“Icelanders regard plentiful, cheap, guilt-free energy as part of their birthright.”
—Daniel Gross, Newsweek, April 2008
A geothermal challenge
At present, Iceland is pinning its hopes on its two major resources—fishing and renewable energy—to pull it out of the current economic crisis. Fish, of course, are a resource limited by quota and catch. Renewable energy on the other hand is essentially unlimited, and—in the light of greenhouse gas emissions—is considered the only sensible way into Earth’s green future.
Iceland’s energy supply consists of 75% hydropower and 25% geothermal, but despite the fact that hydropower is extremely efficient and easy to maintain, it uses vast tracts of pristine nature and is politically unpopular. For precisely this reason, geothermal is considered the most ecologically viable option for progressing Iceland’s economy. Yet given the current economic environment, all may not prove to be smooth sailing.
Alex Richter, Director of Íslandsbanki’s Sustainable Resources Team, expressed his concerns to the Scientific American last year, “[When the crash came] the sense in the seafood and energy industries is that [the financial services built around those two industries] basically all disappeared overnight. The Prime Minister said we are blessed with two resources that have helped the country for centuries…In a sense, that’s a very naïve view. Iceland must overcome a huge foreign debt…a collapsed currency that makes imports expensive as well as high inflation combined with high unemployment.”
And like everything at the moment, this is an uphill battle. But there are promising signs on the horizon.
The Geothermal Energy Association’s (GEA) recent Geothermal Industry Update shows a 20% increase in global geothermal power coming on-stream in the last five years. In 2008, Google.org, the search engine company’s charitable arm, invested close to USD 11 million in geothermal research. And with the Obama administration now finally behind the industry, geothermal development in the U.S. increased by 26% over 2009. Investors worldwide are certainly on the lookout for cheap clean energy, and geothermal is a hot ticket.
So what precisely do Iceland’s geothermal resources represent? Well a lot, for that matter. Let’s start at the beginning.
A brief geothermal history
Harnessing geothermal heat is as ancient as the Earth’s first civilisations. California’s Paleo-Indians were using the steam and hot water of Mayacamas Mountains’ ‘The Geysers’ over 10.000 years ago. And here in Iceland, geothermal pools have been a part of Icelandic culture since the first wave of Norse immigrants. Hverabrauð (hot spring bread) is still as popular today was it was centuries ago. It has been said that the poet Snorri Sturluson maintained a geothermal tub in his back garden, and one wonders if he spent time pondering the Sagas as he sat there, bubbling away, gazing at the stars.
The first prototype of a geothermal power plant was built in 1905 in Larderello, Tuscany, Italy, and went into full-scale production in 1911. Although partially destroyed during the Second World War, Larderello remained the world’s only geothermal power plant for nearly half a century until New Zealand built its own in Wairakei in 1958. Commercial geothermal power plants were developed in Mexico in 1959, the United States in 1960, in Japan on northern Honshu in 1966, and in the Soviet Union in eastern Siberia in 1967.
Although geothermal heating had been in use in Iceland in the early 1900s, Iceland’s first geothermal power plant went online in 1969 (Bjarnarflag [Námafjall], near Mývatn). Svartsengi, a combined heat and power plant famous for its spill off brine high in silica content (which is now Iceland’s premier tourist attraction, the Blue Lagoon), went on-stream in 1977. In the northeast, Krafla Power Plant started operations in 1978. Today, Iceland’s five major geothermal power stations (there are six operational and seven in total) all figure in the world’s top twenty in terms of power generating capacity and represent around 5% of installed global capacity. The Hellisheiði Power Station, which began operations in 2006, is considered to be the second largest in the world, second only to Mexico’s Cerro Prieto Geothermal Power Station.
Iceland’s geothermal resources are closely tied to its location on the Mid-Atlantic Ridge. High-temperature zones—such as the Hengill geothermal area, an important source of energy for the Nesjavellir plant—are also high-pressure and -thermal, providing water at temperatures of 200C and above, and are within the active volcanic rift that runs from northeast to southwest across Iceland. Due to their high mineral and gas content these cannot flow directly into the distribution system, but are used for heating fresh water and for electricity. Low temperature resources, yielding water temperatures below 149C flank the active zone, and are used for space heating. Over 600 hot water springs in low-temperature fields and around 30 high-temperature zones have been identified.
The primary purpose of geothermal energy in Iceland is still for space heating. Geothermal space heating commenced in Iceland at the turn of the century with Stefán Jónsson, who used it for heating his farm. Others quickly followed suit, and by 1930, ten farmhouses had developed their own geothermal heating systems. The first major building to be heated was the Austurbæjarskóli, a primary school in 101 Reykjavik. Soon thereafter the national hospital, a swimming pool and 60 homes were serviced.
