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Posts from the ‘Transmission and Utilities’ Category

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.


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).

Positive Interest in IceLink

The British-Icelandic Chamber of Commerce recently organized a seminar titled Interconnecting Interests – Examining the Issues Surrounding a Potential Submarine Cable that Might Supply the UK and Europe with Icelandic Green Energy. The event was held at the Hilton Reykjavik Nordica, with speakers from the energy industry, government and the environmental lobby, discussing the opportunities and difficulties of electricity interconnection.

Deep knowledge and experience

This seminar was an excellent opportunity for people to hear the views of specialists with extensive knowledge and experience on the subject. From their presentations it seems quite clear that there is a strong willingness on both the British and Icelandic side to consider the project very seriously.


It was the Icelandic Minister of Finance, Mr. Bjarni Benediktsson, who opened the seminar. He was followed by presentations by Mr. Charles Hendry, former Minister of State for the UK Department of Energy and Climate Change (DECC), Mr. Douglas Parr, Chief Scientist and Policy Director of Greenpeace UK, Ms. Charlotte Ramsay, Head of Commercial Regulation and New Business at UK National Grid, and Mr. Edward M. Stern, President and CEO of Power Bridge. Mr. Hörður Arnarson, CEO of Icelandic power company Landsvirkjun, took part in the Panel after the presentations.

Probable electricity price in the range of 80-140 USD/MWh

In their presentations and discussions, speakers at the seminar discussed the matter in general terms rather than for example specifying detailed cost or revenue numbers. However, it can be argued that the power price for electricity sold from Iceland to the UK can be expected to be in the range of 80-140 USD/MWh.

Statnett-Norway-Denmark-Viking-ConnectorThese figures are the wholesale price for the electricity; the transmission cost is not included. At this stage it is not possible to give a precise number for the transmission cost via the subsea cable, but according to a recent report by McKinsey it could be close to 30-40 USD/MWh. This would mean that the total cost for the green electricity from Iceland could be between 120-180 USD/MWh.

Having in mind recent Contracts for Difference (CfD), where new British offshore wind power projects have received commitments for power price in the range of 180-240 USD/MWh, the Icelandic electricity could be very competitive. With regard to this, it is also very important to keep in mind that Icelandic hydro- and geothermal power is much more reliable power-sources than offshore wind in the UK.

Great opportunities for both Iceland and the UK

For the UK, an interconnector to Iceland would give access to substantial amounts of reliable green electricity. Icelandic hydropower reservoirs make the Icelandic electricity generation perfectly steerable, thus an excellent source for power at times of high demand in the UK.  For Iceland, a submarine cable to the UK could also have numerous positive effects. Besides increased security of supply by linking the Icelandic electricity transmission system with another electricity market, the IceLink could offer positive returns for the Icelandic electricity sector.

Iceland-UK-HVDC_Cable-Route-Bathymetry-nordic-seasPresently, most of Iceland’s electricity is sold at very low prices to heavy industries. New sale-contracts with several data centers and silicon plants will mean rising average power price. However, when having in mind that last year (2014) the average wholesale price from Landsvirkjun was just above 20 USD/MWh, it would obviously create very interesting opportunities for increased profitability selling electricity to the UK at 80-140 USD/MWh. The conclusion seems to be clear; IceLink has potentials to be an excellent win-win project for both Iceland and the United Kingdom.

Subsea HVDC cable between Norway and the UK

A subsea high voltage direct current (HVDC) electric cable will be constructed between Norway and the United Kingdom; the NSN Link. This was reported earlier this year (2015). And earlier this month (July 2015), it was announced that contracts have been awarded to build the cable and the converter stations.

NSN-Link_UK-Norway-HVDC-Cable-MapThe NSN Link (or NSN Interconnector) will be the longest subsea electric cable so far. The cable will connect Blyth in Northumberland on the UK side and Kvilldal in Rogaland on the Norwegian side. Today, the record length of such a cable is the NorNed cable between Norway and the Netherlands. NorNed is 580 km long, but NSN Link will be 730 km long. Thus, this new cable will increase the world record length of approx. 25%.

