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13. september 00 Atvinnuvega- og nýsköpunarráðuneytið

Ávarp á "Hyforum 2000" í Munchen 12.09.00

Valgerður Sverrisdóttir
Minister of Industry and Commerce



Iceland}s Renewable Power Sources
Adress delivered at "Hyforum 2000", München, Germany, September 12, 2000.



The base of Iceland's natural resource, consists of the fish stocks in the sea surrounding the country, the land with its soil and vegetation, enourmous quantity of hot and cold spring water and renewable energy resources - both geothermal and hydro. The clean environment of the country, on which food-processing and tourism are based, may also be regarded as one of our most important natural resources. Last but not least the utilization of these resources is based on the highly educated and civilized people living in the country.

Considering here small population Iceland has untapped reserves of renewable energy. Further harnessing of these reserves for economic and sustainable development is an important task for the future and will probably play a large role in maintaining a high standards of living in Iceland in the near future.

In this address I would like to say a few words about Iceland's energy resources, how we have utilized them, the main environmental aspects of the future utilisation and the governmental energy policy.


Hydro Power
Natural conditions in Iceland favour the harnessing of hydropower for the generation of electricity. The technical hydropower potential is theoretically estimated at about 64 TWh per year. After taking into account economic as well as environmental aspects the useable potential will probably be 25 -30 TWh per year. So far only 7 TWh per year have been harnessed, or about 25 per cent of the ueseable hydopower potential.

Geothermal Resources
A rough estimate has been made for electrical power production of the geothermal resources. It should be stressed that the geothermal resource is not strictly renewable in the same sense as the hydro resource. An assessment of the total potential for electricity production from the high-temperature geothermal fields in the country indicates a possible value of 15 TWh per year over a 100 year period. The electricity production capacity from geothermal fields is now only 1.2 TWh per year or 8% of useable potential.
The development of energy use in Iceland

Development of the energy reserves in Iceland may be divided into three phases, with a certain degree of overlapping.
The first phase covered the electrification of the country, which started in 1945, was followed by the harnessing of the first accessible geothermal fields for space heating. In the 1950's the Government decided that as large a part of the population as practically possible should be given access to electricity from public utilities. In the late 70's up to 99 per cent of the population had connection to the public electrical network.

In the second phase, during 1960}s the first steps were taken to harness the resources for power-intensive industry. This started in 1966 with the signing of agreements between the Government of Iceland and Swss Aluminium on the building of an aluminium plant, which is now operating with 200.000 tpy capacity. In 1979 a ferro-silicon plant started production with a capacity of 70.000 tpy. A new 60,000-ton aluminium plant started operation in 1998 and is now enlarged up to 90.000 tons per year. My government regards the harnessing of both geothermal and hydroelectric sources as a priority for economic development. We regard products from power intensive industry as a form of export of power; for example each kg of aluminium exported represents the use of approximately 14 kWh in electricity.

In the third phase, following the oil crisis of 1973 and 1979, a great effort was made to explore and harness geothermal resources of energy to replace oil, particularly for space heating. This has resulted in the fact that oil has almost disappeared as a source of energy for space heating and is replaced by renewable and sustainable hydro and geothermal resources which are more feasible and economically viable.

Together with the harnessing of the energy potential for economic development in Iceland, there may well be more phases in the future – in the next decades rather than years. One of the most attractive possibilities is production of alternative fuels, such as hydrogen, which is the topic of this meeting.
Energy Consumption

During the last few decades we have seen great changes in the energy consumption in Iceland. At the beginning of the century domestic, low-quality peat was the main energy resource for space heating. At the beginning of the Second World War, imported coal was by far the most important source of energy, followed by increasing import of oil. Geothermal and hydropower provided only about 9 per cent of the country's requirements at that time. The energy policy I have just described has completely changed this picture and geothermal heat and hydropower now account for more than two thirds of the country's primary energy consumption.

The electricity consumption for 1999 is also different from other countries where the public utilities account for only 39 per cent of the power production but the use of power intensive industries is 61 per cent.

If we on the other hand look at the sales of imported oil in 1998 the greatest consumers are the general transport and fishery fleet sectors, both account for 42-43 per cent, general industry 12 per cent and energy production only 2 per cent.
This means that 86 per cent of the oil consumed in Iceland is used in the fishing and transportation sectors. If use of oil used by Icelandic companies for transportation between Iceland and other countries is included, this figure is 90 per cent.

