April 2010
Iceland Geothermal Energy
Market Report
Íslandsbanki Geothermal Research
Your Geothermal Financial Partner
Contents
Foreword
4
Íslandsbanki
5
Executive Summary
6
1. Energy market Iceland
8
Primary energy consumption
8
Electricity generation and installed capacity
9
Electricity consumption
9
Government policy and framework
9
Environmental performance
10
2. Geothermal energy in Iceland
11
Overview
11
Iceland and geothermal energy in the global context
11
Geothermal usage – historical development
11
Role and usage of geothermal energy
12
Geothermal resources and potential
13
Geothermal energy industry and players
14
Geothermal power plants
17
Government policy and framework
19
Projects and international cooperation
20
3. Outlook for the Icelandic energy market
21
Overview
21
Status of the energy market
21
Current political debate
21
Energy demand
22
Planned power generation projects
23
Outlook for geothermal energy in Iceland
24
Master plan for hydro and geothermal energy resources in Iceland
24
National energy policy
25
4. Investment needs – geothermal energy
26
Overview of geothermal financing in general
26
Geothermal financing in the Icelandic context
27
Financing of new geothermal projects in Iceland
28
Iceland in the international geothermal development context
29
Investment case geothermal in Iceland
29
Sources
31
Glossary
32
Figures
33
Tables
33
Íslandsbanki Geothermal Research
3
Foreword
Over the last few years, Íslandsbanki has published a number of geothermal research pieces, including our annual U.S. Geothermal
Energy Market Report, but we have not released any of our research into the Icelandic geothermal energy market-until now.
Al Gore, in his book OUR CHOICE: A plan to solve the climate crisis (2009), says that “geothermal energy is potentially the largestand presently the most misunderstood-source of energy in the U.S. and the world today.” In the international context this is
unfortunately the case, but in Iceland, geothermal energy is definitely not “misunderstood”, as it is so much part of the everyday
life of all Icelanders.
In the current economic environment, Iceland looks more than ever to the energy sector as one of the potential key drivers for
economic development and foreign investment. At the same time, there is a vigorous political debate about issues surrounding
the development of new power generating capacity, foreign involvement, environmental aspects and the general impact of new
development in the broader scheme of economic activities.
So we are now pleased to publish our first Iceland Geothermal Energy Market Report. The report comprises an overview of the
current Icelandic energy market, geothermal energy in Iceland, the outlook for the energy market and geothermal energy, and
investment needs. It is aimed at providing a constructive look into investment needs for geothermal power development in Iceland;
it also seeks to highlight opportunities for Icelanders and their experience of the sector.
This report builds on the considerable research efforts and publications of the Icelandic Energy Authority (Orkustofnun) and many
individuals, all of whom have supported Íslandsbanki with their critical reviews, ideas and data.
Árni Magnússon
Executive Director – Íslandsbanki Geothermal Energy Team
4
Iceland Geothermal Energy Market Report
Íslandsbanki
Íslandsbanki is a focused financial partner to the geothermal energy sector. Our dedicated geothermal energy team provides
investment and financial services from the bank’s headquarters in Reykjavík, Iceland, and maintains a worldwide network of
partnerships.
The nature of geothermal projects demands a thorough understanding of the underlying technical issues and risks. Íslandsbanki’s
geothermal energy team has, through the years, worked as a partner to the geothermal energy industry in Iceland and in many
other countries.
Iceland as a unique location for services in the geothermal energy sector
Almost two thirds of Iceland’s primary energy supplies are derived from geothermal sources
Geothermal energy is used to generate 25% of Iceland’s electricity
Iceland is a leader in the utilisation of geothermal energy, both directly and for generating electricity
Installed electricity generating capacity using geothermal resources totals 575 MW
The dynamic geothermal energy sector provides services, drilling, project management and financing
Íslandsbanki’s value proposition
Uniquely focused team for the sector
Extensive geographical and industrial research
Industry player mapping and network
Strategic global partners with leading positions in the sector
Advisory in the geothermal sector, across the entire value chain
Service offerings to the industry and the financial community
How can we as a bank that is uniquely focusing on geothermal energy help you and your business?
With our unique background and experience, we have a strong foundation for our activities in this sector. Our dedicated team
provides us with unparalleled market knowledge combined with strong banking skills. This enables us to fulfil the needs of companies,
investors and other players across the value chain of the geothermal industry and provide opportunities for growth. Our expertise
and understanding of the industry coupled with our ongoing efforts to promote geothermal energy together make us a valuable
partner for our clients and other organisations in the sector.
[email protected]
www.islandsbanki.is/energy
Íslandsbanki Geothermal Research
5
Executive Summary
Geothermal energy plays an important role in Iceland’s energy
supply. As of today, geothermal energy represents more than
60% of the primary energy supply, by far the largest share.
Energy market
For electricity generation, hydropower continues to be the main
provider with 75%, while geothermal energy provides 25% of
the electricity supply. The major energy companies, Landsvirkjun
(76%), Reykjavik Energy (13%) and HS Orka (9%) provide
98% of all electricity consumed in Iceland today.
The aluminium industry is by far the largest customer, consuming
more than 75% of the electricity generated in Iceland, while
other industries, including the ferrosilicon industry, consume a
further 11%. Residential consumption accounts for only 5%
of electricity used in Iceland.
The overall legislative framework is based on EU legislation
governing energy markets, which guarantees an economical
electricity system and a competitive environment for the
generation and sale of electricity. The National Energy Authority
is the supervisory authority for the energy market in Iceland,
working under the auspices of the Ministry of Industry, Energy
and Tourism. Environmental issues, such as planning, impact
analyses, etc. also involve the Ministry for the Environment and
related agencies.
Geothermal energy
Given the maritime climate, the availability of affordable heating
has a large impact on energy demand, and geothermal energy
is a key provider. The country’s long-standing dependence on
oil and coal for heating has been almost completely supplanted
by geothermal energy. Today, transportation accounts for most
oil consumption.
Geothermal energy is mostly used for space heating and electricity
generation, which together account for 85% of geothermal
energy used.
Six geothermal power plants are operating in Iceland as of today.
Iceland is also a very active participant in international research
and development, supporting nations around the globe in
developing geothermal resources. Icelandic companies sell their
highly regarded and necessary services and experience all over
the world.
Outlook for the Icelandic energy market
In the current economic environment, Iceland is looking for
ways to strengthen its economy, and one particular area of
attention is how to make use of natural resources in this
reconstruction effort.
Energy and related issues are currently the subjects of a lively
political debate that is often contentious. The discussions centre
on a few key issues, mainly concerning the environmental impact
of power projects, although their social impact and their overall
Quick facts on
Geothermal Energy
in Iceland
1 First geothermal heating in 1908
2 First power plant in 1969: Bjarnarflag 3
MWe
3 Largest plant: Hellisheidi 213 MWe (303
MWe planned)
4 Largest geothermal player: Reykjavik
Energy 333 MWe installed
5 Strong engineering and consulting
background and international activities
Globally, Iceland has the seventh largest installed geothermal
power capacity, representing about 5% of overall installed
capacity worldwide.
6 90% of all homes in Iceland heated using
geothermal energy, saving annually USD
3,000 per home.
Iceland is situated on a highly active volcanic zone on the ridge
where the Eurasian and North-American tectonic plates meet.
The plates are moving apart at an average rate of 2cm per year.
7 Current electricity generation capacity:
575 MWe (seventh in the world)
The geothermal resources enjoyed by Icelanders are mostly
found in 30 high-temperature areas within the volcanic zone,
which runs through Iceland from south-west to north-east.
The mean base potential for sustainable geothermal power
development in Iceland is estimated to be approximately 4,255
MW of installable capacity, which compares to a current installed
capacity of 575 MW.
Iceland has a very active geothermal energy sector which involves
the government, state-owned organisations (National Energy
Authority and ÍSOR), major energy companies (Landsvirkjun,
Reykjavik Energy, HS Orka) and a large number of service
companies (engineering, consulting, services and drilling).
6
Iceland Geothermal Energy Market Report
8 62% of the primary energy supply in
Iceland comes from geothermal sources
9 Current geothermal projects: 1,070 MWe,
potential 3,000–4,300 MWe
10 Iceland’s UN Geothermal Training
Program has graduated more than 400
professionals.
11 Iceland ranked number one in the 2010
Environmental Performance Index (EPI)
by Yale University
effect on economic development are also matters of concern
for some. Other significant issues include ownership and
acquisitions by foreign conglomerates, and utilisation rights
attached to the country’s natural resources. There are also
questions regarding how the electricity is used and what industries
are buying that electricity.
A large number of companies in the energy-intensive industrial
sector are looking at establishing operations in Iceland, including
additional aluminium smelting and processing companies, data
storage firms, silicon production plants.
The energy companies are planning a large number of new
power plants and extensions to existing installations in an effort
to increase capacity in Iceland. Geothermal power projects
represent the majority of planned capacity or 1,068 MW of a
total of 1,658 MW.
A number of initiatives are looking at the strategic direction of
energy development. One of them is the Master Plan for Hydro
and Geothermal Energy Resources, a multi-player effort
embracing all directly and indirectly related sectors of the
geothermal energy market. This project is considering the best
way forward for energy development in Iceland, taking into
account social, environmental, economic and sustainability
issues.
Investment needs
Governments and their agencies and organisations have
traditionally played a major role in the research and development
of geothermal energy. The risk profile of early stage geothermal
exploration and development has always been an obstacle in
attracting private money to the market.
While about 60% of the cost of a project is obtainable through
debt financing, 40% has to be provided for in the form of
equity, mostly for early stage development and research, but
also for costly drilling. Iceland’s current economic status means
that it is very difficult for energy companies to raise the necessary
equity for project development from their owners, usually the
state or municipalities.
Capital from sources outside the current ownership group is
therefore needed to develop projects in Iceland. The overall
equity investment needed for Icelandic geothermal power
projects is about USD 840 million (ISK 107 billion), while a
total of USD 1,530 million (ISK 196 billion) in debt financing
is required for all projects currently planned until 2017.
Iceland also competes with other countries for financing for
geothermal projects. While the nation is competitive where
development costs are concerned, electricity pricing is currently
not favourable for investments in this sector.
Íslandsbanki Geothermal Research
7
1. Energy market Iceland
The Icelandic energy market is unique. It has been described
by many as a role model in renewable energy development and
usage. The country is uniquely located just south of the Arctic
Circle on the Mid-Atlantic Ridge, a geothermal hot spot.1)
Approximately one-tenth of the country’s land mass is covered
by glaciers, which fuel many powerful rivers. The nation is
blessed with an abundant supply of hydropower and geothermal
resources.
These resources have contributed of Iceland’s transformation
from being one of the poorest nations in Europe to become a
country with a high standard of living, and a leader with regard
to the proportion of renewable resources used in meeting its
energy requirements.
Electricity generation and installed capacity
Annual electricity generation in Iceland is approximately 16,500
GWh, produced by hydropower plants and geothermal plants
along with a decreasing number of diesel-powered generators.
The oil-based installed capacity consists mainly of back-up
plants for industrial use when power outages occur.
Hydropower is by far the largest provider of electricity today,
while geothermal provides 25% of the supply. The major energy
companies, Landsvirkjun (76%), Reykjavik Energy (13%) and
HS Orka (9%) provide about 98% of all electricity consumed
in Iceland today. Smaller electricity providers include
Table 2
Electricity generation 2008, in GWh
Primary energy consumption
The Icelandic energy market is built mainly on natural resources,
hydropower and geothermal energy, which together provide
82% of the primary energy supply in Iceland. The once strong
dependency on coal and later oil for heating has now been
replaced with geothermal energy, which today heats
approximately 90% of all homes. Electricity is also generated
using the country’s geothermal resources, although hydropower
provides the largest proportion of electricity. Oil is still an
important element in fuelling the country’s car and fishing
fleets, however there are determined efforts in Iceland to reduce
the need for oil by using bio-fuels, electric cars and hydrogen
fuel-cell technology for vehicles and ships.
Hydro energy
Geothermal energy
Fuel
12,427.4
4,037.7
2.7
75.5%
24.5%
0.02%
Total
16,467.8
100.0%
Source: Statistics Iceland
Figure 3
Annual electricity generation
1978–2008, in GWh
16,000
Hydro energy
14,000
Table 1
Geothermal energy
Fuel
Primary energy consumption 2008, in PJ
Hydro energy
Geothermal energy
Oil
Coal
44.7
139.4
36.7
4.2
19.9%
62.0%
16.3%
1.9%
Total
225.0
100.0%
GWh
12,000
10,000
8,000
6,000
4,000
2,000
0
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Source: Statistics Iceland
Source: Statistics Iceland
Figure 1
Figure 2
Primary energy consumption 1969–2008, in PJ
Primary energy consumption 1969–2008, in %
200
Coal
100%
250
Hydro
Geothermal
Oil
Coal
80%
60%
100
40%
50
20%
0
0%
PJ
150
Oil
Geothermal
Hydro
1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Source: Statistics Iceland
1) Built upon: Orkustofnun, “Meet Iceland – a Pioneer in the Use of Renewable Resources” (2009)
8
Iceland Geothermal Energy Market Report
Source: Statistics Iceland
Table 3
Electricity generation capacity 2008, in MW
Hydro energy
Geothermal energy
Fuel
Total
1,878.7
574.6
119.9
73.0%
22.3%
4.7%
2,573.2
100.0%
Source: Statistics Iceland
Figure 4
The aluminium industry is by far the largest customer, consuming
more than 75% of all electricity generated in Iceland. Other
industrial uses, e.g. for the ferrosilicon industry, account for a
further 11%. Residential consumption accounts for only 5%
of electricity consumption.
