Exports of Iceland's huge geothermal electricity potential back on the agenda

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21 February 2013, Nuclear, Solar, Wind

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The New York Times has now reported on the industry in Iceland, particularly on the controversy surrounding a huge increase in capacity aimed at exporting power to Europe. Put simply, Iceland has far more potential renewable electricity generation capacity than it could ever need, and the European Union (of which Iceland is not a member) is committed to providing 20% of its electricity from renewable sources by 2020 and will need all the help it can get to achieve this target.

The problem is that Iceland is 715 miles away from Scotland (the nearest mainland land mass) and 1,200 miles away from the European continental land mass. There is no technical reason why underwater cables cannot be laid, but doing so would cost about $2bn. However, the financial incentive is clear: according to the New York Times report Iceland's power authority Landsvirkjun receives less than $30 per MWh from its big aluminum smelting customers, which is less than half the average rate in the European Union (exact figures are difficult to unpick because of different taxes).

Some Icelandic politicians are worried about becoming the Saudi Arabia of the geothermal world, but others counter with the fact that developing the country's abundant natural resources will provide economic security for Iceland in perpetuity. Today, Iceland is the second biggest European power in installed geothermal capacity, behind only Italy, but Turkey is fast catching up based on current known investment plans. At any rate, Icelandic geothermal potential and European desire for renewable resources looks like a marriage made in heaven.

www.datamonitorenergy.com / asken@datamonitor.com / @DatamonitorEN

Source: MarketLine

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