But how did the Icelandic people learn to use the geothermal resources of the country? A few of the first settlers built their farms near hot pools and geysers, which they used mainly for bathing, washing and cooking. Historical records show that the only industrial use of from the sulphur rich steam was production and export of sulphur as early as the 13th century. The production of sulphur because of its great military value gave high prices for centuries.

It was not until this century that utilisation of geothermal energy began on any significant scale. Naturally, utilisation of this resource has grown with the development in science and technology, especially in drilling techniques and geophysics.
More than 75 per cent of the harnessed geothermal energy (excluding steam used for electrical generation) is used for space heating, and geothermal energy meets 86 per cent of the space heating requirements of Iceland but electrical heating accounts for about 12 per cent.

The use of geothermal water for greenhouse cultivation started in 1924. Geothermal water is also used in aquaculture, particularly to stimulate the growth of smolts and species that live in warm water like sea bass for example.

The first large-scale industrial use of geothermal energy was in 1968 to dry diatomaceous earth, and later, plants drying seaweed and producing salt. It should also be mentioned that in the last few years, a great effort has been made in investigation and exploration of utilization of the thermophilic bacteria found in hot springs. This development has increased enourmously in the recent years and a few companies have been founded with the aim of researching this interesting geothermal flora.
Environmental Aspects on Developing the Domestic Energy Resources.

As everybody knows, in recent years increased environmental concern has been raised on the possible harmful impact of developing the above mentioned sustainable energy resources of the country. This is despite the fact that utilisation of these energy sources is not comparable, from environmental point of view to the fossil fuel sources they replace.

It is well known that hydropower developments may have various environmental impacts on nature. The most severe impacts are usually connected to the construction of reservoirs, which are usually necessary to store water from one season to another. Reservoirs often cover vegetated areas, which may be valuable as grazing land for sheep or wild animals and may eventually have visual effects on tourists in the area. Other forms of impact involve reduced flow of waterfalls as well as sediment transport in glacial rivers downstream of the reservoirs. Not least the impact has resulted in changes in water conditions for fresh-water fishing. Generally the last item has experienced in Iceland as a very positive environmental facor, the salmon fishing stock in developed glacial rivers has generally increased.

Geothermal developments may also have various environmental impacts among them the possibel drying up of natural hot springs in the surroundings. Development of high-temperature fields may cause some air pollution by increasing the natural H2S emission from the fields. It may also cause pollution of surface and ground water by power plant effluents. These impacts are restricted to utilization of high-temperature fields.

Many of these impacts are inevitable, but their extent can be minimised by environmentally sound planning, research and construction and by pollution control equipment. Against the negative environmental impacts of both hydro and geothermal developments we must weigh the very important positive effect of eliminating air and water pollution from the fossil fuels they actually replace.

We must also evaluate the use of these renewable energy resources in the light of the UN Program of Action, the socalled Agenda 21, adopted at the United Nations Conference on Environment and Development in 1992. Chapter 9 of Agenda 21, which addresses the protection of the atmosphere, states that the ultimate objective in that area includes the following:
First, to reduce the polluting effects of energy use on the atmosphere and, second, to increase the proportion of efficient energy exploitation which does not pollute the atmosphere and of renewable energy especially. According to the Agenda, governments should review energy use with the aim of promoting clean energy and harmonise regional energy programs wherever possible to enable the utilisation of clean energy from new and renewable energy sources. We regard our use of the renewable energy resources to be consistent with the objective of Agenda 21 and the United Nations Convention on Climate Change, which was de facto adopted in Rio.

The main objective of the Climate Convention is to reduce emissions of greenhouse gases from this planet. It is ironic that the commitments proposed for Iceland in the Kyoto Protocol might ultimately serve to counteract this objective. Let me explain this statement. A new aluminium plant under construction in Iceland with a production capacity of 180,000 tonnes and using renewable energy sources will increase Iceland's total emission of greenhouse gases by only 0.31 million tonnes CO2 equivalents, which equals 11.3 per cent of the total emission of Iceland in 1990. This is only due to so called process emissions, that is emission from the chemical reaction. The same plant located elsewhere on this planet in a venue where coal fired power is produced, would increase emission by about 2.5 million tonnes or almost 8 times more than in Iceland.