Government policy and framework 2)
3,000
Hydro
Geothermal
Figure 6
Oil
Electricity consumption by industry 2008, in %
2,000
MW
Electricity consumption
Current efforts to diversify the electricity consumer market aim
to attract new players and thus reduce the proportion taken by
the aluminium sector.
Installed electricity generation capacity
1978–2008, in MW
2,500
Rafmagnsveitur ríkisins (RARIK), Orkubú Vestfjarda, Nordurorka,
Rafveita Reydarfjardar and Orkuveita Húsavíkur. All provide
electricity to industry, the public sector and residential customers.
Ferrosilicon Residential
industry comsumption
5.8%
5.5%
1,500
1,000
Other industries 5.1%
500
0
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Source: Statistics Iceland
Table 4
Electricity generation by energy company 2008,
in MWh and %
MWh
Landsvirkjun
12,468,587
Reykjavik Energy
2,138,212
HS Orka
1,431,610
Iceland State Electricity (RARIK)
251,054
Westfjord Power Co.
84,067
Nordurorka
1,496
Utility Reydarfjordur
1,342
Utility Húsavík
773
Other
90,612
Total
16,467,753
%
75.7%
13.0%
8.7%
1.5%
0.5%
0.0%
0.0%
0.0%
0.6%
100.0%
Source: Statistics Iceland
Figure 5
Electricity generation by energy company 2008
based on MWh, in %
Reykjavik
Energy
13%
Landsvirkjun
76%
HS Orka
9%
Rarik 1%
Other
1%
Source: National Energy Authority
Utilities
4,3%
Aluminum
industry
75.9%
Other
7.7%
Public services
1.8%
Agriculture
1.4%
Fishing
0.2%
Source: National Energy Authority
Iceland is a member state of the European Economic Area (EEA),
which extends the internal market legislation of the European
Union to Iceland, apart from agriculture and fisheries. The EEA
agreement builds upon the pillars of freedom of movement of
goods, people, services and capital, and additionally covers
social policy, consumer protection and environmental policy.
Legislation in the member states of the EEA covering the energy
market and environmental issues must comply with the
corresponding EU Directives.
EU Directive No.96/92 applies to the electricity market, and
the Icelandic Electricity Act No. 65/20033), enacted in mid2003, implemented this EU legislation in Iceland. The Icelandic
Energy Act includes various elements from older legislation,
including the Inland Waters Act (15/1923), the Energy Act
(No. 58/1967), the Electricity Generating Stations Act (No.
60/1981) and legislation covering individual energy companies.
The Electricity Act brought substantial changes to the
organisation of the electricity market. The objectives of the
legislation are to encourage an economical electricity system,
strengthen the Icelandic energy industry and encourage regional
development. The act further seeks to create a competitive
environment for the generation and sale of electricity and to
2) Based in parts on: Orkustofnun, “Energy in Iceland” (2nd edition 2006),
retrieved on 11 March, 2010, at http://www.os.is/Apps/WebObjects/
Orkustofnun.woa/1/swdocument/9701/Energy_in_Iceland_2ed_2006.pdf
3) Icelandic Electricity Act, No. 65/2003 (English translation), retrieved on
11 March, 2010, Icelandic Ministry of Industry, Energy and Tourism, at:
http://eng.idnadarraduneyti.is/media/Acrobat/raforkulog_enska.pdf
Íslandsbanki Geothermal Research
9
foster the efficient and cost-effective transmission and
distribution of electricity. It also seeks to ensure the security of
the electricity system and the interests of its consumers, and
it promotes the use of renewable energy sources.
In order to separate generation from transmission and distribution,
Landsnet, a limited liability company, was established in
accordance with the Electricity Act. Founded in early 2005, the
company is responsible for the transmission and system operation
services of its predecessor, Landsvirkjun (National Power
Company), which holds 70% of Landsnet’s shares. The other
owners are RARIK (Icelandic State Electricity) and the Westfjord
Power Company (Orkubu Vestfjarda). Following the establishment
of Landsnet, the transmission system was enlarged, and it now
provides greater equality in transmission costs, particularly for
customers in remote areas of the country.
Companies that provide both heating services and electricity
may operate in the electricity market, but they are required to
maintain separate accounts in order to avoid cross-subsidies.
Legislation applying to the energy market in Iceland covers
natural resources, the distribution of heat and electricity
generation. The following is a list of legislation and other
regulations that directly or indirectly apply to the energy market.4)
Act on Landsvirkjun, No. 42/1983
Act on the creation of the Hitaveita Sudurnesja, No. 106/2000
Act on the guarantee of origin of electricity produced from
renewable energy sources, etc., No. 30/2008
Electricity Act, No. 65/2003
Act on the establishment of Landsnet hf., No. 75/2004
Act on the survey and utilisation of ground resources, No.
57/ 1998
Act amending various acts of law relating to natural resources
and energy, No. 58/2008
Act on water, No. 20/2006
Act on the evaluation of environmental impact, No. 106/2000
Various regulations on the provision and distribution of
heating services for a number of individual communities/
municipalities.
The National Energy Authority (Orkustofnun) acts as a supervisory
authority for both transmission and distribution companies. It
also establishes income caps for company tariffs as well as for
concession activities that involve the transmission or distribution
of electricity. The generation and sale of electricity is monitored
by the competition authorities.5)
A special Appeals Committee on Electricity has been set up to
examine any disputes that might arise from administrative
decisions made by the National Energy Authority.
The Energy Act contains various other general provisions relating
to how licences are granted, other procedures, tariffs and how
accounts must be kept separate.
Environmental performance
In the recently released 2010 Environmental Performance Index
(EPI) by Yale University,6) 163 countries were ranked “upon 25
performance indicators across ten policy categories covering
both environmental public health and ecosystem vitality”. Iceland
was ranked number one, followed by Switzerland, Costa Rica
and Sweden.7)
This provides a very positive picture of Iceland’s environmental
track record, including issues such as pollution, climate change,
biodiversity and so on. With the continuing development of the
energy sector and the economy as a whole, Iceland will have to
build on this track record and maintain its leadership in using
its natural resources wisely for the benefit of the nation.
4) Based on list of Energy and natural resources related legislation in Iceland, Ministry of Industry, Energy and Toursim, retrieved on 11 March, 2010, at:
http://eng.idnadarraduneyti.is/laws-and-regulations//nr/1266 and the Icelandic version, at http://www.idnadarraduneyti.is/malaflokkar/raforka/log/
5) The Icelandic Competition authority (Samkeppnisefterlitid): http://www.samkeppni.is/en/competition_authority/
6) Environmental Performance Index (EPI) 2010, retrieved on 11 March, 2010, at: http://epi.yale.edu/Home
7) EPI 2010, retrieved on 11 March, 2010, at http://epi.yale.edu/Countries (ranking), and http://epi.yale.edu/Countries/Iceland (Iceland)
10
Iceland Geothermal Energy Market Report
2. Geothermal energy in Iceland
Overview
Figure 7
Geothermal energy plays an important role in Icelandic society
and in the country’s economy. With nearly two thirds of the
primary energy supply being derived from geothermal resources
within the country, Iceland annually saves more than USD 460
million8) – the amount it would need to replace the electricity
and heating currently derived from geothermal resources.
Geothermal electricity generation capacity
by country 2009, in MW
Despite its location close to the Arctic Circle, in between Europe
and North America, Iceland has a relatively mild climate, largely
due to a branch of the Gulf Stream that flows around the
southern and western coasts of the country. But it still has a
colder maritime climate, with the cool ocean waters around
Iceland keeping average temperatures low. Average temperatures
from May until September are around 10° C (48°F) and average
temperatures from October until April are around 3°C (31°F).
This means that the availability of space heating year round is
important for the country.9)
Iceland is blessed with geothermal resources because of its
location in an active volcanic zone, right on top of where the
Eurasian and the North American tectonic plates meet. Volcanic
activity can be observed along the edges of the volcanic zone,
which runs across the whole country from south-west to northeast. More than 10 volcanoes can be described as active. The
most recent eruption on Eyjafjallajökull on April 15, 2010 has
affected air travel across all Europe.10)
Geothermal energy is not only used for electricity generation,
but is particularly important for residential and industrial heating,
as well as for a large number of other “direct use” applications
that use heat, such as greenhouses.
United States
Philipp ines
Indonesia
Mexico
Italy
New Zealand
Iceland
Japan
El Salvado r
Kenya
Costa Rica
Other
3,087
2,195
1,169
958
811
584
575
535
204
169
163
458
0
1,000
2,000
3,000
4,000
Source: Íslandsbanki estimates for 2009.
Iceland and geothermal energy in the global context
Iceland has been (in absolute terms, not only relative to its size)
at the forefront of geothermal development. Today, it is number
seven in the world in overall installed capacity11) for electricity
generation from geothermal resources, representing about 5%
of total installed capacity worldwide. In the ranking of countries
utilising geothermal energy for direct use, Iceland ranks number
four overall, with around 6,800 GWh/year of thermal use.
Geothermal usage – historical development
Iceland’s geothermal hot springs have been used for centuries,
dating back to the Viking era. The in Iceland well-known
Snorralaug (Snorri’s pool) dating back to 1200, is a hot spring
said to have been used by one of Iceland’s famous historical
figures, Snorri Sturluson (1178–1241), a historian, poet and
politician.
Table 5
Geothermal electricity generation capacity by
country 2009, in MW
United States
Philippines
Indonesia
Mexico
Italy
New Zealand
Iceland
Japan
El Salvador
Kenya
Costa Rica
Other
Total
3,087
2,195
1,169
958
811
584
575
535
204
169
163
458
28.3%
20.1%
10.7%
8.8%
7.4%
5.4%
5.3%
4.9%
1.9%
1.5%
1.5%
4.2%
10,908
100%
Source: Íslandsbanki estimates for 2009.
While used in the earliest times for bathing and washing, the
late 19th century saw people “experimenting using geothermal
energy for outdoor gardening; and early in the 20th century
geothermal sources were first used to heat greenhouses, then
swimming pools and houses”.12)
8)
Ketilsson, J., National Energy Authority of Iceland, “57 milljardar spörudust í fyrra”, Fréttabladid 26 November 2009
9)
Icelandic Metereological Office, “The Weather in Iceland 2009”, retrieved on 16 March 2010, at: http://en.vedur.is/weather/articles/nr/1802
10) Details about the volcanoes of Iceland can be found on Volcanoediscovery.com. Retrieved on 5 March 2010
11) Based on estimates for installed capacity in 2009 by Íslandsbanki and Bertani R., “World Geothermal Generation in 2007” (GHC Bulletin, September 2007),
retrieved on 11 March 2010, at: http://geoheat.oit.edu/bulletin/bull28-3/art3.pdf
12) Orkustofnun Íslands, “Geothermal Development and Research in Iceland” (April 2006)
Íslandsbanki Geothermal Research
11
The first use of geothermal energy for space heating can be
traced back to the entrepreneur and farmer Stefán B. Jónsson.
Building his new house in a community in proximity to the
capital, Reykjavík, he decided to heat his house “by leading
water through a pipeline from a hot spring about half a kilometre
away” in 1908.13)
About three years later, a farmer in the west of Iceland also
“managed to lead steam to his house for space heating and
also used it for cooking”.14)
In Reykjavík, extensive distribution of hot water for heating
homes began in 1930 when a 3 km long pipeline was built to
transport hot water from the Hot Springs at Laugardal in
Reykjavík to two primary schools, an indoor swimming pool the
main hospital and 60 family homes in the capital area. In 1943,
a major step was taken when a new 18 km pipeline was put
into use, and the Reykjavík District Heating Service began
operating. By the end of 1945,850 buildings had been
connected. The population of Reykjavík was just over 44,000.
“In addition to development in the capital area, many
communities around the country built their heating distribution
systems in places where hot springs or successful drilling yielded
suitable geothermal water. The largest of these systems were
in Ólafsfjördur (1944), Hveragerdi (1947), Selfoss (1948) and
Saudarkrókur (1953). Community schools in the countryside
were also preferably located close to supplies of geothermal
water, which was available for heating and swimming.”15)
In 1977 the Krafla geothermal power (Landsvirkjun) plant
started with 30 MW installed capacity, and an additional 30
MW came online in 1997. Other plants followed; today there
are 75 MW installed at Svartsengi (HS Orka), 120 MW at
Nesjavellir (Reykjavik Energy), 2 MW at Húsavík (Orkuveita
Húsavíkur), 100 MW at Reykjanes (HS Orka), and 213 MW at
Hellisheidi (Reykjavik Energy).
Role and usage of geothermal energy
In the overall energy mix of the country, geothermal plays a
significant role, predominantly for heating purposes, but also
for electricity generation. not only for electricity generation,
but predominantly for heating purposes.
The largest part of geothermal energy in Iceland is used for
space heating, both for residential, public and private clients,
followed by electricity generation. Together, they represent
about 85% of geothermal energy usage.