The oil crisis of the 1970s forced the Icelandic government to speed up the development and use of geothermal heat for housing. In 1970, around 50% of space heating came from oil, forty years later it represents less than 1%. Today, virtually the entire municipality of Reykjavik and around 90% of all buildings in Iceland are heated with geothermal water. Reykjavik Energy is considered to operate the world’s largest, most sophisticated district heating system.
Certainly Iceland’s resources—in particular its glaciers, rivers, and volcanism—have significantly helped raise the country from being one of Europe’s poorest nations to one with a high standard of living. “Geothermal heating saved Iceland billions,” says Stefán Pálsson, historian at the Reykjavik Energy Museum. “It’s the only thing in Iceland today that’s really cheap. If not for geothermal energy, Iceland would not be a modern society today.” In actual fact, Íslandsbanki’s calculations indicate that moving from fossil fuels to geothermal heating saved the country the equivalent of more than USD 7.2 billion (1970 to May 2010).
Outside of space heating and electricity, geothermal resources are also used in number of direct applications including hot water for over 130 public swimming pools, snow melting on roads, for heating greenhouses, and various industrial applications: the diatomic plant at Mývatn, seaweed processing at Reykhólar, fish farms (predominately trout) who use geothermal water to heat fresh water, and using geothermal fluid for the production of commercial liquid carbon dioxide.
This is all optimum in terms of a self-sustained environment, but particularly now during the economic crisis, Iceland is deeply committed to generating foreign currency through its energy and resources. Stefán Pálsson points out: “Right now this can only be achieved by attracting more energy-intensive industry to set up in Iceland.”
The core of the matter
GEA ranks Iceland 7th in the world, 2nd in Europe for geothermal energy production, and 4th in the world for direct geothermal use. Today, the state-owned Landsvirkjun covers 76% of the country’s energy requirements (primarily hydropower) and is Iceland’s largest power company, they are followed by Orkuveita Reykjavíkur (Reykjavík Energy) at 13%, and HS Orka, Iceland’s only privately-owned energy company, provides 9% of the country’s energy requirements. Canada’s Magma Energy Corp’s recent acquisition of Geysir Green Energy raised its stake in HS Orka from 43.3% to 98.5%, causing much consternation and debate.
Assuming necessary financing is at hand, the International Geothermal Association (IGA) estimates Iceland’s geothermal energy capacity to increase from its present 575 MW to 800 by the year 2015. If all the presently planned industrial projects in Iceland were to come to fruition, the energy demand by 2016 would be close to 1.600 MW; yet as Íslandsbanki’s Sustainable Energy Team clearly states, “…it is estimated that they alone would require an investment of USD 3.1 billion with nearly two thirds of that needed in the next 4 years.”
Last year, Christopher Mims stated in the Scientific American: “Whereas many in Iceland… are optimistic that the country’s renewable power can help to rebuild its economy, there are significant obstacles. The further development of geothermal resources… is heavily dependent on outside investment, yet the most important outside investment to date, new aluminium smelters, has become unpopular because of the concern about the environment, and economically unsound as long as the price of aluminium stays low.” Alex Richter notes: “Iceland’s current economic status means that it is very difficult for energy companies to raise the necessary equity for development from their owners, usually the state or municipalities.”
At present 75% of Iceland’s total electricity consumption goes to aluminium smelters and around 11% to the ferrosilicon industry. Aluminium sales have now grown to a level that is approximately equal to the fishing industry for export income; however the ‘market flux’ of both international fish and aluminium prices is a cause of major concern. Diversification into other industries is essential.
Presently there are numerous parties interested in starting up data centres, silicone chip manufacturing—there’s even a company interested in producing methanol from geothermal CO2 emissions—but little is beyond the development phase. “We are looking at quite a few years before these new projects come on-stream,” says Júlíus Jónsson, Managing Director of HS Orka.
It certainly appears revenue, in particular foreign currency, will be slow forthcoming, but you can be sure that won’t stop the Icelanders from giving it all their steam.
A FEW GEOTHERMAL FACTS:
The entire world resource base of geothermal energy is considered to be greater than the resource bases of coal, oil, gas and uranium combined. Even though geothermal energy is technically a finite resource, the typical lifetime for geothermal activity is so long that it is considered a renewable resource.
Ranked 7th in the world for geothermal energy production
Ranked 2nd in Europe for geothermal energy production
Ranked 4th in the world for direct geothermal use
Presently represents around 5% of installed global geothermal capacity
Hellisheiði Power Station is the 2nd largest geothermal power station in the world
5 of Iceland’s geothermal power stations are within the world’s top 20
Around 2/3 of Icelandic primary energy comes from geothermal resources
25% of Iceland’s energy is generated by geothermal energy
90% of all buildings in Iceland are heated with geothermal water