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Energy in Iceland.

Domestic Energy Resources.

Hydro Power
Natural conditions in Iceland favour the harnessing of hydropower for the generation of electricity. The hydropower potential is theoretically estimated at about 64 TWh per year, of which 40 – 45 TWh per year may be technically and economically feasible. After taking into account environmental aspects the potential will probably be 25 -30 TWh per year. So far only 6,5 TWh per year have been harnessed.

Geothermal Resources
An estimate has been made for the geothermal resources. The geothermal resource is not strictly renewable in the same sense as the hydro resource. An assessment of the total potential for electricity production from the high-temperature geothermal fields in the country gives a value of about 1500 TWh or 15 TWh per year over a 100 year period. The electricity production capacity from geothermal fields is now only 1.3 TWh per year.

Energy Policy in the Past

Development of the energy reserves in Iceland may be divided into three phases, with a certain degree of overlapping.

The first phase covered the electrification of the country and harnessing the most accessible geothermal fields, especially for space heating.

In the second phase, steps were taken to harness the resources for power-intensive industry. This began in 1966 with the signing of agreements on the building of an aluminium plant, and in 1979 a ferro-silicon plant began production.

In the third phase, following the oil crisis of 1973-74, efforts were made to use domestic sources of energy to replace oil, particularly for space heating. Oil has almost disappeared as a source of energy for space heating, and domestic energy has replaced oil in industry and in other fields where such replacement is feasible and economically viable.

Together with the harnessing of the energy potential for economic development in Iceland, there may be two more phases in the future – in the next decades rather than years. One is export of electricity by submarine cable. The other is production of alternative fuels, such as hydrogen.

Energy Consumption

During the 20th century we have seen great changes in the energy consumption in Iceland. At the beginning of the century domestic, low-quality peat was the main energy resource. At the beginning of the Second World War, imported coal was by far the most important source of energy, followed by oil. Geothermal and hydropower provided only about 9 per cent of the country's requirements. To-day geothermal heat and hydropower account for more than 70 per cent of the country's primary energy consumption.

Primary Energy Consumption:

Iceland ranks first among OECD countries in the per capita consumption of primary energy with 8.6 toe per capita, followed by U.S. with 8.1. In electricity consumption, Iceland is second, coming very close to the figure for Norway.

86 per cent of the oil consumed in Iceland is used in the fishing and transportation sectors. If use of oil used by Icelandic companies for transportation between Iceland and other countries is included, this figure is 90 per cent.

By far the most important application of geothermal energy is in space heating. More than 75 per cent of the geothermal energy that has been harnessed (excluding steam used for electrical generation) is used for space heating, and geothermal energy meets 86 per cent of the space heating requirements of Iceland.

Energy use for Space Heating:

Environmental Aspects.

Hydro power developments may have various environmental impacts. The most severe is usually connected with the construction of reservoirs which may be necessary to store water for the winter season. Such reservoirs often cover vegetated areas in the highlands which may be valuable as grazing land for sheep. In some cases these areas are also important habitats for wild birds. Other forms of impact may involve the disappearance or alteration of waterfalls, reduced sediment transportation in glacial rivers downstream from the reservoirs and changed conditions for fresh-water fishing.

Geothermal developments may also have various environmental impacts, among them the drying up of natural hot springs. Development of high-temperature fields may cause some air pollution by increasing the natural H2S emission from the fields. It may also cause pollution of surface and ground water by power plant effluents. These effects are essentially restricted to high-temperature fields.

Many of these effects are inevitable, but their extent can be minimised by environmentally sound planning and construction and by pollution control equipment. Against the negative environmental impacts of both hydro and geothermal developments we must weigh the very important positive effect of eliminating air and water pollution from the fossil fuels they replace.

We must also evaluate the use of these renewable energy resources in the light of the UN Program of Action, the so called Agenda 21, adopted at the United Nations Conference on Environment and Development in 1992. According to the Agenda, governments should review energy use with the aim of promoting clean energy and harmonise regional energy programs wherever possible to enable the utilisation of clean energy from new and renewable energy sources. Iceland regards the use of the domestic renewable energy resources to be consistent with the objective of Agenda 21 and the United Nations Convention on Climate Change which was also adopted in Rio.

Future Development.

The government's policy is to harness Iceland's clean and renewable energy reserves, geothermal and hydropower, for sustainable development and to further improve the living standards in the country. Use of clean energy sources contributes towards reduction of carbon dioxide emissions.

Foreign investment in power intensive industries over the past 5 years is probably the single most important contribution to our economy in that period. The agenda of the Government emphasises the increased use of energy resources for economic development. In the near term, power intensive industries are the most realistic option for large scale utilisation of the domestic energy resources.

The option of exporting power by submarine cable has been studied from time to time since the early fifties. The export is now considered technically feasible and on the margin of being economically feasible. The cost of electricity exported to the Continent of Europe would double from the cost on the shore in Iceland, which supports our policy to produce power intensive products in the country for export.

Production and use of alternative fuels has also been studied for some decades. Studies in the early 1990s indicated that the production and use of alternative fuels is not economically viable. The situation may be somehow different today mainly due to the progress in fuel cell technology, but many innovations and improvements are still needed before hydrogen or other alternative fuels can replace oil in the energy system. During the past few years the discussion in Iceland on alternative fuels has mainly revolved around hydrogen as an energy carrier. In 1999 VistOrka, an Icelandic private company, together with DaimlerChrysler, Norsk Hydro Produksjon and Shell International, signed a joint venture agreement on co-operation in this area. The Government is not a party to the agreement but on that occasion it made the following statement:

"It is the Government's policy to promote increased utilisation of renewable energy resources in harmony with the environment. One possible approach towards this goal is production of environmentally friendly fuels for powering vehicles and fishing vessels. Liquid hydrogen is an example of such a fuel. The establishment of a company owned by Icelandic parties and several international corporate leaders in the field of hydrogen fuel technology could open up new opportunities in this field.
The Government of Iceland welcomes the establishment of this company by these parties and considers that the choice of location for this project is an acknowledgement of Iceland's distinctive status and long-term potential. The initiative taken by the parties involved in this project deserves to be applauded and respected."