Figure 8
Utilisation of geothermal energy by type
in Iceland 2008, in %
Electricity
generation
37%
Space heating
48%
Research into the use of geothermal energy for space heating
started after World War II. In the 1950s oil and coal were the
predominant sources for heating, but already 25% of families
around the country were using geothermal heating services.
With 50% of the population depending on oil for heating
purposes at the time, the oil crisis of the 1970s and increasing
energy prices had a profound impact on Iceland, leading the
government to subsidise oil consumption. This then caused the
country to change its energy policy, turning to domestic energy
resources, hydro and geothermal energy.
The country started a programme to search for new geothermal
resources and started to build new heating services across the
country, including the installation of necessary transmission
pipeline infrastructure, commonly 10–20 km in length. This
development helped to reduce the dependency on foreign
supplies for heating purposes. In 1970 about 50% of heating
came from oil, today it represents less than 1%. Geothermal
energy provides heating for about 90% of all homes in Iceland,
while the remainder are heated using electricity. with the
remainder provided by heating through electricity.
The 3 MW Bjarnarflag plant was the first geothermal power
plant in Iceland. The plant was built in 1969 and originally
owned by the Laxá Power Company. In 1983 Landsvirkjun
bought the plant, when it merged with Laxá. The plant provides
electricity to a remote area of the country, provides district
heating for and supplies water to a nearby geothermal spa.16)
Fish farming 4%
Snow melting 4%
Swimming pools 3%
Industry 2%
Greenhouses
2%
Source: Orkutölur 2009, National Energy Authority
Other forms of utilisation are fish farming, snow melting,
swimming pools, industrial use and heating for greenhouses.
The utilization for space heating alone has tremendous economic
benefits for Iceland. The Energy Authority of Iceland, in November
2009, calculated savings through geothermal heating compared
to consumer costs of oil, which amounted to ISK 57 billion (or
USD463 million) in 2008. Since the 1970s those savings
amounted to a sum of ISK 880 billion (USD 7.2 billion). For a
small economy like Iceland these are big numbers.17)
Today there are 29 district heating systems in Iceland, providing
residents with geothermal heating. They also provide various
businesses that provide services or manufacture with thermal
energy. The district heating services provide heating to service
areas ranging from one municipality to several adjoining
municipalities.
The major district heating systems in Iceland are run by Reykjavik
Energy, which serves around 200,000 people in the capital area
of Reykjavik and smaller communities in the country. The
company is considered to operate the world’s largest and most
sophisticated geothermal district heating system. The company
supplies heating from its Nesjavellir plant in proximity to the
capital area, and through wells within the city of Reykjavik.
13) Sveinn Thordarson, “Hundred Years of Space Heating with Geothermal Energy in Iceland” (2008), retrieved on 8 March 2010, at samorka.is
14) Sveinn Thordarson (2008)
15) Orkustofnun Íslands, “Geothermal Development and Research in Iceland” (April 2006)
16) Jardbödin vid Mývatn, at: http://www.jardbodin.is/english/
17) Ketilsson, J., National Energy Authority of Iceland, “57 milljardar spörudust í fyrra”, Fréttabladid 26 November 2009
12
Iceland Geothermal Energy Market Report
HS Veita is the other big provider of geothermal district heating.
The company provides heating to the communities on the
Reykjanes peninsula and to the municipality of Hafnafjördur,
serving around 40–45,000 people through its plant at Svartsengi.
Electricity generation is provided by three energy companies,
Reykjavik Energy, Landsvirkjun, HS Orka. The small plant of the
energy company in Húsavík in the North-east of Iceland is
currently not operational. The energy companies sell electricity
to residential customers, but the main customers are from the
energy-intensive industry, e.g. the aluminium smelters.
Despite being a small industry in Iceland, fish farming is a
relatively big customer of geothermal energy. The energy is
used to heat water for on-shore fish farming operations, primarily
in raising trout. It is expected that fish farming production will
increase, particularly in smolt production for trout and salmon.
plants. Tomatoes, cucumbers, paprika and flowers are the main
products. In recent years there has been a decrease in
greenhouses, based mostly on competition and other market
issues.
Geothermal resources and potential
The location of Iceland on the major fault lines of the MidAtlantic ridge (Eurasian and North American plate) provides a
unique and very visible geological scene. The separation of both
tectonic plates of about 2 cm per year are visible above sea
level and make Iceland one of the most tectonically active places
on earth.
The Icelandic geothermal features are common for zones in
volcanic areas along tectonic plate boundaries. Groundwater
and seawater seep into the ground, travelling through fractured
bedrock. As the water reaches certain depths it comes into
contact with heat from volcanic sources. The heated water
ascends through fissures, crevices and volcanic crusts and
manifestations of it can be seen in hot springs and other
geothermal features.
Large areas of pavement, streets and parking spaces in the
capital Reykjavik and elsewhere in the country are heated by
hot water, helping to keep those snow and ice free. Most of
the water used for snow-melting comes from used water at
about 35°C from buildings, sometimes mixed with additional
More than 30 high-temperature fields have been identified,
hot water. The actual use fluctuates depending on the weather,
and along the zone clusters low temperature fields exist.
but represents an important form of utilization of geothermal
According to the National Energy Authority, “temperatures
heat in Iceland. Bathing is and has been very popular in Iceland.
reach 250°C in the uppermost 1,000 meters”20) in the highWith mostly open air pools and the colder climate of the country,
temperature fields of the country. Temperatures in the lower
heating those pools with geothermal energy plays an important
temperature areas, about 250 separate areas in total, don’t
role. Today geothermal resources heat numerous public and
exceed 150°C and flank the active volcanic zones of Iceland.
private open air swimming pools across the country and fuels
a large number of natural hot springs used for bathing. There
With the main interior of the country not settled and not easily
are about 160 pools in the country, with more than 130 of
accessible, most of the geothermal development has been close
them heated by geothermal energy. Based on size of the pools,
to the resources in the South-west corner of Iceland and towards
one can say that more than 90% of all pools are heated using
the end zones of the volcanic belt n the North-west of the
geothermal heat. Iceland’s probably most popularf geothermal
country.
pools are the Blue Lagoon close to the international airport in
Keflavik, the Jardbödin at Mývatn in the North-east of the
Several studies have looked into the potential for geothermal
country and the Laugardalur swimming pool in Reykjavík.
Figure 9
There are various industrial players using geothermal
heat for manufacturing or other forms of utilisation for
business purposes. Among them are producers of dried
foods, e.g. for seaweed, fish, pet food and others, as
well as a company producing liquid carbon dioxide from
geothermal fluid. There are new projects that plan to
utilise geothermal energy directly or indirectly, such as
a company planning to produce methanol from CO2
emissions of a geothermal plant18) and another that
plans to fixate CO2 in basaltic rock next to a geothermal
power plant by dissolving CO2 from the plant in water
“at elevated pressure and then inject it through wells
down to 400–800m”.19)
Simplified geothermal map of Iceland
Geothermal energy is also used for heating greenhouses
in Iceland, which provide Icelanders with fresh vegetables
year round, an important supply in this relatively cold
climate of the country. The growing season for vegetables
in the greenhouses of Iceland is also lengthened through
electric lighting from renewable energy fuelled power
Source: Reykjavik Energy, Nesjavellir Information Brochure (2006)
18) Project by Carbon Recycling International in proximity to the Svartsengi geothermal power plant, company website at: http://www.carbonrecycling.is/
19) CarbFix project, by Reykjavik Energy in proximity to the Hellisheidi geothermal power plant, project website at:
http://www.or.is/English/Projects/CarbFix/AbouttheProject/
20) Energy Authority of Iceland, “Renewable Energy in Iceland” (June 2009)
21) National Energy Authority, “Sustainable Utilization of Geothermal Energy”, retrieved on 16 March, 2010, at: http://www.nea.is/geothermal/sustainable-utilization/
Íslandsbanki Geothermal Research
13
energy use in Iceland and a good overview has been provided
by the National Energy Authority.21) This overview looks at the
overall energy potential of the country’s resources and the
energy stored in its bedrock. Energy occurs in the form of
volcanism (volcanic activity), conduction to the surface, and
geothermal energy, which together represent around 30 GW
(30,000 MW) of energy capacity. Of these energy resources,
some are covered by glaciers, so that the geothermal energy
potential that can be harnessed is estimated at 7,000 MW.
While this number provides an indication of overall potential,
sustainability and both technical and environmental issues
related to the development of those resources have to be
considered when looking at utilisation potential. In its work for
the Master Plan on Energy Development in Iceland
(Rammaáætlun, see below in “Geothermal Energy Outlook”),
ÍSOR22) revisited earlier estimates of the potential for electricity
generation from geothermal resources from 1985, and provided
a new estimate range for the main known or expected geothermal
fields of Iceland.
The report provides a “feasibility estimate for the generation
of electricity from known high-heat geothermal fields in Iceland”.
The findings of the report “build upon numberless thermal
conductivity measurements on nearly all high-temperature
geothermal fields”.
The average base estimates given are: 3 MW/km2 in 95% of
the cases (low estimate), 5 MW/km2 in 50% (average estimate)
of the cases and 9 MW/km2 in 5% of the cases (high estimate).
The average base case scenario has then been applied to all
known high-temperature geothermal fields. In comparison with
the 1985 study by the National Energy Authority, the overall
potential area estimate has increased from 480 km2 to 850
km2, and estimated power generation potential has increased
from 3,300 MW to 4,255 MW, a 30% increase. The report does
not take into account potential limits with regards to
environmental or other protection concerns.
The range given provides an overall low estimate of 2,550 MW,
a high estimate of 7,660 MW of potential electricity generating
capacity from geothermal resources, with a 4,255 MW overall
medium capacity potential. Current
installed capacity from geothermal is
Figure 10
573 MW.
In its over three decades the organisation has established itself
as one of the leading geothermal energy research institutions
in the world. In 2003 the National Energy Authority was split
based on new legislation, with the consulting and research arm
of the organisation established as an independent but
governmentally owned research and service institution, called
Iceland GeoSurvey (ÍSOR).
The National Energy Authority and ÍSOR have provided
communities, companies and individuals with consulting and
advice on the utilisation of geothermal resources, in Iceland
and internationally.
The National Energy Authority and ÍSOR together with other
industry players have been participating in international research
work, and in the education of geothermal experts in the United
Nations University Geothermal Training Programme (UNU-GTP),
which is hosted in Iceland. The programme was established
1978 and has educated more than 400 geothermal experts
from about 40 countries mostly from Asia, Africa, Latin America,
but also from Central and Eastern European countries.
With government support for building power generation capacity
within the country, a geothermal industry has developed. Today
there are four major energy companies active in geothermal
power development and various services firms operating on the
exploration, drilling, as well as on the engineering and consultancy
side.
Without going into ownership issues, international relations,
etc., the structure shown in Figure 10 provides an overview of
the Icelandic geothermal energy industry and its related players.
With governmental involvement, particularly on the issue of
research and regulation, the energy companies are mostly
government or municipality owned, except HS Orka, which is
the only privately owned energy company in Iceland.
Services to the industry are mostly provided by private
engineering/servicing companies, and governmentally owned
ÍSOR. Most of the Icelandic engineering and service firms
working in the sector have worked on projects in Iceland and
work internationally in the geothermal sector.
Icelandic geothermal energy market overview
Geothermal energy industry and
players
The political drive towards the utilisation
of own natural resources of hydro and
geothermal after the oil crisis of the
1970s saw increased research and
development. The National Energy
Authority (Orkustofnun) is a government
agency under the Ministry of Industry,
Energy and Tourism. It works in an
advisory capacity to the government on
energy and related issues, promotes
energy research and administrates
development and exploitation of energy
resources.
Regulators/ authorities
Muncipality -level
Energy Authority
Governmental
supervision
Competition Authority
Specialist services - exploration
Specialist services - consultants
Tertiary Education
Large, Small and Individual Consultants
Technical services - drilling
Utilities
Acting as
developers & operators
Transmission/
distribution
Industrial
off-taker
&
Residential
customers
Construction services - contractors
Equipment suppliers
Source: Íslandsbanki
22) Ketilsson, J., Björnsson, H., Halldórsdóttir, S., Axelsson, G., “Mat á vinnslugetu háhitasvæda” (OS, ÍSOR), OS-2009/09, retrieved on 16 March, 2010, at:
http://www.os.is/gogn/Skyrslur/OS-2009/OS-2009-009.pdf
14
Iceland Geothermal Energy Market Report
Government, agencies and organisations
The main governmental entities related to the energy market
and geothermal energy are the Ministry of Industry, Energy and
Tourism, the Ministry for the Environment and the National
Energy Authority.
Responsibilities with regards to industrial- and power-intensive
matters, energy matters, the use of energy, heating and electricity,
as well as ground (natural) resources on land, the sea bed and
in the subsoil fall under the Ministry of Industry, Energy and
Tourism (Idnadarráduneytid).23) The National Energy Authority
(Orkustofnun, www.os.is) and ÍSOR (www.geothermal.is) also
fall under the auspices of the Ministry.
