegian krona (NOK), runs out in 2019. In recent years, the power price for the Elkem-plant in Iceland has been extremely low (lower than the power price paid by the Norðurál smelter). Probably Landsvirkjun wants a major change in the pricing methodology, developing the tariff to Elkem towards the Nordic market spot pricing model.

century-aluminum_nordural-smelter-grundartangi-icelandFinally, note that the graph above only includes power contracts the aluminum smelters have with Landsvirkjun. Two other Icelandic power firms also generate and sell electricity to the aluminum industry in Iceland. These two firms are HS Orka and Orka náttúrunnar (Orka náttúrunnar is normally referred to as ON or Reykjavík Energy). ON is in public ownership, while HS Orka is privately owned. Both companies – ON and HS Orka – mostly rely on harnessing geothermal energy for their power generation. And both have long-term power contracts with the Norðurál smelter, where the tariff is linked to aluminum price on LME. The average power tariff in these contracts is slightly higher than the tariff in Norðurál’s contract with Landsvirkjun from 1997/1999  (the red column on the graph above). The Icelandic Energy Portal will soon be introducing more information about the power tariffs in the contracts Norðurál has with ON and HS Orka.

The most surprising energy fact?

Here at the Icelandic Energy Portal, we are very proud of the fact that power consumption in Iceland is almost totally based on renewable power sources. And when we look at gross energy consumption, Iceland is also the green leader.

iceland-coal-consumption-2015_askja-energy-partners-2017Therefore, it may be a surprising fact that Iceland is fast increasing its coal consumption. In fact the country is becoming a major user of coal (per capita).

According to information from the International Energy Agency (IEA), coal consumption in Iceland (per capita) is now almost on pair with the coal consumption in the United Kingdom (UK). As can be seen on the graph at left.

In the coming years, it is expected that coal consumption (per capita) in Iceland will grow quite fast. And soon become close to the present world average coal consumption (per capita).

Iceland has no coal power station. The reason for the growing use of coal in Iceland, is the heavy industries located in the country. They import and use the coal in their industrial process.

united-silicon-plant_helguvik-icelandIceland has a major aluminum industry and the aluminum smelters need carbon materials for the production. Also, Iceland has a fast growing silicon industry, which also uses coal in their production. These are the reasons why Iceland is becoming such a substantial coal consumer.

The growing use of coal in Iceland in the coming years, is all related to new and upcoming silicon plants. These industrial plants are the main reason why Iceland is scoring much higher on the list of coal consuming countries, than people in general may assume.