Framework for foreign investment in Iceland

Abstract

Iceland possesses a wealth of hydro power and geothermal energy. No less than 50,000 GWh/year of power are estimated to be producible from hydro and geothermal in Iceland at a sufficiently low cost to be of interest to power-intensive industries and for export. Only a fraction of this energy potential has been developed or some 5,000 GWh/year. The power resources of Iceland represent one of the country's best opportunities for large scale development and economic growth and their utilization is high on the Government's priority list. In the past Iceland has run a successful campaign attracting foreign investors in power intensive industries and about half of the electric production today is consumed by power intensive industries. New industries can be sure of highly competitive power prices compared with Europe and North America for new contracts. The estimated investment cost for power plants indicate a price level of around 20 US mills/kWh for electricity based on hydro power and USD 2.50 per ton of industrial steam from large geothermal fields. Many other reasons for locating energy intensive industry in Iceland are outlined in the paper, such as the educated work-force, European culture and political stability, Mid-Atlantic location and proximity to markets, good transport and communication facilities, abundance of fresh water, good industrial sites with a large extension potential and excellent harbours for large vessels. The future prospects for hydro and geothermal energy include large greenfield aluminium smelters, direct export of electricity by submarine cables to the European continent and industries using geothermal steam for process application. The Icelandic Energy Marketing Unit, established in 1988 is mandated to promote and market Iceland's energy resources and seek investors in the field of power intensive industries. Currently marketing efforts are being undertaken to promote the direct use of geothermal steam for industrial application.