In relation to the use of natural resources, geothermal energy
resources in this case, the Icelandic Ministry for the Environment
also plays an important role, as it “formulates and enforces
Icelandic government policy on environmental affairs. The
ministry supervises affairs pertaining to nature in Iceland,
conservation and outdoor recreation, the protection of animals,
wildlife management, pollution prevention, hygiene, planning
and building matters, fire prevention, weather forecasting and
avalanche-protection, surveying and cartography, forestry and
soil conservation, environmental monitoring and surveillance”.24)
The National Land Survey and the Planning Agency fall under
the auspices of the same Ministry.
The National Energy Authority, as an agency under the auspices
of the Ministry of Industry, Energy and Tourism, is probably the
most important organisation related to geothermal energy
development in Iceland, as its primary role and responsibility is
to “advise the Icelandic government on energy issues and related
topics, promote energy research and administrate development
and exploitation of the energy resources” of the country.
Other organisations related to geothermal energy in
Iceland are:
Geothermal Association of Iceland (Jardhitafélag Íslands,
www.jardhitafelag.is), which represents around 20 firms,
institutions and associations that are active or associated
with geothermal energy matters in Iceland.
Samorka (www.samorka.is), federation of the Icelandic
electricity industry, district heating, waterworks and sewage
utilities in Iceland.
International Geothermal Association (IGA, www.geothermalenergy.org) an international body representing around 2,000
members in 65 countries whose main objective is to encourage
research, development and utilisation of geothermal resources
worldwide. The secretariat of the organisation is based in
Iceland via the office of Samorka (see above).
Competition Authority (Samkeppniseftirlitid,
www.samkeppni.is), the supervision authority for, among
other things, competition issues related to the energy market.
Energy companies
The following energy companies are those with installed
geothermal power capacity, while there are also smaller companies
and distributors of geothermal heating.
Landsvirkjun (”LV”), the national power company of Iceland,
was established in 1965 by the city of Reykjavik and the state
of Iceland. The company is fully owned by the Icelandic state.
Landsvirkjun primarily serves heavy industry, providing it with
electricity, but also smaller energy companies around the
company. Landsvirkjun has 11 power plants, mostly hydropower
plants. It runs two geothermal power plants, the 3 MW Bjarnaflag
and the 60 MW Krafla geothermal power plant (www.lv.is).
Reykjavik Energy (Orkuveita Reykjavíkur, “OR”) was established
by merging the Municipal Electric Authority and the Geothermal
Heating Authority in Reykjavík in 1999, is the biggest geothermal
energy company in Iceland. It is 95% owned by the city of
Reykjavík, while 5% is held by the municipalities of Akranes
and Borgarbyggd. It distributes electricity and hot water for
heating, as well as cold drinking water and water for fire fighting.
Reykjavik Energy serves nearly half of the Icelandic population.
It operates two geothermal power plants, which also provide
heating to the greater capital area, and two smaller hydropower
plants (www.or.is).
HS Orka is the largest privately owned energy company in
Iceland. Total installed geothermal power capacity is 175 MW,
from the Svartsengi and Reykjanes power plants. Svartsengi
also provides 150 MW of thermal energy for district heating.
As of April 2010, the company is 55.3% owned by Geysir Green
Energy, 43.2% by Magma Energy, and the municipalities of
Reykjanesbaer, Grindavík, Gardur and Vogar together own
around 1.5% of shares (www.hsorka.is).
Húsavík Energy (Orkuveita Húsavíkur ehf.) is owned by the
local municipality of Nordurthing in the north-east of Iceland.
The company generates electricity, and acquires hot and cold
water, which it sells and distributes to its customers in the
municipality. It owns the 2.0 MWe Kalina geothermal power
plant, which is currently not operating (www.oh.is).
There are two other sizeable energy companies in Iceland, RARIK
(100% owned by the Icelandic State) and Nordurorka (100%
owned by the municipality of Akureyri), neither of which are
directly involved in power generation from geothermal energy.
Education
There are a number of educational programmes and schools
that provide geothermal programmes, courses, education and
training.
Probably the most prominent is the United Nations University
– Geothermal Training Programme, which the National Energy
Authority (Orkustofnun) administers and established in 1978.
The programme provides six months of specialised training for
students from developing countries with significant geothermal
potential. In its 30 years of operation, the programme has
educated more than 400 scientists and engineers from around
40 countries. It is financed mostly through funds from the
Icelandic government. Since 2000 it has also been providing a
Masters programme in conjunction with the University of Iceland
(www.unugtp.is).
The national University of Iceland is the biggest university in
Iceland and has various programmes directly or indirectly related
to geothermal energy, and most, if not all, of the people working
23) The Ministry of Industry, Energy and Tourism, http://eng.idnadarraduneyti.is
24) The Ministry for the Environment, http://eng.umhverfisraduneyti.is
Íslandsbanki Geothermal Research
15
in the geothermal field in Iceland have studied at least in part
at the university (www.hi.is). The university cooperates with
other universities and schools in Iceland on geothermal energy
related courses and programmes.
Other programmes offering geothermal energy related courses
as part of their curriculum are the Reykjavik Energy Graduate
School of Sustainable Systems (REYST, www.reyst.is), The School
for Renewable Energy Science in Akureyri (RES, www.res.is),
and the Keilir Institute of Technology, School of Energy and
Technology, in Reykjanesbær (www.keilir.net).
Companies
There are a large number of companies working with geothermal
energy or servicing the sector. The following overview provides
a list in no particular order:
Reykjavik Energy Invest (REI), international business
development and investment arm of Reykjavik Energy,
www.rei.is
Landsvirkjun Power, engineering, construction and foreign
investment arm of Landsvirkjun, www.lvpower.is
Iceland GeoSurvey (ÍSOR), exploration services firm,
government ownership, www.isor.is – www.geothermal.is
Mannvit Engineering, engineering and consulting firm, offices
in Hungary, Germany and the UK, privately held,
www.mannvit.is.
the start of operations at HS Orka’s Reykjanes plant and
Reykjavik Energy’s Hellisheidi, an additional 300 MW came
online in 2006–08.
Table 6
Geothermal power plants in Iceland,
as of February 2010
Hellisheidi (OR)
Nesjavellir (OR)
Reykjanes (HS orka)
Svartsengi (HS orka)
Krafla (LV)
Bjarnarflag (LV)
Húsavík (OH, not operating)
MWe
213.0
120.0
100.0
76.4
60.0
3.2
2.0
Total
574.6
Source: Statistics Iceland
Figure 11:
Simplified map of the main geothermal
areas and power plants of Iceland
Verkís Engineering, engineering and consulting firm, privately
held, www.verkis.com
GeothermHydro, engineering and consulting firm, a joint
venture by Verkís, Mannvit and ÍSOR based in Chile, privately
held, www.geothermhydro.com
Efla Engineering, engineering and consulting firm, privately
held, www.efla.is
Iceland Drilling (Jardboranir), drilling services firm, privately
held, www.jardboranir.is, www.icelanddrilling.com
Geysir Green Energy, investment firm, privately held,
www.geysirgreenenergy.com
Source: ÍSOR
Magma Energy Iceland, Icelandic office of Canadian Magma
Energy Corp., geothermal
Figure 12:
power company, listed on
Toronto Stock Exchange/
Development of geothermal electricity generation capacity
Canada,
in Iceland 1969–2008
www.magmaenergy.is
Kaldara Green Energy, geothermal electrical power
production equipment, privately held, www.kaldara.com
Reykjavik Geothermal,
investment, management and
consulting firm, privately held,
www.reykjavikgeothermal.com
Geothermal power plants
Today there are seven geothermal
power plants in Iceland; six are
in operation. In recent years there
has been strong growth in
geothermal power capacity. With
16
Iceland Geothermal Energy Market Report
Source: Statistics Iceland, Íslandsbanki
Geothermal power plants
Svartsengi – South-west Iceland
Bjarnarflag– North-east Iceland
Owner: HS Orka hf.
Capacity: 76.4 MWe
Start of operation: 1977
Supply: Heat and electricity
Turbines: 6 MWe – Fuji (III), 7x1.2 MWe – Ormat (IV),
30 MWe – Fuji (V), 30 MWe – Fuji (VI)
Wells: 24 wells (average depth 1,200m, 11 production,
2 injection wells)
Owner: Landsvirkjun, National Power Company
Capacity: 3.2 MWe
Start of operation: 1969 (Laxárvirkjun)
Supply: Heat and electricity
Turbine: 3 MWe British Thomson-Houston
Wells: 4 wells
General: In close proximity to the Blue Lagoon geothermal
spa, the main tourist attraction in Iceland, which runs on
“waste” water from the geothermal power plant. On the
plant site, the company Carbon Recycling International
is currently working on a new technology for converting
CO2 emissions from the plant into methanol fuel.
General: Fuelling district heating, a brick factory, a pallette
factory and a geothermal spa (Jardböd vid Mývatn)
Picture Source: Landsvirkjun
Picture Source: Creative Commons, flickr/vestman
Nesjavellir – South-west Iceland
Krafla – North-east Iceland
Owner: Orkuveita Reykjavikur (Reykjavik Energy)
Capacity: 120 MWe, 300 MWth
Start of operation: September 1990 (various research
efforts since 1965, construction started 1987)
Supply: Heat and electricity
Turbines: 4x30 MWe Mitsubishi Heavy Industries, Melco
Wells: 26 wells (5 closed)
Owner: Landsvirkjun (National Power Company)
Capacity: 60 MWe
Start of operation: 1978
Supply: Heat and electricity
Turbines: 2x30 MWe Mitsubishi Heavy Industries
Wells: 22 wells (17 high pressure, 5 low pressure, deepest
2,200m)
General: Nesjavellir is located about 177m above sea
level. Hot water for heating purposes is pumped to a tank
on a neighbouring ridge at 406 m above sea level. From
there the water is supplied through 23 km of pipes to
provide district heating in the greater Reykjavik area,
losing only 2°C in temperature on the way.
Picture source: Alexander Richter
Picture Source: Commons/Wikimedia, Gretar Ívarsson
Íslandsbanki Geothermal Research
17
Hellisheidi – South-west Iceland
Reykjanes – South-west Iceland
Owner: Orkuveita Reykjavikur (Reykjavik Energy)
Capacity: 213 MWe (300 MWe planned)
Start of operation: Autumn 2006 (first research 1985
then 2001/2002 as basis for current plant)
Turbines: 2x45MWe in 2006 Mitsubishi Heavy Industries,
33 MWe low-pressure engine in 2007 Toshiba, 2x45MWe
in 2008 Mitsubishi Heavy Industries
Wells: 71 wells (57 production wells, 14 re-injection wells)
Owner: HS Orka hf.
Capacity: 100 MWe (addition of 50 MWe and 30 MWe
bottom cycle planned)
Start of operation: May/ December 2006
Turbines: 2x50 MWe Fuji Electric
Wells: 28 wells (average depth 2,200 m, 9 wells plugged)
General: The plant also provides heating for the greater
Reykjavik area. The plant site is also the focus of a research
project called CarbFix, which is looking into the
sequestration of carbon dioxide in basaltic rocks. The
general approach here would be to dissolve CO2 emissions
released from plant operations into cooling water and
reinject it below the ground to depths of 300–800 m.
Comment: The Reykjanes Power Plant is the only seawater cooled geothermal power plant in the world, and
has one of the highest intake pressure to a geothermal
turbine.
Picture source: HS Orka hf.
Picture source: Orkuveita Reykjavíkur/ media images
Húsavík– North-east Iceland
Owner: Orkuveita Húsavíkur ehf.
Capacity: 2.0 (net) MWe (Kalina), 20 MWth
Wells: 3 wells (95l/s, 121°C)
Start of operation: Mid-2000
Comment: This is a low-temperature plant, one of the
few Kalina plants in the world. Currently the plant is not
in operation; a replacement turbine is expected in autumn
2011.
Picture source: Orkuveita Húsavíkur
18
Iceland Geothermal Energy Market Report
Government policy and framework
A more detailed overview on the legal and regulatory framework
concerning the energy market, electricity generation,
transmission, is provided above. But there are certain special
features relating to activities in the geothermal energy market
in Iceland that should be taken into account.25)
The most important pieces of legislation for the utilisation of
geothermal resources are the Act on Surveys and the Utilisation
of Ground Resources, No. 57/1998, and the Electricity Act,
No. 65/2003; based on those two pieces of legislation, research
and utilisation of ground resources are subject to governmental
licensing, despite resource ownership being based on the
ownership of land. Additionally, surveys, utilisation and other
developments are also subject to the Nature Conservation Act,
Planning and Building Act and other acts relating to the surveying
and utilisation of land and land benefits, which fall under the
auspices of the Ministry for the Environment and related
supervision.
According to the National Energy Authority, “The utilisation of
resources inside the ground is subject to a licence from the
Minister of Industry, Energy and Tourism, whether it involves
utilisation on private land or public land, with the exceptions
provided for in the Act. The National Energy Authority can grant
licences on behalf of the Minister of Industry, Energy and
Tourism. A landowner does not have any priority to a utilisation
licence for resources on his or her land, unless such owner has
previously been issued a prospecting licence. The utilisation
licence permits the licence holder to extract and use the resource
in question during the term of the licence to the extent and on
the terms laid out in the Act and as regarded necessary by the
Minister”.
Further, “According to the Electricity Act, a licence, issued by
the Minister of Industry, Energy and Tourism, is required to
construct and operate an electric power plant. However, such
a licence is not required for electric power plants with a rated
capacity of under 1 MW”.