According to ABB, even longer submarine cables of this kind are already both technically and financially possible. Therefore it seems increasingly more likely that an interconnector between Iceland and Europe is only a matter of time.

NSN-Link-UK-Norway-HVDC-CableAs the NSN Link will be twin cabling, the total length will be approximately 1,460 km of cable. The capacity will be 1,400 MW. Owners and operators of the cable will be the Norwegian Transmission Operator Statnett and UK National Grid. The NSN Link is expected to be in operation by 2021.

By the NSN Link, Norwegians can take advantage of their highly flexible hydropower to increase the efficiency of their utilization of this great natural and renewable resource. By taking advantage of the price differences in the Norwegian and British electricity markets, and the price fluctuations within each day and night, the cable offers positive possibilities to maximize profits in the Norwegian electricity production.

NSN-Link-UK-Norway-HVDC-Cable-More-EfficiencyThe cable will also create new revenues for British electricity companies, as there will for example be an incentive for Norway to buy and import electricity from wind power farms in UK at periods when electricity demand is low. This creates opportunity to save water in the Norwegian reservoirs, which then will be used for generating electricity and export it to the UK when power prices are high.

An electric cable between Iceland and the UK would create similar opportunities. Currently, the pros and cons of such a cable are being considered by the Icelandic Ministry for Industry and Innovation. A further governmental decision on the matter may be expected early next year (2016).

Landsnet strengthening the grid

Demand for electricity in Iceland has grown immensely since the development of the current national transmission grid system, which was mostly constructed during the period 1972-1984. Since 1984 the amount of electricity being fed into the Icelandic grid has quadrupled.


The Icelandic Transmission System Operator (TSO) Landsnet is currently working on an environmental impact assessment (EIA) for a new high voltage transmission line between Southern and Northern Iceland; the South-North-Connection (SNC) over the Sprengisandur highland plateau. This new 220 kV transmission line will improve the current power transmission and increase security of supply and stability in the electric system.

Furthermore, the new line will substantially increase the transmission capacity. Thus, the project will not only be positive for better fulfilling current demand, but also prepare Landsnet to meet increased electricity demand in the coming years and decades. The increased demand will for example come from increased electrification of fish meal plants, and from new industrial production plants and services (such as data centers). Because of its stable energy supply, green energy portfolio, and yet-unharnessed renewable energy sources, Iceland is a very appealing location for companies that need substantial amount of electricity or heat for their production process. Iceland’s main power producer (Landsvirkjun) is currently offering long-term electricity contracts at a fixed price of 43 USD/MWh. Those long-term contracts are probably the most favorable in Europe and even in the whole OECD.

The basic transmission system to become 220 kV

In its Transmission Systems Plan 2014-2023 (TSP), Landsnet has proposed three different options (platforms) for the development of the Icelandic electricity grid.  All three platforms aim to construct stronger connections between the major energy areas in the country, to increase stability in the transmission system and to ensure better delivery of electricity. The TSP is a.o. based on the National Master Plan for Hydro and Geothermal Energy Resources, which is a parliamentary resolution on future development of Icelandic energy resources, and an independent governmental forecast of how the electricity market will develop.


According to Landsnet, the transport capacity of the Icelandic national transmission system will be developed to be at least 220 kV. Presently, 220 kV transmission lines have only been constructed in the southwestern part of the country (between the capital region and hydropower stations in the Þjórsá and Tungnaá region) and between Fljótsdalur power plant and the aluminum smelter in Reyðarfjörðir in Eastern Iceland. The new line between Southern and Northern Iceland (SNC), over the Sprengisandur highland plateau, could become the next major 220 kV connection. This will increase operational security, flexibility and efficiency of the Icelandic transmission.

Four options of North-South-Connection over Sprengisandur will be considered


Landsnet has started the process of examining the option of South-North-Connection more closely, preparing an environmental impact assessment (EIA) of the new transmission line. According to a draft already presented in the preparation for the EIA, Landsnet will compare four options of a South-North-Connection over the Sprengisandur highland plateau.

