Iceland review - 2016, Page 56

54 ICELAND REVIEW
ASSESSING THE RISKS
Unlike in the past, the project might now be commercial-
ly viable, Björgvin says, in part due to increasing taxes on
non-renewable electricity abroad implemented as part of
efforts to move away from carbon-based fuels. With Iceland’s
energy production being clean, the country’s power prices are
therefore more favorable than before. “The market structure
in Europe has all of a sudden made this an option which is
probably commercially feasible.”
According to Björgvin, there are three risks surrounding
the commercial feasibility of the project. “The first one is the
construction risk: who is financially responsible if the project
is never completed? The second thing is operational risk: who
is responsible if the interconnector breaks down? The third
thing is the market risk: does it pay for itself? We don’t have
answers to these questions yet,” he explains. “The UK-Iceland
task force will be assessing those risks, and the UK government
might eventually decide to pay for the cable if that turns out to
be sensible,” he adds.
As for the technical feasibility, Björgvin believes the evi-
dence suggests it is possible. “The likes of the National Grid,
which has been involved in several interconnectors, say it is
technically doable.” Norway has also built similar subsea cables
to Denmark, the Netherlands and Germany and is currently
working on an over-700-kilometer long cable to the UK, due
for completion in 2020.
Björgvin emphasizes that the project is still in the analysis
stage. “I don’t think anyone in Iceland knows whether this
ultimately makes sense or not. However, we believe it is really
worthwhile to do further research into the project, given the
opportunities this might bring Iceland as a country.”
Árni says he understands Landsvirkjun’s interest in the pro-
ject due to the higher price they could be getting for energy.
However, it cannot come at the cost of environmental destruc-
tion, he argues. “If a cable means continuation of building new
power plants on top of everything else currently going on
[there are many energy intensive projects currently under con-
sideration], I don’t think anyone will see the cable as an option.
It will be difficult to find energy for everyone.”
THE IMPORTANCE OF PRICE
Árni suggests that there has been a change in policy on selling
energy in Iceland. “The old one of building up Iceland by
providing cheap energy to everyone here, and the new one
where we can get a better price for energy if we export it or
sell it to foreign companies in Iceland.” Árni says it’s useful to
compare energy with fish in this regard. “Fish is not subsidized
in Iceland. When I was a kid I ate fish three or four times a
week, but today it is almost a luxury. We can get a better price
for it abroad so we export it.”
Árni is among those who believe that, like fish, domestic
energy prices will increase once the resource is exported.
“I’m convinced that prices will go up if the interconnector
is built,” he says. In an interview with Iceland Review at the
Northern Future Forum, Prime Minister Sigmundur Davíð
Gunnlaugsson stressed the importance of avoiding energy
price increases. “It is very important to us here in Iceland
that we are in a position to offer households electricity at rea-
sonable prices,” he said, adding that it was also essential that
IceLink not negatively influence the potential for any new
investment in Iceland.
If prices were to go up, Árni says Iceland would be less
attractive for energy intensive industries such as the alu-
minum industry—which environmentalists in Iceland have
long fought against—and may leave Iceland as a result.
“However, an interconnector will likely call for new hydro-
and geothermal power stations, thus destroying valuable
nature areas.”
ENVIRONMENTAL CONSIDERATIONS
Guðmundur Ingi Guðbrandsson, director of Landvernd, the
Icelandic Environment Association, warns that the environ-
mental impacts of the project need to be seriously considered.
“We believe that a sea cable would put more pressure on build-
ing more power plants and we know that it would definitely
call for a stronger infrastructure for the electricity transport
system.”
Björgvin acknowledges that new power plants would need to
be built. “We certainly expect some further power plants to be
built in Iceland but to a much lesser degree than a lot of people
think, and nowhere near to another Kárahnjúkar,” he says in
reference to Iceland’s largest, and most controversial, power
plant. The construction of the East Iceland plant, which was
completed in 2009, involved the damming of two rivers, creat-
ing three reservoirs. It is operated by Landsvirkjun and serves
Alcoa’s Fjarðaál aluminum smelter with 4,600 GWh annually.
It is not yet clear where the new plants would be built,
Björgvin adds: “We have not identified exactly which these
might be, because the cable would only be operational in eight
or more years ... Before a final decision is made we will have to
know how we are going to supply the power.”
Some of the required power could come from existing sur-
plus, Björgvin insists. “We believe that quite a lot of the power
[required for IceLink], perhaps 30 to 40 percent, could come
from the existing infrastructure that we have.” Due to Iceland’s
isolated electricity system, it is currently necessary to keep
emergency reserves, which would no longer be required with
the interconnector, and could therefore be used or exported,
he explains. In other words, an interconnector would allow for
less waste in the energy system in Iceland, he argues.
Environmentalists are generally united in their opposition
to the construction of more power plants in the highlands,
and to a potential new power line across the highlands. They
are worried about the number of prospective projects—the
sea cable being just one of the projects Landsvirkjun and
other energy companies would like to fuel; including silicon
plants, data centers and other medium-to-high power inten-
sive energy users currently being considered, as Guðmundur
says. “There are a lot of ideas floating around and as long as
we don’t have any base on how much energy we are willing to
utilize or how much there is a consensus on utilizing, it is really
ENERGY