The National Energy Authority is “responsible for monitoring
geothermal areas, as well as regulating the compliance of
companies operating under issued licences”. The Nature
Conservation Act also provides for protection and monitoring
measurements, which geothermal activities have to comply with.
Recently there have been a number of legislative amendments
related to the energy framework in Iceland. The “ownership of
resources can no longer be sold by the state or municipalities
although the utilization rights can be leased to a developer for
up to 65 years with an extension possibility. Royalties for the
utilization are determined by the Prime Minister.” With the open
market provisions for electricity producers, combined heat- and
power plants are “obliged to keep separate accounts for heat
and power production to prevent cross subsidization of
electricity.”
25) National Energy Authority, Geothermal Legal Framework, retrieved on 16 March, 2010, at: http://www.nea.is/geothermal/legal-and-regulatory-framework/
Íslandsbanki Geothermal Research
19
Projects and international cooperation
Iceland participates in international cooperation and efforts to
promote geothermal energy. The following is an overview of
some of the major projects in which Icelanders are involved.
The International Partnership for Geothermal Technology
(IPGT)
Established by the governments of Australia, Iceland and the
United States in 2008, the partnership is aimed at accelerating
development of geothermal technology through international
cooperation. This coordinated effort at project collaboration
provides a forum for government and industry leaders. Iceland
has joined this project, providing its experience, know-how and
research support (www.internationalgeothermal.org).
Energy Development in Island Nations (EDIN)
Iceland is also part of this project, which supports island states
in developing sound policies for clean energy development and
incentive systems to assist in attracting private capital and
project developers, as well as developing a knowledge base in
clean energy technologies through technical assistance and
training (www.edinenergy.org).
Iceland Deep Drilling (IDDP)
The Iceland Deep Drilling Project (IDDP), www.iddp.is, is a joint
project undertaken by a consortium of Icelandic energy
companies: HS Orka, Landsvirkjun, Reykjavik Energy (Orkuveita
Reykjavíkur), and the National Energy Authority of Iceland
(Orkustofnun). Consultants to the project include staff from
the IDDP consortium, as well as ÍSOR, Mannvit and other
companies and organisations.
Picture source: IDDP website, drilling rig of
Iceland Drilling on IDDP drilling site, spring 2009.
The main purpose of the project is to explore if it is “economically
feasible to extract energy and chemicals out of hydrothermal
systems at supercritical conditions”. The consortium had been
preparing to drill a 4–5,000 m deep drill-hole into one of its
high-temperature systems in order to reach 400–600°C hot
supercritical fluid at a rifted plate margin on a mid-ocean ridge.
The project has been funded by the government of Iceland,
Iceland Drilling, the International Continental Scientific Drilling
Program (ICDP) and the US National Science Foundation. The
drilling of the initial well has been financed by National Power
(Landsvirkjun) and Alcoa.
In the spring of 2009 the drilling started at the site close to the
Krafla geothermal field in the north-east of Iceland. On June
24, 2009, the “drilling rig encountered molten rock at a depth
of 2,104 m and the drill-string got stuck”.26) Tests showed that
the project hit a magma chamber, which could be “deeper than
4 km”, which makes the feasibility of continued drilling efforts
very unlikely.27) So while IDDP must “abandon its ambition to
drill into active supercritical zone at this time”, the current well
might provide a future opportunity for high-temperature
Engineered Geothermal Systems (EGS), probably even the
highest temperature EGS system. There is currently no news on
the results of the first flow tests, which were planned for late
November 2009.
Despite the turn of events, there are ongoing discussions on
continuing the deep drilling project at another site on the
Reykjanes peninsula in south-west Iceland.
Icelandic Geothermal Cluster
A private market initiative is currently working on a project to
define and provide guidance on an Icelandic Geothermal Energy
Cluster. This work is lead by the private company Gekon in
conjunction with various stakeholders in the industry. The project
is based on the definition of an industry cluster by Professor
Michael Porter of Harvard University in the United States.
According to this definition, a business or industry cluster “is
a geographic concentration of interconnected businesses,
suppliers and associated institutions in a particular field. Clusters
are considered to increase the productivity with which the
companies can compete, nationally and globally”. Professor
Porter is the project manager, along with Dr Christian Ketels of
the Institute for Strategy and Competitiveness at Harvard
Business School. The results of the project are expected to be
presented as part of a conference on 2 November 2010. The
patron of the conference is the President of Iceland, Dr Ólafur
Ragnar Grímsson. Íslandsbanki supports the project and is
working with Gekon on this important project for the industry,
on its further development and on the export of know-how in
this industry sector, which is so important for Iceland.
Other involvement
The National Energy Authority has and continues to provide
support, e.g. in the Caribbean region, Nicaragua, Africa and
various other regions in the world. In many cases this work is
provided in partnership with the Icelandic International
Development Agency (ICEIDA).
26) IDDP Press Release “Drilling into Magma at Krafla” from 25 June 2009, retrieved on 26 February 2010, at:
http://www.iddp.is/news/News_releaseDrilling_into_magma_2009-06-25.pdf
27) IDDP Press Release “Exciting Discovery at the IDDP-1 Well” from 29 June 2009, retrieved on 26 February 2010, at: http://www.iddp.is/news/29_June_2009.pdf
20
Iceland Geothermal Energy Market Report
3. Outlook for the Icelandic energy market
Overview
After finding itself in an acute economic crisis following the
collapse of its banking system in 2008, Iceland is now considering
ways to help strengthening its economy and directing its
attention towards the use of its natural resources. As it has
developed its energy sector, Iceland has been able to attract a
number of companies from energy-intensive industries to Iceland
over the years, namely the aluminium plants of Alcoa, Alcan
and Nordurál (a subsidiary of Century Aluminium).
projects and the sometimes limited financial resources of their
owners.
The political decision to use the country’s natural resources to
attract foreign investment to the country resulted in Iceland’s
first aluminium smelter being built in 1969. At the time, fish
exports accounted for around 90 percent of Iceland’s export
income, so with this new smelter the country started a new
economic diversification. Today, income from aluminium exports
equals that of fish, and a debate has started on the need for
further diversification, particularly related to the fluctuating
prices in the fish and aluminium markets.
The development of the Kárahnjúkar hydropower dam and plant
in the east of Iceland in 2003–07 created a sometimes bitter
controversy surrounding the environmental impact of the use
of natural resources for energy-intensive industries.
So while energy will play an important role in Iceland’s economic
development, a balanced approach to using the resources of
the country in order to attract foreign investment is to be
expected.
There are currently two projects of importance for the further
development of the energy market in Iceland. The Master Plan
for Hydro and Geothermal Energy Resources in Iceland compares
the economic feasibility and environmental impact of the
proposed power development projects. This plan is supposed
to aid in the selection of the most feasible projects to develop,
considering both the economic and environmental impact of
such decisions, such as which rivers or geothermal fields should
not be harnessed due to their value as natural heritage and for
recreation.28)
The other project on energy policy was initiated by several
government ministries with the objective of providing
recommendations on who should be able to make use of the
natural resources of the country, own and operate power plants
and produce electricity.
Status of the energy market
The current electricity market is dominated by three major
energy companies, two of which are owned by the Icelandic
state and municipalities. HS Orka is the only privatised energy
company in Iceland as of today.
All three companies are working on a large number of projects
to add electricity generation capacity from hydro and geothermal
resources, driven mostly by increasing demand. They also face
a number of obstacles, including a weak Icelandic krona, foreign
currency denominated debt positions, financing demand for
Current political debate
There is currently a lively political debate on energy and related
issues. To summarise the main elements of the debate is not
easy. The discussions centre on a few key issues, mainly with
regards to the environmental impact of power projects and their
effect on society and overall economic development. Other
significant issues include ownership and usage rights of the
country’s natural resources and their acquisition by foreigners.
There is also the question of what to do with the electricity
generated and the industries buying that electricity.
As tourism plays a more and more important role in Iceland, the
environmental and visual impact of power plants becomes more
of a concern. At the same time the geothermal power plants of
the country are in themselves very popular sites for tourists in
Iceland. The Hellisheidi geothermal power plant of Reykjavik
Energy has had record numbers of visitors from year to year,
with last year’s number of visitors exceeding 100,000. This
compares to a total of 500,000 visitors to Iceland in 2009.
The Blue Lagoon, a geothermal spa built in the shadow of the
geothermal power plant Svartsengi, attracts more than 400,000
visitors a year, so geothermal energy is part of the programme
of ordinary tourists in Iceland.
On the issue of economic development, polls29) indicate that
there is general support for investments in large-scale industrial
projects, but there seems to be a consensus that this will have
to be diversified, particular with regards to additional aluminium
smelters in Iceland. People also discuss the job creation potential
of both energy industry development and its wider ramifications.
Local municipalities in rural areas of Iceland are also exploring
various ways of attracting companies to build up operations,
with often conflicting interests of local residents, environmental
groups or even other municipalities competing for the same
companies.
28) Orkustofnun, Introduction to the Master Plan, retrieved on 16 March, 2010, at: http://www.nea.is/geothermal/master-plan/
29) Capacent Gallup polls for various players from 2005–2009
Íslandsbanki Geothermal Research
21
The ownership of natural resources and control thereof by the
general public or the government also sees a lively debate across
all parties. Interestingly enough, this is covered in Icelandic
legislation on the energy market and the use of natural
resources.30) Current legislation clearly states that “ownership
of resources cannot be sold by the state or municipalities”, but
the rights for the use of resources “can be leased to a developer
for up to 65 years”. This has paved the way for the privatisation
of HS Orka, including the first foreign investment in an energy
company in Iceland. So while there can understandably be a
debate with regards to valuation of leasing fees, Iceland’s
membership of the European Economic Area (EEA) also means
that there cannot be ownership limitations with regards to
companies from states within the EEA.
a combined electricity generation capacity of 1,600 MW, and
about 260 MW more if the projects with open-ended start dates
are included.
This report does not consider the investment needed for those
energy intensive projects, but it is estimated that they alone
will require an investment of about USD 3.1 billion (ISK 400
billion) with nearly two thirds of that needed in the next 4
years.31)
Figure 13
Electricty demand by year, based on new
projects and planned operation start
456
500
456
400
There is an increased demand for energy in Iceland from a large
number of projects that are built upon using affordable electricity
derived from sustainable resources. With increased awareness
of environmental issues and the general climate change debate,
companies all over the world are looking into sourcing “green”
electricity; in some instances they are even forced to do so by
national legislation setting renewable standards on electricity
supply.
There are currently a large number of industrial projects in
progress, and they all plan to use a lot of electricity. Table 7
provides an overview on current energy intensive industry
projects planned in Iceland (potential off-takers).
The list suggests a tremendous energy demand, should all of
these projects go ahead. Until 2016 these projects would need
MW
Energy demand
276
300
200
265
231
145
100
35
0
2010
2011
2012
2013
2014
2015
2016
n/a
Source: ASÍ
The National Energy Authority has examined closely the future
demands on the electricity market in its electricity demand
projections 32) for 2009–2030. Unlike the study by the
Confederation of Labour mentioned above, these projections
do not consider currently planned industrial projects. It predicts
an increase in demand of about 4% in 2010 from 2009 levels
of 16,816 GWh to 17, 503 GWh. In installed capacity, just
through gradual demand increases from current customers, The
Authority predicts an annual increase in demand of about
Table 7 Planned industrial projects and their energy capacity demand
Project/ Industry sector
Company
Location
Paper production
Data Storage I (1)
Data Storage II (1)
Silicon production I
Carbon fibre
Data Storage I (2)
Aluminum smelter (1)
Data Storage II (2)
Silicon II (1)
Aluminum smelter – extension
Aluminum smelter (2)
Aluminum smelter (3)
Aluminum smelter (1)
Aluminum smelter (4)
Aluminum smelter (2)
Aluminum smelter – extension
Silicon production II (2)
Silicon production III
Aluminum foil for capacitors
Icelandic Paper
Verne Holding
Greenstone
Tomahawk/ ISC
UB koltrefja ehf
Verne Holding
Nordurál
Greenstone
BPI/ Strokkur
RTA
Nordurál
Nordurál
Alcoa
Nordurál
Alcoa
Nordurál
BPI/ Strokkur
Elkem
Becromal
Hellisheidi
Midnesheidi
Blönduós
Helguvík
Saudarkrókur
Midnesheidi
Helguvík
Blönduós
Thorlákshöfn
Straumsvík
Helguvík
Helguvík
Bakki
Helguvík
Bakki
Grundartangi
Thorlákshöfn
Grundartangi
Akureyri
Region
Energy
supply
MW
MW
sum.