Special emphasis is placed to minimize the visual impact of the line, as the area is largely untouched (except from gravel summer road). Parallel to this work by Landsnet, the Icelandic Road Administration will perform an EIA of a new road in the area. Of the four options on the transmission line that will be examined, one option is specified as the main advantage (with a total length of 192 km). Interestingly, one of the other options is an underground cable as part of the route.

The importance of diversifying Europe’s energy sources

Economist-Euorope-Energy-Security-april-2014-3The Economist recently wrote about how Europe is highly vulnerable to Russian control over gas supplies – and how Europe can reduce its reliance on Russia by changing generating technology. In the article, it states that “better electricity interconnectors could reduce that need for gas by making it easier to export electricity from renewables-rich markets like Germany on sunny or windy days and to import it on dark or still ones.“ This brings attention to the great importance of strengthening the electric grid in Europe and construct new electric cables, such as to Norway and to Iceland.

The Economist correctly points out that interconnectors can help substitute one type of renewable energy for another. Hydropower (like gas-fired power stations) can easily be turned on – when the wind in Germany or United Kingdom  falters. But hydropower is not evenly spread. As stated in the article, “Sweden and, particularly, Norway have a lot of it, Germany and Benelux not so much.” Iceland is a country with abundant hydropower, that by far exceeds the country’s own electricity needs. In addition, Iceland also has extensive geothermal resources, that offer stable electricity generation for domestic use and for exports via submarine electric cable(s). Thus, Icelandic energy can be an excellent option for diversifying Europe’s energy sources.

Icelink-Bloomberg-HVDC-2“Forging such links requires a pan-European push”, the Economist-article continues. To make it work on a large scale will require new pricing strategies to recompense the owners of fossil-fuel plants pushed off the grid when renewable energy from other countries flows in. According to the Economist, Norway could generate much more hydropower, given a market. The Economist states that there are currently plans for up to five new interconnectors from Norway to the EU to be built by 2020, with a capacity of up to 5GW. An inteconnector to Iceland would easily offer 1 GW more.

In last March (2014) the EU’s Heads of Government told the EU Commission to produce a plan for reducing energy dependence. The plan is to be finalized by June, and some of the key elements of the strategy are to include an in-depth study of EU energy security and plan for the diversification of supply. That is likely to give a push to storage capacity and both more and larger interconnectors. Iceland is the world’s number one electricity generator per capita and still has substantial unharnessed hydro- and geothermal resources. Thus, the development and implementation of such an action plan may offer very interesting possibilities for the Icelandic energy sector.

UK will import more power from neighbouring countries in the future

LV-HVDC-Iceland-UK-London-august-2012-1According to the UK National Grid, the UK will import more power from neighbouring countries in the future as the country’s electricity margin continues to tighten. The Financial Times recently wrote about how one of the new subsea electric cables to be constructed is likely to be a cable between UK and Iceland (sometimes referred to as the IceLink):

Swiss engineering group ABB last year commissioned a 262 km interconnector to link Ireland’s grid to the UK’s. National Grid is also working on interconnector projects with Belgium, Denmark, Norway and Iceland. About 5-7 GW of additional capacity could flow from the new interconnectors over the next decade or so, said Mr Bonfield. However, some of the interconnector projects are more feasible than others. A link between UK and Iceland may be the best economic option.

LV-HVDC-Iceland-UK-London-august-2012-2Net electricity imports cost the UK about GBP 365 millions in the past six months of 2013, two and a half times more than two years previously, according to data supplied by ICIS, the price reporting agency. Electricity imports can be cheaper than those produced by UK suppliers and are a small but growing part of the country’s overall power supply. Power is produced in France and the Netherlands and imported via subsea interconnectors. Electricity flows both ways but the UK currently buys more than it sells. And there will be a rise in Uk’s power imports, says Andrew Bonfield, National Grid’s chief finance officer .“[This is] because there is a pricing differential which we believe will be beneficial to the country, and ultimately customers.”

