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Powering up a connection to a renewable Europe

The prospect of a building a submarine power cable to the UK might enrich the people of Iceland, but opponents fear it would soil Iceland’s otherwise clean reputation

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As the world increasingly turns towards renewable energy, the hydro and geothermal energy that has provided the people of Iceland with clean, inexpensive energy is becoming an increasingly hot commodity.

For most of the young republic’s history, aluminum companies have had near sole access to the country’s energy output, but a groundbreaking infrastructure project could change all that.

The idea of building a submerged power cable between Iceland and Europe has been on the drawing board for over two decades, but technological advances, rising international energy costs and European renewable energy goals mean that the project is only now becoming feasible.

The ‘Europe 2020’ strategy, proposed in March 2010, is a 10-year plan that would advance the economy of the EU. One of the main targets of the initiative was to reduce greenhouse gas emissions by at least 20 percent compared with 1990 levels, as well as to bring renewable energy’s share of energy consumption to 20 percent of the total.

SEE RELATED: Iceland, UK close to connecting on power cable

In September 2013, Gam Management, an Icelandic financial-consultancy firm, released a report looking at the rationale behind building the cable and its effects on household energy rates. The report showed that the UK is far from reaching its 2020 renewable energy goals, and that the submarine power cable could serve as part of a broader strategy to achieve the target.

The effect on Icelandic households, the report concluded, would be higher power bills, but that the overall effect on the national economy would far outweigh the extra they had to pay, especially considering that household power consumption only amounts for 5 percent of total energy production. The aluminum plants, on the other hand, use around 77 percent.

Last September Jón Steinarsson, an Icelander who is an economist at Columbia University, wrote in Fréttablaðið, an Icelandic newspaper, that he held a position similar to that expressed in the Gam report.

He pointed out that British authorities have recently signed a 15-year contract to build off-shore wind farms. The agreement would see London pay producers £135 ($225) per terawatt hour. The aluminum companies pay $30 per terawatt hour. Even if just a part of the price UK authorities are willing to pay for wind power could be negotiated, the benefits to Landsvirkjun, the government-owned energy producer, would be significant.

Steinarsson further argued that the environmental impact would be minimal, as the national energy output would only have to be increased by around 3 terawatt hours.

Environmental groups are unsure of Steinarsson’s assessment, and during the 2012 Náttúruþing, an annual national environmental conference, attendees issued a statement calling for a closer study of the cable’s environmental impacts.

Ragnheiður Elín Árnadóttir, the Icelandic minister for industry and commerce, told parliament late last year that she wants a thorough assessment made on the cable and that a committee be formed to study its impact.

SEE RELATED: Iceland could provide renewable energy to UK

Another worry is that the power cable might actually turn a profit. Even if the estimates turn out to be true and the environmental impact of the cable would be minimal, a second one one would require yet more energy output and further environmental damage. A handsome return on investment would make it more tempting to rationalise building additional cables.

As it stands, British authorities remain keen on the project, a position William Hague, the UK foreign secretary, expressed during a meeting in September with Sigmundur Davíð Gunnarsson, Iceland’s PM.

The UK business community feels the same. During a conference in November hosted by the British-Icelandic Chamber of Commerce, Paul Johnson, head of development for National Grid, the British energy transport company, argued that building the cable would help maintain energy security and decrease the country’s reliance on hydrocarbons.

Iceland’s image in the UK, tarnished first by its failed banks, then by its volcanic ash, has, it would appear, been re-energised.