SW
SW
NE
SW
NE
SW
SW
NE
SW
SW
SW
SW
NE
SW
NE
SW
SW
SW
NE
10
25
50
60
10
25
156
70
50
75
156
156
300
156
300
40
50
100
75
10
35
85
145
155
180
336
406
456
531
687
843
1,143
1,299
1,599
1,639
1,689
1,789
1,864
Start of
operation Energy source
2010
2010
2011
2011
2011
2011
2012
2012
2012
2013
2013
2015
2015
2016
2016
Status
Reykjavik Energy (excess water from Hellisheidi plant
National Power (hydro, Thjórsá)
National Power (sourced by demand)
HS Orka (30 MW), Reykjavik Energy
undefined
National Power (possibility of 25+ MW)
HS Orka, Reykjavik Energy
National Power (draft contract)
National Power (MOU)
National Power (Búdarháls/Hydro)
HS Orka, Reykjavik Energy
HS Orka, Reykjavik Energy (ongoing research)
National Power, Theystareykir (ongoing research)
HS Orka, Reykjavik Energy (ongoing research)
National Power, Theystareykir (ongoing research)
Reykjavik Energy (Hellisheidi)
National Power (MOU)
No electricity secured
National Power (draft contract)
Status:
1 = Existing interest, feasibility work in progress
2 = Feasibility closed (interest, electricity likely in sight), work on environmental impact analysis and permits
3 = Environmental Impact Analysis closed/ not needed, work on permits, construction could have started
4 = Permits given, construction already far advanced, work on financing
Locations: SW = South-west, NE = North-east
Source: ASÍ
30) See legal framework in the “Geothermal Energy in Iceland” chapter above
31) Fréttabladid of 12 February, 2010, “Fjárfestingar í orkufrekum idnadi 400 milljardar til 2017”, retrieved on 16 March, 2010, at:
http://www.visir.is/article/20100212/VIDSKIPTI06/847898525/-1
32) Orkustofnun, Raforkuspá 2009–2030 (OS-2009/004), retrieved on 11 March, 2010, at: http://www.os.is/gogn/Skyrslur/OS-2009/OS-2009-004.pdf
22
Iceland Geothermal Energy Market Report
3
3
2
3
2
3
4
2
2
4
3
3
2
3
2
1
2
1
1
0.5–0.6%, or about 12–13 MW in additional capacity needed
per year to fuel that demand.
Figure 14
Planned power project capacity added by year
Planned power generation projects
443
The main energy companies in Iceland are in various stages of
developing power projects, either hydropower plants or
geothermal power plants. The following overview, based in large
part on a study by the Icelandic Confederation of Labour (ASÍ),33)
provides an overview of projects, project owners, potential offtakers, locations and planned capacity.
MW
400
300
220
220
205
185
200
170
165
100
50
0
There are currently 27 projects, which would-according to
current plans-add 1,660 MW of electricity generation capacity
by 2017, increasing current capacity by 64%.
2010
2011
2012
2013
2014
2015
2016
2017
Source: ASÍ
Of those 27 projects planned until 2017, some are extensions
to plants either currently in operation or planned. Geothermal
power projects are representing with 65% the majority of
projects when it comes to capacity planned. Planned geothermal
projects would add 1,068 MW or nearly triple current installed
capacity..
Figure 15
Planned power project capacity added by year
by energy source
443
400
Geothermal
Assuming that installed capacity for oil-based generation remains
the same, then geothermal would end up representing about
38% of all power generation capacity installed in Iceland by
2017.
Hydro
MW
300
200
100
The following overview on current power plant projects provides
an overview on plant sites, the kind of resource, planned capacity,
as well as the potential off-taker.34)
0
205
140
165
135
90 80
50
0
2010
130
90
80
2011
0
2012
2013
0
2014
2015
50
0
2016
2017
Source: ASÍ
Table 8 Planned power projects by type, developer and estimated start of operation
Plant sites
Type
Developer
Búdarhálsvirkjun
Reykjanes 2
Hellisheidi 4
Hellisheidi 5
Holtavirkjun/ Thjórsá
Reykjanes 3
Hverahlíd
Hvamm/ Thjórsá
Urridafoss
Krísuvík 1
Eldvörd
Gráhnjúkar
Theystareykir 1
Bjarnarflag 1
Skaftá
Theystareykir 2
Theystareykir 3
Bjarnarflag 2
Krafla II 1
Bitra
Krísuvík II
Krísuvík III
Krafla II 2
Krafla II 3
Gjástykki 1
Gjástykki 2
Trölladyngja
Hydro
Geothermal
Geothermal
Geothermal
Hydro
Geothermal
Geothermal
Hydro
Hydro
Geothermal
Geothermal
Geothermal
Geothermal
Geothermal
Hydro
Geothermal
Geothermal
Geothermal
Geothermal
Geothermal
Geothermal
Geothermal
Geothermal
Geothermal
Hydro
Hydro
Geothermal
Landsvirkjun
HS Orka
Reyjavik Energy
Reykjavik Energy
Landsvirkjun
HS Orka
Reykjavik Energy
Landsvirkjun
Landsvirkjun
HS Orka
HS Orka
Reykjavik Energy
Theystareykir/ Landsvirkjun
Landsvirkjun
Landsvirkjun
Theystareykir/ Landsvirkjun
Theystareykir/ Landsvirkjun
Landsvirkjun
Landsvirkjun
Reykjavik Energy
HS Orka
HS Orka
Landsvirkjun
Landsvirkjun
Landsvirkjun
Landsvirkjun
HS Orka
Total
Location
MW
SW
SW
SW
SW
SW
SW
SW
SW
SW
SW
SW
SW
NE
NE
SE
NE
NE
NE
NE
SW
SW
SW
NE
NE
NE
NE
SW
80
50
45
45
50
45
90
80
125
75
45
45
45
45
130
45
45
45
45
113
75
75
45
45
40
40
50
MW sum.
80
130
175
220
270
315
405
485
610
685
730
775
820
865
995
1,040
1,085
1,130
1,175
1,288
1,363
1,438
1,483
1,528
1,568
1,608
1,658
1,658
1,658
estimated operation
Status:
1 = Existing interest, feasibility work in progress
2 = Feasibility closed (interest, electricity likely in sight), work on environmental impact analysis and permits
3 = Environmental Impact Analysis closed/ not needed, work on permits, construction could have started
4 = Permits given, construction already far advanced, work on financing
Locations: SW = South-west, SE = South-east, NE = North-east
2010
2010
2010
2010
2011
2011
2011
2012
2012
2013
2013
2013
2014
2014
2014
2015
2015
2015
2015
2015
2015
2015
2016
2016
2016
2016
2017
Offtaker
Status
Straumsvík
Helguvík
Grundartangi
undefined
undefined
Helguvík
Helguvík
undefined
undefined
Helguvík
Helguvík
Helguvík
Northwest
Northwest
undefined
Northwest
Northwest
Northwest
Northwest
undefined
Helguvík
Helguvík
Northwest
Northwest
Northwest
Northwest
Helguvík
4
3
4
4
3
3
4
3
3
2
2
2
2
3
1
2
2
3
2
3
1
1
2
2
1
1
1
Source: ASÍ
33) Confederation of Labour (ASÍ), “Haustskýrsla Hagdeildar ASÍ 2009” (21.10.2009), retrieved on 11 March, 2010, at:
http://www.asi.is/Portaldata/1/Resources/documents/Haustsk_rsla_2009_-_LOKA211009.pdf
34) See footnote above
Íslandsbanki Geothermal Research
23
Outlook for geothermal energy in Iceland
As can be seen in the above overview of power projects in
Iceland, geothermal energy based power plant projects represent
nearly two thirds of overall electricity generating capacity
planned. They will therefore play a crucial role in providing much
needed electricity for the economic development in Iceland in
the coming years.
There is a potential for electricity generation from geothermal
resources of about 4,300 MW in Iceland. Current geothermal
projects tap only around 25% of that amount, so there could
be more development. The recently released findings of the
second phase of the Icelandic master plan (see below) also
highlight the importance of geothermal energy in energy
planning for Iceland as it represents the option with the least
environmental impact when compared to hydropower plants.
Phase 2 of the master plan work (2004-07, with new project
management from 2007–10) has primarily looked at the
protection and use of the natural environment in respect of
hydro and geothermal resources. The main emphasis in this
phase was put on the protection and wide-ranging use of natural
resources, as well as the sustainability of the energy resources.
The initial results of Phase 2 were published in March 2010,
and there is now an ongoing public consultation process with
a deadline for comments of April 19, 2010. The final report is
then expected to be published taking the results of the
consultation process into account.
The initial report, now open for consultation, provides details
on the options for energy use in Iceland, stating a potential of
22,405 GWh/ year (22.4 TWh) for hydropower, and 30,435
GWh (30.4 TWh) for geothermal power.
Master plan for hydro and geothermal energy
resources in Iceland
While the master plan work looks into both hydropower and
geothermal energy, this report only considers the elements of
the plan that concern geothermal energy.
In 1999 work started on an Icelandic master plan for the
protection and use of natural resources which focused on hydro
and geothermal energy resources. Split into two phases, the
project had been planned to be finished by the end of 2009.
As part of the work on the report, the National Energy Authority
together with ÍSOR have provided an estimate of geothermal
resources that are feasible for development,35) (see Table 9).
The work on this master plan looks into all potential
power projects in hydro and geothermal, evaluating
and categorising them based on energy efficiency,
economics and the potential impact on the
environment. Comparable to the planning of land
use and land protection, the master plan is not
intended to go into details regarding an
environmental impact assessment (EIA), but is
supposed to “find those projects that are best
suited for development based on energy production,
economy and protection of the nature.”
Figure 16
Geothermal fields in Iceland
The first phase of the work (1999–2003) looked
primarily into the use of energy resources in Iceland,
with the emphasis on bigger hydropower plants,
mostly built in the highlands of Iceland, and on
geothermal power plants. Twenty possible hydro
project sites were evaluated at 11 locations and
20 possible geothermal project sites in 8 hightemperature areas.
Phase 1 was concluded with a preliminary finding,
recommending that more research would be needed
into the geothermal high-temperature areas.
35) Ketilsson, J., Björnsson, H., Halldórsdóttir, S., Axelsson, G. (2009) Mat á vinnslugetu háhitasvaeda (OS-1009/09)
24
Iceland Geothermal Energy Market Report
Source: ÍSOR
Table 9 Base case evaluation of electricity generation potential for 50 years in Iceland
Area
Size
(km2)
Estimate of
1985 (MW)
High estimate
(MW)
Mid estimate
(MW)
Low estimate
(MW)
Askja
Brennisteinsfjöll
Fremrinámar
Geysir
Gjástykki
Hágöngur
Hengill
Hrúthálsar
Hveravellir
Kerlingarfjöll
Krafla-Námafjall
Krýsuvík
Kverkfjöll
Reykjanes*
Svartsengi-Eldvörp
Theistareykir
Torfajökull
Vonarskarð
27
5
10
5
11
43
142
4
14
39
62
89
31
9
30
48
253
29
74
12
35
27
69
63
689
62
9
76
464
302
49
28
108
150
1,012
65
243
45
90
45
99
387
1,278
36
126
351
558
801
279
81
270
432
2,277
261
135
25
50
25
55
215
710
20
70
195
310
445
155
45
150
240
1,265
145
81
15
30
15
33
129
426
12
42
117
186
267
93
27
90
144
759
87
Total
851
3,294
7,659
4,255
2,553
* For Reykjanes there are additional estimates by Mannvit, provided in a report for Magma Energy Corp, which states proved resources of 100 MW
and an indicated resource of 90 MW” (Mannvit/ Magma, 2010)
Sources: National Energy Authority, “Development feasibility evaluation of high heat areas” (OS-2009/09),
“Geothermal Resources and Properties of HS Orka, Reykjavik Peninsula, Iceland – Independent Technical Report”, Mannvit for Magma Energy Corp.
Jan. 29, 2010
Research estimates in the technical report by Mannvit were established based on the Canadian Geothermal Code for Public Reporting of the Canadian
Geothermal Energy Association (CanGEA)
National Energy Policy
Based on the political discussion about the energy market and
the use of natural resources, as well as the work on the Master
Plan for Hydro and Geothermal Resources in Iceland, the Icelandic
government36) decided to create a policy working group. This
working group is to present its recommendations for a National
Energy Policy. This policy is supposed to provide a framework
for the use of natural energy resources, ownership and
development, highlighting the importance of using the natural
resources wisely and to the benefit of the nation.
Within the legal framework of the energy market of Iceland
(see above), there is also currently work being done to determine
a competitive process or decision criteria should there be a case
where two parties apply for usage rights.
The National Energy Policy working group is expected to provide
its recommendation in the autumn of 2010, and it will then
enter the political decision process.
36) Based on a speech by the Minister for Industry, Energy and Tourism, Katrín Júlíusdóttir, 25 February, 2010 at the Open meeting about the National Energy Policy,
retrieved on 16 March, 2010 at: http://www.idnadarraduneyti.is/radherra/raedur-greina-KJ/nr/2851
Íslandsbanki Geothermal Research
25
4. Investment needs – geothermal energy
Overview of geothermal financing in general
Governments and government agencies have traditionally played
a major role in the research and development of geothermal
energy projects. The risk profile of early stage geothermal
exploration and development has always been an obstacle in
attracting private money to this industry. Therefore, research
on geothermal resources and geothermal fields, the necessary
exploration work and pre-feasibility studies have traditionally
been financed by public funds.
Until the resource has been proven, traditional long-term project
financing is not available. To what extent the resource needs to
be proven varies by project. As a geothermal project develops
so the project risk decreases, making it easier to attract capital.
The current size of the industry, long lead times, and high upfront capital costs have hindered the geothermal industry from
becoming an obviously attractive investment opportunity for
financial players, banks and investors.
