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How Renewable Energy Has Fueled Iceland's Miraculous Comeback

Full steam ahead for Iceland's energy business
Full steam ahead for Iceland's energy business
Henryk M. Broder

KEFLAVIK — The first thing that strikes you on landing at Keflavik International Airport is the weather. It’s raining. The clouds hang so low that it looks like you could reach out and touch them. Welcome to Iceland.

A land mass covering 103,000 square kilometers, Iceland is a little larger than Hungary, but at 330,000 its population is less than a fifth that of the Hungarian capital. Still, this sparsely populated island, just beneath the Arctic Circle between Europe and North America, boasts an infrastructure that would make many larger countries proud. The Hringvegur, a well-built ring road that goes all the way around the island, is 1,340 kilometers long — about the distance of a flight from Hamburg to Rome.

Iceland has two international and six regional airports, three universities, three daily papers, an opera, over 12 theatres and more than a dozen state museums and art galleries.

This thriving cultural center is a very different picture from five years ago when the financial crisis hit. Banks that had overextended themselves in international dealings fell like dominoes and had to be taken over by the state. The construction industry ground to a halt, and the Icelandic currency, króna, became massively devalued. Iceland, once the poorest country in Europe along with Ireland, was regressing back to the 19th century.

But not now. While mainland Europe continues to battle the financial crisis, the descendants of the Vikings are breaking new ground. They are rebuilding, the economy is growing, tourism is booming, and unemployment is falling faster than expected.

Ask what problems Icelanders face today and the replies are unbelievable. “It’s hard to find a parking space in Reykjavik.” “For good restaurants, you have to make a reservation two or three days in advance.” Is that all? No, there are the debts owed to foreign banks and investors, but the government will worry about that.

Negotiations to join the EU have been put on ice, so to speak. The króna may be a weak and unpredictable currency, but the euro doesn’t seem to be a particularly stable alternative. Icelanders have learned to rely on themselves.

“Who needs coal when you already have fire?”

The question is written on posters at the state electricity company Landsvirkjun, which produces roughly three-quarters of Iceland’s energy. Founded in 1965, Landsvirkjun has 13 hydroelectric power plants and two geothermal plants and has recently added two wind turbines. Geothermal and hydroelectric power supply about 80% of the country’s energy, while the remaining 20% is imported gas for cars, buses and fishing trawlers. There are no more coal plants in Iceland and only one oil power station.

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Krafla geothermal power plant in Iceland — Photo: Asgeir Eggertsson

“Now we only need coal for barbecues,” says Rikardur Rikardsson, an engineer by training who is responsible for recruiting new Landsvirkjun clients. Many companies with high energy demands have chosen to base their production in Iceland because the energy costs are so much lower than on the European mainland or in the United States. “It’s worth it for these companies, even though they first have to transport the raw materials to Iceland and the end product somewhere else.”

Rikardsson is 35 years old. His parents can still remember a time when they were dependent on coal ovens and plagued by smog and air pollution. Hot springs were used for washing and cooking, but imported coal was still used for heating. In Reykjavik alone, over 270,000 tons of carbon dioxide was emitted into the atmosphere. Now Reykjavik is one of the cleanest cities in the world. The volcanoes and hot springs emit more natural CO2 than all Icelandic power stations put together.

Rikardsson is keen to excuse the wind turbines that his company has installed in a deserted area of the island. They are “an experiment,” he stresses. It seems that no one wants a wind turbine “on their front doorstep,” he says, characterizing them as just “one option among many.”

Literary inspiration

Energy companies have found inspiration in unlikely sources. At Verne Global, an Icelandic company with headquarters in London, the name says it all. Jules Verne’s novel Journey to the Center of the Earth begins on the Snæfellsjökull volcano in west Iceland, which is now home to the company’s massive electronic storage facility. “Databases require huge amounts of energy,” says Andreas Sturm, an IT technician at Verne Global. “They’re responsible for the same amount of CO2 emissions as the entire civil aviation industry.”

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The Nesjavellir geothermal power plant — Photo: Gretar Ivarsson

The Smart Data Center stores data for companies from around the world, powered entirely by renewable energy. Over 150 years ago, Jules Verne realized that Iceland was the perfect setting for a utopian vision. Now companies looking to reduce costs and improve their green credentials come to Verne Global.

The trend that started with outsourcing call centers to India has now gone high-tech, with computers transferring data in milliseconds. Here a third company comes into play: Farice, which lays high-capacity underwater cables between Iceland and mainland Europe. There are already two in use: one running between Iceland and Scotland (1,200 kilometers) and one to Denmark (2,300 kilometers). Clients can rent cables as a kind of private data motorway. For managing director Omar Benediktsson, this is only the beginning. His engineers are working on a super cable that will be able to export energy.

If they are successful, Europe could be joined to the Icelandic energy network. Iceland’s electricity could heat swimming pools in Britain and allow factories in Germany to keep production running day and night without worrying about their energy supply, all for a fraction of the current cost. A utopian vision? Perhaps, but as Jules Verne knew, Iceland is the world leader in utopias. The Icelanders have transformed almost every disadvantage — their geographical situation, the climate, the lack of natural resources — into an advantage. The journey to the center of the earth continues.

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