Emissions of greenhouse gases in Iceland differ from other OECD countries. Firstly, due to the large share of renewable energy resources and secondly due to the large share of emissions from the fishing fleet and transportation. Iceland has therefore very limited possibilities to limit and reduce emissions of greenhouse gases. Let me explain this further. During the oil crisis of the 1970s our Government moved to utilize the renewable energy resources forr house heating instead of use of oil. As a result in 1990 the base year of the Kyoto protocol, Iceland}s greenhouse gas emissions were some 40% lower than they would have been had our Government failed to act as it did during the oil crisis. This should be a very positive position for Iceland instead of being merely a mixed blessing. Almost 100 per cent of the electricity production, and over 95 per cent of the stationary energy use is supplied by renewable sources. On the other hand, Iceland has already reduced its greenhouse gas emissions almost as far as possible given the current state of technology. Bear in mind that the fishing industry accounts for almost 50% per cent of the national income. The potential for reducing emissions from this sector and transportation sector for the commitment period 2008 – 2012 is very limited. Our only hope is that alternative fuels will change that in the longer term as I will explain now.

Government Policy and Future Development.

My government's policy is to harness Iceland's clean and renewable energy reserves, geothermal and hydropower, for sustainable development and to further improve the living standards in the country. By using our clean energy sources, we are making a contribution towards the reduction of carbon dioxide emissions from power plants, as it is clear that this utilisation replaces fossil-fuel power stations.

Production and use of alternative fuels has in Iceland been studied for some decades. Studies in the early 1990s indicated that the production and use of alternative fuels would not be economically viable. The situation is somehow different today mainly due to the progress in fuel cell technology. However, innovations and improvements are still needed until hydrogen or other alternative fuels can replace oil in the energy system.
During the past few years the discussion in Iceland on alternative fuels has mainly revolved around hydrogen as an energy carrier. Following the outcome of a committe established by the former Minister of Industry and Commerce, VistOrka, an Icelandic private company, together with DaimlerChrysler, Norsk Hydro Produksjon and Shell International, have signed a joint venture agreement on co-operation in this area. On that occasion the Government made the following statement:
"It is the Government's policy to promote increased utilisation of renewable energy resources in harmony with the environment. One possible approach towards this goal is production of environmentally friendly fuels for powering vehicles and fishing vessels. Liquid hydrogen is an example of such a fuel. The establishment of a company owned by Icelandic parties and several international corporate leaders in the field of hydrogen fuel technology could open up new opportunities in this field.
The Government of Iceland welcomes the establishment of this company by these parties and considers that the choice of location for this project is an acknowledgement of Iceland's distinctive status and long-term potential. The initiative taken by the parties involved in this project deserves to be applauded and respected."
Our Government is not involved in these studies of the companies. However in a recent trip to Germany where I visited the fuel cell research facilities of DaimlerChrysler in Nabern and the hydrogen fuelling station at the Munich airport I got convinced that this new hydrogen technology could become the future's solution for powering the transport sector. Other participants in that trip agree to my view and as a result the New Business Venture Fund and The Technological Institute of Iceland have decided to increase their share in the holding company VistOrka (EcoEnergy). VistOrka will therefore have more capability of participating in hydrogen research work in the future. It will also strengthen the basis for Icelandic New Energy Ltd. as VistOrka owns more than 50% of the share capital in that company. Icelandic New Energy Ltd. with its foreign partners DaimlerChrysler, Norsk Hydro and Shell Hydrogen has recently finalized the planning of a research and demonstration project of 3 fuel cell city buses in the capital of Iceland, Reykjavík. A work plan and financing of the project with support from the European Comission is now in place. The project will commence in a few months but the actual demonstration begins in 2002. This will be the first major step towards using domstic renewable energy in Iceland to power the transport sector in a CO2 free manner.

In conclusion, the longterm vision we actually have in Iceland is that hydrogen fuel will be in due time competitive with the fossil fuel which we are to day using in our fishery fleet and transport sector. The Icelandic energy system is based on renewable energy resources – both hydro and geothermal – to a larger extent than in any other country. Fossil fuels are almost exclusively used where it is not technologically feasible compared to use renewable energy sources, that is to say in transport and fisheries. These two sectors stand for 85% of the oil import. Therefore my Government's policy is to promote increased use of our renewable resources. Production and use of hydrogen is in line with our policy when it proves to be economically feasible. Iceland therefore welcomes studies, technological development and other initiatives in promoting the use of alternative fuels. We look forward to the furure hydrogen development and utilization of our renewable engergy resources.

Thank you mr. chairman

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