Geothermal development has always been correlated with price
developments in electricity and oil markets. As a result, increases
in geothermal development have come in phases. The late 1970s
and early 1980s saw a lot of governments providing the necessary
financing for a push in development. With the increasing
awareness and discussion about global warming and rising
energy prices, geothermal energy has recently gained interest
as a much needed base-load energy resource.
To describe what a typical capital structure should look like and
how capital could be raised for a geothermal project is difficult
as projects differ greatly with regards to location, local market
conditions, geothermal settings, water flows, local political
environment and developer specifics. Capital flows into
geothermal development have also depended greatly on local
energy markets and on public and political support. But first
and foremost, geothermal projects and investors face high initial
risks that decrease over the course of a project.
It is not uncommon in the life-cycle of geothermal power projects
that it can take around 5–7 years until the actual operation is
up and running. It could also take 1–2 years more or less,
depending on the granting of permits and other licensing issues.
Development depends greatly on the resource available and
the success of drilling. Clearly, as in any other industry faced
with drilling risk, raising capital can be difficult. Here the drilling
risk is reduced with a proven resource-in volume, temperature,
pressure of the fluids and sustainability.
Generally, a geothermal project can be divided into five different
phases. Each phase requires different financial products, with
very different risk profiles at each stage in the development cycle.
Traditional project and debt financing cannot be drawn upon in
the early stages of the development of a geothermal project.
Traditionally, the start-up phase has attracted governmental
support in the form of research efforts, accompanying legislative
efforts, permitting and licensing issues. A clear legislative and
regulatory framework is crucial for geothermal development.
In the “Exploration and Pre-Feasibility Phase”, geophysical
surveys and collected geochemical and geological data are
analysed, and temperature gradient drilling provides an overview
of where there is geothermal potential for further development.
In this early phase of a geothermal project, the risk is high and
only development equity can provide the necessary financing,
mostly through financing provided by the developer itself or
outside seed capital. To attract any financing at this stage is
extremely difficult, and the overall geothermal potential for this
particular area/region needs to be favourable in order to attract
investors.
In the pre-feasibility part of this phase a focused exploration
of the most favourable resource areas is conducted and sufficient
exploration data is being collected and analysed.
At this stage, the risk is still relatively high and financing can
only be provided through development equity (see above). But
venture capital and early stage private equity can also help drive
the project further. Still, the developer will find it rather difficult
to raise the necessary financing and only equity can be of help
at this point in the project.
Figure 17
Geothermal project development phases and financing options
Start-up
Venture
Capital
Exploration/
Pre-Feasibility
Development
Equity
•Developers
•Independent Power Producers (IPP)
•Resource Speculators
•Venture Capitalists
Feasibility/
Resource
verification
Detailed Design
& Construction
Mezz./ Bridge
Debt, Const.
Financing
Project
Financing
Drilling
Equity
Project
Equity
•Private Equity
•Public Markets
•Financial Partners
•Private Equity
•Strategic Partners
Start of
Operation
Tax
Equity
•Financial Players
•Large IPPs with ability
to monetize tax
credits
Source: Íslandsbanki
26
Iceland Geothermal Energy Market Report
The lengths of the “Exploration” and “Pre-Feasibility” phases
differ greatly by region; each region, each can take about one
year.
In the “Feasibility/ Resource verification” phase, which may
take around two years, the first full-sized production well and
additional confirmation wells are drilled. Successful drilling here
proves the existence of the resource and significantly reduces
the risk of the project. It also allows the preliminary design of
the planned geothermal plant to be drawn up.
Given a clearer picture of the resource, the financing possibilities
improve and can attract additional financial resources. The
drilling in this phase is mostly financed through drilling equity,
provided for by private equity, financial partners, and even
public markets in some cases. Very few banks have been able
to provide debt financing at this rather early stage. There have
been cases of banks and other financial players accepting steam
output representing 30% of planned capacity to provide debt
financing for drilling the remaining well capacity (production
wells), but those levels have risen to up to 70% of steam output
in the current financial market conditions.
The overall development cost of a geothermal project up to this
point is as much as 20–30% of overall project cost, with the rest
being spent on the design and construction of the power plant.
The duration of the “Detailed Design & Construction” phase
differs as well. The remaining production and re-injection wells
are drilled and tested, any necessary civil works are finished and
the final design, construction, and testing of the plant can be
processed within a 2–3 year time frame. This phase sees
traditional project equity possibilities coming into the picture.
The resource is proven and clearer estimates about the output
allow for construction financing for the project. At this stage,
strategic partners, e.g. suppliers and/ or energy companies,
can come into the picture, providing further private equity to
the project, either in the form of cash or through the provision
of technology in exchange for a share in the equity of a project.
After up to seven years, the plant can be operated and
maintained, with a potential extension of the plant as well, all
depending on the yield of the resource field. Project finance
and, depending on country, production tax credits, now allow
an opportunity for the exit of early stage and strategic investors.
As can be seen from all the above, development cycles with
different risk profiles present challenges to geothermal project
development globally. This applies particularly in regions where
the geothermal energy potential has not been discovered and
quantified as it has been in countries with “established”
geothermal production, such as the Philippines, Indonesia, the
United States and Iceland.
In the past, the development of geothermal projects has been
driven by big energy companies in many regions, most of them
in state ownership, such as in the Philippines. There, the political
support for geothermal energy as a resource that provides
independence from outside energy resources has been particularly
strong, but so has the potential for geothermal energy utilisation.
Other examples are New Zealand and Iceland, two island states
that started to develop geothermal in times of scarce and highpriced energy supplies, New Zealand as early as the early 1950s,
and Iceland with its big push for geothermal in the 1970s.
Today reliance on political support has lessened, but in regions
where the development of geothermal energy is more capital
intensive, such as in Germany, it still depends heavily on
government incentive programmes, such as feed-in-tariffs
(Germany) or renewable portfolio standards (in many states in
the U.S.).
While governmental support and/or subsidies in the form of
risk insurance (for the drilling risk, for example) or so-called
feed-in-tariffs (with electricity prices per kWh higher than the
market price for non-renewable electricity generation), as well
as production tax credits, can help projects to get off the ground,
all those projects depend heavily on the open market for their
financing needs.
Geothermal financing in the Icelandic context
Research and exploration of geothermal resources have been
led by the National Energy Authority with funding from the
Icelandic government.
With most of the exploration and research done by these two
entities, the energy companies in Iceland, all of which are in
government or municipality ownership (or at least they were
until 2007 when the state sold its share in Hitaveita Sudurnesja,
now HS Orka and HS Veita) have then built their projects and
plants on the back of work conducted by the National Energy
Authority and ÍSOR.
The establishment of a “prospect” for a geothermal project and
the necessary drilling to prove the resource, has-as in other
countries-been covered by equity infusion from the developer.
In the case of Iceland, that financing has come in the form of
equity from the energy companies. Because the energy companies
are owned by the state or municipalities, one can say that this
development was indirectly financed by the taxpayer or by
customers’ utility bills.
Aside from general research work on geothermal resources
undertaken on a national level, one estimates that about 10%
of the project development costs of a geothermal power plant
are spent in exploration and pre-feasibility work. Estimating
this portion of the overall cost in the Icelandic context is difficult,
but it is at least close to that figure. The drilling cost is one of
the largest and most crucial cost elements in geothermal project
develop-ment, representing about one third of the overall
development cost.
While most of the initial drilling needs to be paid for in the form
of equity, part of the drilling could and can be covered by
construction financing. In the past about 35% of steam output
had to be proven, but in the current financial climate those
levels have risen to up to 70%, which definitely increases the
demand for equity provision from the developer, in this case
the energy companies.
In the case of Reykjavik Energy’s Hellisheidi plant, the European
Investment Bank (EIB) provided a EUR 170 million loan for the
plant’s 90 MW expansion and a new 90 MW plant in Hverahlíd
in 2009. This probably represents around half of the overall
project cost for both projects. The loan provides financing for
the “construction and operation of new power generation
facilities”. Given the current production at Hellisheidi, the loan
provides some financing for new production wells, but it will
Íslandsbanki Geothermal Research
27
While construction of the power plant is by far the largest part
of the development cost, the cost to get through the start-up,
the exploration/pre-feasbility and feasibility phases can be up
to 50%.
So, even when there is project financing available from banks
like the European Investment Bank, this has typically only
covered just over half of the project development cost for the
later part of the project. The rest has to come from the energy
companies themselves.
Financing of new geothermal projects in Iceland
In the current economic climate with budget cuts on national
and municipality levels, as well as cutbacks in services to the
general public and increasing tax levels, energy companies face
significant challenges while raising the necessary capital to
develop planned geothermal power projects.
As described above, the capital required from the energy
companies themselves to cover the high initial costs of
development needs to come from their own equity, or equity
raised on the public markets. Given that most of the new projects
are still at an early stage, debt financing is not an option. So
to develop planned projects, the energy companies need equity
injection from their owners. In the case of Landsvirkjun this is
the Icelandic state, and in the case of Reykjavik Energy this is
primarily the municipality of Reykjavík. In the case of HS Orka,
it is Geysir Green Energy and Magma Energy.
The financial crisis has left the energy companies with highly
leveraged balance sheets, while at the same time leaving them
with the need to raise equity for both operations and new
projects. At the same time, the energy industry is viewed as a
possible tool for diversifying the economy and attracting foreign
direct investments to Iceland.
If Iceland manages to attract companies from energy intensive
industries, it needs to provide electricity to serve those increasing
demands. In turn, this involves further development in the
power sector, meaning additional power plants. At present, the
owners are not able to provide the necessary capital increase,
which leaves the option of raising money in the public market
or through investors.
Perhaps self-evidently, the nature of equity is that it represents
the ownership interest of shareholders in a corporation, or in
the case of the energy companies in Iceland, it means that
equity raised from new investors will dilute the holding of
existing owners of the company. So if current owners are not
able to provide additional equity this equity has to be raised
outside the current shareholder group.
Planned additional geothermal power
capacity by year, in MW
443
400
300
MW
EIB provided EUR 32 million for the construction of Nesjavellir
(1998), EUR 21 million for the expansion at Nesjavellir (2000)
and EUR 24 million for the expansion of the geothermal cogeneration at Nesjavellir (2004).
Figure 18
200
140
165
135
90
100
90
50
0
0
2010
2011
2012
2013
2014
2015
2016
2017
Source: ASÍ
For the purpose of this document we are only looking at currently
planned geothermal power projects. Of those planned projects,
two have already secured debt financing. Reykjavik Energy has
raised debt financing from the European Investment Bank for
the extension of Hellisheidi and the new plant at Hverahlíd.
Figure 19
Investment needs for currently planned
geothermal projects, in million USD
800
700
Debt
600
m illio n US D
not cover all drilling costs. The same applies to the new project
at Hverahlíd and another EIB loan of EUR 157 million provided
jointly to Landsvirkjun, Reykjavik Energy and Hitaveita Sudurnesja
(now HS Orka) in 2004.
500
248
400
300
200
100
0
Equity
665
135
278
83
2010
128
2011
267
267
70
2012
2013
2014
135
25
2015
75
2016
2017
Source: Íslandsbanki estimates based on data by ASÍ
The total investment needs for currently planned geothermal
power plants amount to USD 2.7 billion (or roughly ISK 345
billion)37) for the 1,068 MW of geothermal power generation
capacity planned for Iceland. Taking into account the secured
debt financing of Hellisheidi and Hverahlíd, the total investment
needed as of now is USD 2.4 billion (roughly ISK 300 billion)38).
Based on the current pipeline of projects, one can estimate the
following investments and debt financing is needed to finalise
those projects in their planned timeframe.
The overall equity investment needed for Icelandic geothermal
power projects is about USD 840 million (ISK 107 billion), while
about USD 1,530 million (ISK 196 billion) is needed in debt
financing for all projects currently planned until 2017.
The equity provided will get projects to a stage where construction
or project financing in the form of a loan can be obtained.
37) This is based in parts on the findings of the Specialist Group 4 of the Master Plan project. (exchange rate of USD1 = ISK 128, as of 16 March, 2010), retrieved
on 16 March, 2010, at: http://www.rammaaaetlun.is/media/nidurstada-faghopa/Fag3-og-4.pdf
38) See footnote above
28
Iceland Geothermal Energy Market Report
One clearly important factor is the
development cost, which also has to be
seen in the context of electricity prices
achieved by the developer/energy
companies.
Figure 20
World geothermal installed power generation capacity
& pipeline of projects, in MW
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Capacity 2009
Projects
MW
So while the development cost of each
installed MW in Germany is extremely
high, the 20-year guaranteed feed-intariff, which is in excess of 30 cents/kWh
makes an interesting investment case.
In the U.S., power purchasing agreements (PPA) between developers and
energy companies, which are required
in order to buy electricity from renewable
resources, have been paying in the range
Source: Íslandsbanki estimates
of 7–10 cents/kWh. So while development cost is clearly an important
element,
so
are
the
eventual
revenues from electricity sales to
Iceland in the international geothermal development
the energy companies and respectively the investors backing
context
the project.
Iceland competes on international markets for financing on
many levels. If we look at financing for its geothermal projects,
Investment case geothermal in Iceland
it competes with all the other major geothermal countries in
As described above, investment decisions by potential investors
the world.
are made on the basis of a number of criteria, including the
In order to draw a comparison with a potential geothermal
development cost, potential for development, demand for and
investment case for Iceland, one has to look at development in
price of electricity, general economics of the project as driven
other countries and the factors that would affect raising necessary
by expected revenues, political risk and accessibility of the
investment for the sector.
market.