National Grid will invest about GBP 3.5 billion this year, most of which will go towards reinforcing its UK transmission infrastructure. Power imports should help National Grid level out peaks and troughs from renewable energy production and deal with the UK’s diminishing electricity margin, which represents the safety cushion of spare power generating capacity (National Grid previously said that the electricity margin during peak demand in cold weather will be 5 per cent, down from more than 15 per cent in the winter of 2011-12). IceLink could become an important part of this strategy, opening access to Iceland’s 100% renewable power geothermal- and hydro power generation.

The two illustrations above are from a presentation by Mr. Hörður Arnarson, CEO of the Icelandic Power Company Landsvirkjun, presented in August 2012.

The Nordic energy infrastructure is gaining interest

Public ownership is widespread in the energy sector of the Nordic countries. This especially applies to the transmission system operators (TSO’s). Strong state ownership is also the norm regarding all the main electricity producing companies and oil exploration companies in the Nordic countries. However, private investment has been increasing in the Nordic energy sector, especially in energy infrastructure projects and renewable energy production.

Nordic-Energy-Perspectives-CoverThe Norwegian electricity company Statkraft and the Norwegian TSO Statnett are both 100% owned by the Norwegian state. Norwegian oil giant Statoil is 70.9% owned by the Norwegian state.

The Swedish electricity company Vattenfall is 100% owned by the Swedish state and so is the Swedish TSO Svenska Kraftnät. Finnish electricity company Fortum is 50.76% owned by the Finnish state. And the Finnish TSO Fingrid is 53.1 % owned by the Finnish state.

Icelandic electricity company Landsvirkjun is 100% owned by the Icelandic state. And the Icelandic state owns  87.24% in the Icelandic TSO Landsnet (through 100% state owned Landsvirkjun and Rarik). In Denmark, the Danish state has owned 76,49% in the energy company Dong Energy. And the Danish TSO is 100% owned by the Danish state.

Thus, all the major Nordic electricity companies and the TSO’s are controlled by the relevant Nordic state, and also the main Nordic oil exploration companies. Although this ownership structure of the Nordic energy sector will probably not change much in the near future, we may be experiencing increased private investments in certain parts of the Nordic energy sector. This seems especially to apply to infrastructure and renewable energy.

Norway-Gassco-PipesSubstantial private investment is already to be found in Statoil (oil & gas), Fortum (electricity), Fingrid (TSO), and in Dong Energy (oil, gas, heating & electricity). In addition, the Norwegian state has sold large share of the natural gas transportation infrastructure system that links the gas resources of the Norwegian continental shelf with the neighbouring countries. Today, the Norwegian state owns only 45.8% stake in Gassled (through the state owned oil license investing company Petoro), plus its stake through Statoil, which owns 5% in Gassled. The major private investors in Gassled are Abu Dhabi Investment AuthorityCanada Pension Plan Investment Board, and the German insurance and financial services group Allianz (together they own 24.75% in Gassled).

The most recent private investment in the typically state owned Nordic energy sector took place earlier this year (2013). When two funds (managed by Goldman Sachs) and two Danish pension funds (Arbejdsmarkedets Tillægspension; ATP, and Pension Forsikringsaktieselskab; PFA) agreed to buy 26% stake in the Danish Dong Energy. When this 2 billion USD deal will be finalized (probably within a few weeks) it is expected that Goldman Sachs will own approximately 19% in Dong Energy, ATP approximately 5% and PFA approximately 2%. The Danish state will still be owner of more than half of the shares in the company.

It is expected that this deal will allow Dong to strengthen its balance sheet (hit by falling electricity demand due to the economic crisis and competition from coal) and to pursue its ambition to become a leading player in offshore wind energy. Thus, the deal has a strong renewable energy aspect. Dong Energy is already European market leader with almost 2 GW of offshore wind power installed in Denmark, Britain and Germany. And the company wants to more than triple that to 6.5 GW by 2020.

