On the Icelandic Energy Situation HÍ political science

On the Icelandic Energy Situation (HÍ, political science dep. , presentation in a course on security) Gústaf Adolf Skúlason Deputy Director General Samorka – Icelandic Energy and Utilities

Briefly on the speaker • • • B. A. , political science, HÍ, 1992 M. Sc. , international relations, LSE, 1993 Research + assistant lect. , HÍ, ‘ 93 -’ 95 Althingi, international relations, ’ 95 -2000 SA-Confederation of Icelandic Employers (director of policy and communic. ), ’ 01 -’ 06 • Samorka – Icelandic Energy and Utilities since 2007

Structure • A brief description of the Icelandic energy system • Some comments on possible risks and challenges

Iceland: Rich in Renewables • Abundant energy potential in the form of geothermal energy and hydropower. • (Oil a totally different issue, possibly a domestic energy source in 20 years) • Energy consumption per capita in Iceland among the highest in the world, mainly due to several energy intensive industry plants such as aluminium smelters.

• About 90% of all housing in the country is heated with geothermal energy; the remainder being heated mainly with electricity (all such statistics from OS). • If oil was the source we would need some 800. 000 tons annually, which today would cost around 400 million USD, or about 50 billion ISK • The majority of the country's electricity (80%) is generated using hydropower; the remainder being based on geothermal power. Around 99, 95% of all electricity is generated using hydro or geothermal power – i. e. renewable energy sources.

• Around 80% of all primary energy use is renewable energy, the remainder being mostly oil for use in transport and fisheries. A unique situation, envied the world over. • By way of comparison, EU’s new target for year 2020 is a 20% share of renewables. The current figure is around 8. 5%.

EU’s targets for 2020 • Renewables’ share • Reduction in green house gas emissions (from 2001) • Increase in energy efficiency 20% 20%

Iceland’s electricity consumption

Primary energy consumption in Iceland

Source of space heating

Share (%) of renewables in primary energy use

And cheap too! Standard home consumption

And cheap too!

Great potential • 30 -40% of the economically feasible hydropower, and only 20% of the conventional geothermal potential available for electricity production in Iceland, have already been harnessed. • Percentage of econ. . . hydropower already harnessed in Norway, Sweden, Finland, Italy, Austria, Switzerland, France, Spain. . . : around 70 -90%.

Great potential for. . . • . . . further production of electricity for heavy industry, data centers. . . • . . . further use of domestic, renewable energy in transport. Less demand for electricity during the night >> potential estimated for around 2/3 rds of what the whole car fleet would need, without building any new power plants!

Possible risks • First of all: Much greater energy security than most other countries, very low dependence on imported energy sources. Iceland’s profile is definately that of an energy producer. • Yet, obviously some potential risk areas: – External developments: International oil prices, transport routes. . . war! We do need oil for transport and the fishing fleet, and our renewable energy system needs spare parts, cables. . . • EU: Need to have 90 day oil reserves (around 40 -45 today) in the country or near and earmarked – Natural disasters, an example would be Krafla geothermal power plant and volcanic eruptions in the 1970 s. – Terrorism. Easy access to energy infrastructure. – Economic disasters!

On economic disasters • Currency fluctuations and oil imports, plus imports of spare parts, cables. . . • Lack of confidence and imports • The biggest energy companies are quite indebted, some heavily since autumn 2008 due to the dramatic depreciation of ISK • Most of these same companies receive a large percentage of their income in USD and their status is stable, with huge sales contracts financing the power plants • Yet, this last year or two have been for most an unprecedented experience and it is impossible to rule out any future difficulties such as in relation with foreign creditors

Risks >> Opportunities • An external challenge can spark or at least accelerate positive developments: – International oil crisis in the 1970 s > Huge increase in geothermal space heating investments in Iceland – Another oil or economic crisis might spark or accelerate the foreseeable development in electric transport

Other challenges • If we expand the definition of a challenge to our energy system to that of a challenge towards our future efficiency maximizing energy system, we can add: – Politics – Nature conservation lobby (in most countries this would be called the green lobby but that frase is not relevant here)

Politics Challenges “to our future efficiency maximizing energy system” • Efficiency maximizing is not necessarily the prime objective of politicians. Other (of course perfectly legitimate) priorities may include: – Prohibiting private ownership, which may reduce the value of natural energy sources and power plants – Preserving little or undisturbed nature areas, at least when it comes to possible power plants or transmission lines – Limited interest in (if not prejudice against) certain types of industry – Stress on price symmetry, in urban and rural areas – Popular but expensive demands, which may render projects economically unfeasable (strings vs. lines)

Nature conservation lobby Challenges “to our future efficiency maximizing energy system” • Increasing in strength in recent years, a strong and visible voice – artists, journalists… • Some are constructive, others are against practically all new power plants, or against all the most economically efficient solutions. • Some even cite green house gas emissions, an imported but unadjusted debate • Constitute a challenge to our possibilities in terms of harnessing with max efficiency the clean energy the whole world envies us for. • “Activists” sometimes cause economic damages as well as threats to lives and safety

On the Icelandic Energy Situation (HÍ, political science dep. , presentation in a course on security) Gústaf Adolf Skúlason Deputy Director General Samorka – Icelandic Energy and Utilities