President Olafur Ragnar Grimsson has been travelling the world promoting Icelandic expertise in geothermal technology and has announced deals with China, India and Russia. He says countries are turning to Iceland for clues on how to switch to green energy.
"The geothermal transformation of the world has become a very important global mission for Iceland," he said in an interview on Jan. 28 in Davos, Switzerland. "We've proved that you can move within a relatively short time from a fossil-fuel economy over to a clean economy."
Powering Smelters
The island produced 17.2 terawatt-hours of electricity last year. Of that, about 80% went to three aluminum smelters and a ferrosilicon smelter. Output could double or triple over the next 30 years, depending on whether Iceland exploits environmentally sensitive areas, Landsvirkjun estimates.
State-owned Orkuveita Reykjavikur hf is Iceland's second- largest utility, followed by HS Orka hf, which was taken over by Canada's Magma Energy Corp. last year. Energy accounted for about 5% of the economy in 2008, compared with almost 7% for financial services, according to the latest data available from the country's statistics agency.
Iceland's drive to become one of Europe's main renewable energy sources comes as competition also intensifies in Denmark and Norway to supply the continent with energy. The EU is trying to spur development of a power grid covering the whole region to establish more links between countries, connect offshore turbines to prevent blackouts when the wind doesn't blow and allow easier movement of power between markets.
So far, the island's producers have concentrated on selling power to the energy-intensive aluminum industry. Iceland now wants to diversify to other industries that use a lot of power, such as data centers and chemical industries, said Juliusdottir.
Alcoa Inc., Rio Tinto Group and Century Aluminum Company have already set up plants in Iceland to take advantage of its cheap energy.
Consider Options
For now, demand for access to Iceland's power is growing faster than the island can supply. Alcoa, the biggest U.S. aluminum producer, said this month it's pursuing a plan to build a geothermal-powered smelter even after Landsvirkjun said it may not be able to supply the plant.