UK-Electric-Subsea-Cables-MapThe investments by the Goldman Sachs funds, Abu Dhabi Investment Authority, the Canadian pension fund, and Allianz are good examples of increased interest in the Nordic energy infrastructure and renewable energy. This may be a positive development, having regard to financing of the IceLink (an electric cable between Iceland and the UK). Financing projects like that could be perfect fit for large pension funds and investment vehicles.

Upcoming new world-record subsea electric cables

An electric subsea cable between Iceland and Europe is currently being considered.

HVDC-Euroasia-Interconnector-map-2The cable, sometimes referred to as IceLink, will be approximately twice as long as the longest subsea electric cable today, which is the NorNed cable between Holland and Norway (NorNed is 580 km, with a capacity of 700 MW). It seems likely that we will soon see a substantially longer cable than the NorNed, which will be a new cable between Norway and the United Kingdom (this new cable will be more than 700 km long, with a capacity of 1,400 MW). However, an even more ambitious project is being planned in the Mediterranean; the EuroAsia Interconnector.

The EuroAsia Interconnector project aims to link the power grids of Cyprus, Greece (including both Crete and the Greek mainland) and Israel. The total length of the cable will probably be between 1,000 and 1,500 km, and have a capacity of 2,000 MW. It will travel through an enormous depth of more than 2,500 m.

HVDC-Euroasia-Interconnector-2Firstly, a 330 km cable will link Israel with Cyprus. Further, Cyprus will be connected with the Greek island of Crete via an 880 km long cable. From there Crete will be connected to Greece via a 310 km long cable, providing a connection to the pan-European electricity grid.

In March 2012, Cyprus and Israel initiated a feasibility study to explore the possibility of the EuroAsia Interconector connecting the grids of the two countries. The project is expected to be completed in 36 months from the start of construction. The interconnector will be funded and developed by DEH Quantum Energy, a joint venture consisting of Greece’s DEH and Cyprus’ Quantum Energy, with the Bank of Cyprus as a minority shareholder.

HVDC-Euroasia-Interconnector-1In comparison with the EuroAsia Interconnector, the IceLink between Iceland and Europe seems to be a very positive and even a simple project. While the EuroAsia Interconnector will mainly transfer electricity generated by burning natural gas, the IceLink is based on renewable hydro- and geothermal power. The IceLink is likely to be close to 1,200 km (if connecting Iceland and UK) and the maximum depth of the route is close to 1,000 m. As the depth is one of the main challenges for subsea electric cables, it is interesting that the EuroAsia Interconnector will be at more than twice as much depth as the IceLink.

The EuroAsia project has recently been added to the European Commission’s list of Projects of Common Interest (PCI). This recent list of 248 key energy infrastructure projects was adopted by the European Commission on 14 October 2013. These projects will benefit from faster and more efficient permit granting procedures and improved regulatory treatment, and may also have access to financial support from the Connecting Europe Facility (CEF). The CEF has a budget of EUR 5.85 billion that has been allocated to trans-European energy infrastructure for the period 2014-20. The current plan is to have the EuroAsia Interconnector up and running as soon as 2017.

Data centers in Iceland offer dramatic savings

Businesses overseas are turning to Iceland to host their data, making use of cheaper energy and natural cooling resources. Icelandic datacenters do not only offer very competitive prices, but also reduce carbon footprint and improve green credentials, as they are powered by renewable electricity only (from natural hydro- and geothermal resources).

datacenter-icelandA recent study by PricewaterhouseCoopers found that the operating expenditure of a 10,000 sqf data center in Iceland, over a 15 year period, is USD 130 million cheaper than running it in the United Kingdom or in Continental Europe. Thus, Iceland offers dramatic savings in the long run.

According to Invest in Iceland, a government body provides information to foreign investors, a fifth of data centre costs are spent on power. Half of that is used for cooling. In Iceland, businesses have access free-air cooling all year round and thus saving substantially on cooling costs.

In addition, the electricity is much cheaper in Iceland than in the rest of Europe. In Iceland, data centers are currently being offered power at the price of USD 0.043 (4.30 cents) per kWh, which is less than half of the price which is common in other European countries. This low Icelandic price can be locked up for at east 12 years, offering businesses a clear understanding of operating expenses in the long run.