Iceland ranks number seven when it comes to installed power
generation from geothermal energy.
With regards to the overall geothermal project pipeline in the
world, Iceland ranks number four when it comes to planned
generating capacity.
When it comes to financing the current pipeline of projects,
there are a lot of factors that influence investor interest in the
geothermal sector. Factors that are of the essence are the
political situation, political risk, investment climate, investment
opportunities and, last but not least, the rate of return.
Figure 21
Geothermal development cost compared,
selected countries (million USD/MW)
15.0
16
14
million USD
12
10
8
6
4
5.8
4.5
2.5
2.6
3.5
3.5
2
0
Source: Íslandsbanki estimates
Iceland, with a thriving geothermal energy industry, experienced
development teams, strong know-how, and service availability,
has many things to offer that most of the new emerging
geothermal countries, e.g. Chile and others, do not. The
availability of experienced staff is vitally important, as in the
worldwide context there is an increasing demand for human
resources given the increase in development globally. There has
been an increasing demand for Icelandic geothermal expertise
and a number of companies have been very active internationally,
either individually or in the case of Chile, jointly. Icelandic
geothermal experts have worked globally in most, if not all,
regions and countries with geothermal potential and have built
a solid reputation.
From an economic perspective, Iceland can offer relatively
competitive development costs. But on the issue of revenues
through electricity sales the picture looks slightly different. So
while development cost in the United States is nearly double
that in Iceland, revenues from electricity sales are much higher.
Estimates of electricity sales in Iceland are at around 2.5 to 3
cents/kWh, compared to 7–10 cents/kWh in the U.S.39)
So, Iceland will have to look into the possibility of increasing
its competitiveness from that angle. This is clearly a challenging
task, as it needs to attract customers for electricity to Iceland
at the same time as it is in need of further investment in the
energy sector. The aluminium sector has played an important
role in diversifying the Icelandic economy to a point where there
is now fear of a new dependency. At the same time the fluctuation
39) Based on analyst research on Magma Energy and its holding in HS Orka, as well as estimates by Íslandsbanki
Íslandsbanki Geothermal Research
29
of aluminium prices in international markets, and the way that
electricity prices are tied to aluminium prices, has effectively
meant that the energy companies carry a risk that some
commentators believe should have been carried by the offtaker, in Iceland’s case the aluminium smelters. There is a debate
on diversifying the industry demand for electricity and thereby
creating a more competitive and increased demand for electricity.
Another debate has centred on the possibility of electricity
exports through a subsea cable to enter the European electricity
market, where higher electricity prices should be achievable.
On the political side, investors are clearly concerned about
sentiment towards investments by foreigners and the political
30
Iceland Geothermal Energy Market Report
implications of such investments. There is now a clear distinction
between ownership of natural resources and time-limited
utilisation by energy companies, which has made possible the
acquisition of the first and only privatised geothermal energy
company, HS Orka (the power generation part of the former
Hitaveita Sudurnesja). Investors, therefore, see this as a sign of
the potential of the Icelandic energy market. It remains to be
seen how and if politics in Iceland will respond to the increasing
demand for electricity through various energy intensive projects,
and the corresponding capital requirement facing the many
power projects in the pipeline.
Sources
Energy market Iceland
Orkustofnun, “Meet Iceland – a Pioneer in the Use of Renewable Resources” (2009)
Based in parts on: Orkustofnun, “Energy in Iceland” (2nd edition 2006), retrieved on 11 March 2010, at
http://www.os.is/Apps/WebObjects/Orkustofnun.woa/1/swdocument/9701/Energy_in_Iceland_2ed_2006.pdf
Icelandic Electricity Act, No. 65/2003 (English translation), retrieved on 11 March 2010, Icelandic Ministry of Industry,
Energy and Tourism, at: http://eng.idnadarraduneyti.is/media/Acrobat/raforkulog_enska.pdf
Based on a list of energy and natural resources related legislation in Iceland, Ministry of Industry, Energy and Tourism,
retrieved on 11 March 2010, at: http://eng.idnadarraduneyti.is/laws-and-regulations//nr/1266 and the Icelandic version,
at http://www.idnadarraduneyti.is/malaflokkar/raforka/log/
The Icelandic Competition authority (Samkeppnisefterlitid): http://www.samkeppni.is/en/competition_authority/
Environmental Performance Index (EPI) 2010, retrieved on 11 March 2010, at: http://epi.yale.edu/Home
EPI 2010, retrieved on March 11, 2010, at http://epi.yale.edu/Countries (ranking) and http://epi.yale.edu/Countries/Iceland
(Iceland)
Geothermal energy in Iceland
Based on the Icelandic Meteorological Office, “Icelandic Climate”, retrieved on 5 March 2010, at:
http://en.vedur.is/weather/climate_in_iceland/
Icelandic Metereological Office, “The Weather in Iceland 2009”, retrieved on 16 March 2010, at:
http://en.vedur.is/weather/articles/nr/1802
Details about the volcanoes of Iceland can be found on Volcanoediscovery.com. Retrieved on 5 March 2010
Based on estimates for installed capacity in 2009 by Íslandsbanki and Bertani R., “World Geothermal Generation in 2007”
(GHC Bulletin, September 2007), retrieved on 11 March 2010, at: http://geoheat.oit.edu/bulletin/bull28-3/art3.pdf
Orkustofnun Íslands, “Geothermal Development and Research in Iceland” (April 2006)
Thordarson, S., “Hundred Years of Space Heating with Geothermal Energy in Iceland” (2008), retrieved on 8 March 2010,
at samorka.is
Jardbödin vid Mývatn, at: http://www.jardbodin.is/english/
Ketilsson, J., National Energy Authority of Iceland, “57 milljardar spörudust í fyrra”, Fréttabladid, 26 November 2009
Project by Carbon Recycling International in proximity to the Svartsengi geothermal power plant, company website at:
http://www.carbonrecycling.is
CarbFix project, by Reykjavik Energy in proximity to the Hellisheidi geothermal power plant, project website at:
http://www.or.is/English/Projects/CarbFix/AbouttheProject/
Energy Authority of Iceland, “Renewable Energy in Iceland” (June 2009)
National Energy Authority, “Sustainable Utilization of Geothermal Energy”, retrieved on 16 March 2010, at:
http://www.nea.is/geothermal/sustainable-utilization/
Ketilsson, J., Björnsson, H., Halldórsdóttir, S., Axelsson, G., “Mat á vinnslugetu háhítasvæda” (OS, ÍSOR), OS-2009/09,
retrieved on 16 March 2010, at: http://www.os.is/gogn/Skyrslur/OS-2009/OS-2009-009.pdf
The Ministry of Industry, Energy and Tourism, http://eng.idnadarraduneyti.is
National Energy Authority, Geothermal Legal Framework, retrieved on 16 March 2010, at: http://www.nea.is/geothermal/legaland-regulatory-framework/
IDDP Press Release “Drilling into Magma at Krafla” from 25 June 2009, retrieved on 26 February 2010, at:
http://www.iddp.is/news/News_release-Drilling_into_magma_2009-06-25.pdf
IDDP Press Release “Exciting Discovery at the IDDP-1 Well” from 29 June 2009, retrieved on 26 February 2010, at:
http://www.iddp.is/news/29_June_2009.pdf
Íslandsbanki Geothermal Research
31
Outlook for the Icelandic energy market
Orkustofnun, Introduction to the Master Plan, retrieved on 16 March 2010, at: http://www.nea.is/geothermal/masterplan/
Capacent Gallup polls for various players from 2005-09, www.gallup.is
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at: http://www.visir.is/article/20100212/VIDSKIPTI06/847898525/-1
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http://www.asi.is/Portaldata/1/Resources/documents/Haustsk_rsla_2009_-_LOKA211009.pdf
Ketilsson, J., Björnsson, H., Halldórsdóttir, S., Axelsson, G. (2009) Mat á vinnslugetu háhitasvaeda (OS-2009/09)
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http://www.rammaaaetlun.is/media/nidurstada-faghopa/Fag3-og-4.pdf
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Investment needs – geothermal energy
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http://www.rammaaaetlun.is/media/nidurstada-faghopa/Fag3-og-4.pdf
Glossary
KW:
Kilowatt
MW:
Megawatt (1,000 KW)
GW:
Gigawatt (1,000 MW)
kWh:
Kilowatt hours
MWh: Megawatt hours (1,000 KWh)
GWh: Gigawatt hours (1,000 MWh)
TWh:
Terawatt hours (1,000 GWh)
TJ:
Terajoules
TJ/yr: Terajoules per year
PJ:
Petajoules
MWe: Megawatt electric, installed electricity generation capacity
MWth: Megawatt thermal, installed thermal capacity
IGA:
32
International Geothermal Energy Association
Iceland Geothermal Energy Market Report
Figures
Figure 1:
Figure 2:
Figure 3:
Figure 4:
Figure 5:
Figure 6:
Figure 7:
Figure 8:
Figure 9:
Figure 10:
Figure 11:
Figure 12:
Figure 13:
Figure 14:
Figure 15:
Figure 16:
Figure 17:
Figure 18:
Figure 19:
Figure 20:
Figure 21:
Primary energy consumption 1969–2008, in PJ. Source: Statistics Iceland. Page 8
Primary energy consumption 1969–2008, in %. Source: Statistics Iceland. Page 8
Annual electricity generation 2008, in GWh. Source: Statistics Iceland. Page 8
Installed electricity generation capacity 1978–2008, in MW. Source: Statistics Iceland. Page 9
Electricity generation by energy companies 2008 based on MWh, in %. Source: National Energy Authority. Page
9
Electricity consumption by industry 2008, in %. Source: National Energy Authority. Page 9
Geothermal electricity generation capacity by country 2009, in MW. Source: Íslandsbanki estimates for 2009.
Page 11
Utilisation of geothermal energy by type in Iceland 2008. Source: Orkutölur 2009, National Energy Authority.
Page 12
Simplified geothermal map of Iceland. Source: Reykjavik Energy, Nesjavellir Information Brochure (2006). Page
13
Icelandic geothermal energy market overview. Source: Íslandsbanki. Page 14
Simplified map of the main geothermal areas and power plants of Iceland. Source: ÍSOR. Page 16
Development of geothermal electricity generation capacity in Iceland 1969–2008. Source: Statistics Iceland,
Íslandsbanki. Page 16
Electricity demand by year based on new projects and planned operation start. Source: ASÍ. Page 22
Planned power project capacity added by year. Source: ASÍ. Page 23
Planned power project capacity added by year by energy source. Source: ASÍ. Page 23
Geothermal fields in Iceland. Source: ÍSOR. Page 24
Geothermal project development phases and financing options. Source: Íslandsbanki. Page 26
Planned additional geothermal power capacity by year in MW. Source: ASÍ. Page 28
Investment needs for currently planned geothermal projects, in million USD. Source: Íslandsbanki estimates based
on data by ASÍ. Page 28
World geothermal installed power generation capacity & pipeline of projects, 2009. Source: Íslandsbanki estimates.
Page 29
Development cost compared (million USD/MW). Page 29
Tables:
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Table 7:
Table 8:
Table 9:
Primary energy consumption 2008, in PJ. Source: Statistics Iceland. Page 8
Electricity generation 2008, in GWh. Source: Statistics Iceland. Page 8
Electricity generation capacity 2008, in MW. Source: Statistics Iceland. Page 9
Electricity generation by energy company 2008, in MWh and %. Source: Statistics Iceland. Page 9
Geothermal electricity generation capacity by country 2009, in MW. Source: Íslandsbanki estimates for 2009.
Page 11
Geothermal power plants in Iceland, as of February 2010. Source: Statistics Iceland. Page 16
Planned industrial projects and their energy capacity demand. Source: ASÍ. Page 22
Planned power projects by type, developer and estimated start of operation. Source: ASÍ. Page 23
Base case evaluation of electricity generation potential for 50 years in Iceland. Source: National Energy Authority,
“Development feasibility evaluation of high heat areas”. Page 25
This Iceland Geothermal Market Report was written by:
Alexander Richter
Director | Sustainable Energy – Íslandsbanki
[email protected]
Íslandsbanki Geothermal Research
33
Notes
Disclaimer
This introduction is made by Íslandsbanki hf.
The information in this summary is based on publicly available data and information from
various sources deemed reliable. The information has not been independently verified by
Íslandsbanki hf. which therefore does not guarantee that the information is comprehensive
and accurate. All views expressed herein are those of the author(s) at the time of writing and
may change without notice. Íslandsbanki hf. holds no obligation to update, modify or amend
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This document is a brief summary and does not purport to contain all available information
on the subjects covered.
Regulator: The Financial Supervisory Authority of Iceland (www.fme.is)
United States
This summary is informative in nature, and should not be interpreted as a recommendation
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investment market and different investment alternatives.
Canada
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any manner in Canada and therefore should not be construed as any kind of financial
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Your Geothermal Financial Partner
Íslandsbanki’s Sustainable Energy Team
Íslandsbanki, Kirkjusandi, IS-155 Reykjavik, Iceland
Tel.: +354-440-4500
For more information:
[email protected]
www.islandsbanki.is/energy