Furthermore, while cost is one of the major factors attracting data centre investment and services to Iceland, carbon footprint is also an important driver for European businesses to consider Iceland as a location for their data. As European carbon taxes begin to bite, companies are looking towards Iceland’s carbon free data centers as a long-term option to demonstrate their commitment to green IT. Currently, three data centers have been constructed; the Advania, GreenCloud and Verne Global.

Iceland-Data-Fiber-ConnectionsThe Icelandic electricity generation and distribution ranks as one of the most reliable in the world. Thus, Iceland data centers offer 99.999% uptime, and power companies are willing to put that uptime in the contract agreement. Connectivity to the Icelandic data center facilities is provided by redundant, high-capacity, multi-terabit-per-second connections, including Farice, Danice and Greenland Connect.

Volcanic activity in Iceland may have the effect making investors reluctant to invest in data centers in Iceland and same may apply to businesses regarding hosting their data in the country. But the fact is, that large areas in Iceland have no volcanic activity and none seismic risk. In a nutshell, the risk for data centers from natural hazards or extreme weather are no higher in Iceland than in most other European countries.

Reykjavik-Center-WinterThe regulatory environment in Iceland is clear and is built on European standards (Iceland is a full member of the European Economic Area; EEA). Numerous agencies and local governments are willing to assist companies interested in investing. Our readers are welcome to contact us at the Icelandic Energy Portal for more information. You can call us at +354-863-8333 and/or send message through our contact-form.

Icelandic energy in the New York Times

“In a nation with only 320,000 people, the state-owned power company, Landsvirkjun, which operates the Krafla facility, sells just 17 percent of its electricity to households and local industry. The rest goes mostly to aluminum smelters owned by the American giant Alcoa and other foreign companies that have been lured to this remote North Atlantic nation by its abundant supply of cheap energy.”

NYT-Iceland-electric-cable-feb-2013These words are from an article published by the New York Times (NYT) a few days ago. The article describes how electricity generated by harnessing Iceland’s extensive renewable energy sources may possibly be exported to consumers in the European Union (EU). Such an export could result in a very substantial increase in profits for the generating companies in Iceland. The aluminum smelters are paying prices believed to be less than 30 USD per MWh. Which is, according to the NYT, less than half the going rate in the EU and barely a quarter of what, according to the Renewable Energies Federation, a Brussels-based research unit, is the average tariff, once tax breaks and subsidies are factored in, for renewable electricity in the EU.

Currently, Landsvirkjun is conducting a research into the possibility of a submarine electric cable (a High Voltage Direct Current cable or HVDC) to connect the electricity markets of Iceland with the European market. The cable would be approximately three times longer than the link between Norway and the Netherlands, which is currently the world’s longest submarine electricity cable. It is to early to say what would be the preferable connecting point in the EU; it could be Scotland, the Netherlands, Germany, or even Norway.

A connector between Iceland and Europe would not only offer the Icelandic electricity generating companies the possibility of substantially higher price for their product. Such a cable would also make it possible to import electricity to Iceland in periods of low electricity prices at the other end of the cable (such as during the night). The connector would also increase the energy security in Iceland, as the country would be less dependent on keeping large emergency reserves, as it does now. For the EU this would also be an attractive project – not least as the Union’s 27 member states agreed in 2009 to a mandatory target of deriving at least 20 percent of its energy from renewable sources by 2020.

Hordur-Arnarson-Landsvirkjun-CEOLandsvirkjun’s CEO, Mr. Hörður Arnarson, has described the possible cable as a very promising project.  “We have a lot of electricity for the very few people who live here.” Compared with the rest of the world, he said to the NUT, Iceland produces “more energy per capita by far, and it is very natural to consider connecting ourselves to other markets.”

It is expected that final decision on the cable will be taken within two years or so. For more information about the cable and the importance of EU’s energy policy for Iceland, please check out our earlier post on the issue.

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