New report on the Icelandic geothermal energy market


At a meeting with industry representatives, Íslandsbanki released a new report on the Icelandic geothermal energy market. The report looks at the energy market in Iceland, the political and legal framework in the country and the investment needs for currently planned geothermal power projects.

The report highlights the fact that the aluminium sector represents by far the largest part of electricity consumption - more than 75% of all electricity generated in Iceland, in fact. Other industrial activities, for example ferro-silicon, consume around 11% of all electricity, while general residential use only represents 5% of all electricity consumption in Iceland.

Today, 25% of the electricity generated in Iceland comes from geothermal power plants, but more importantly around 90% of all homes are heated by geothermal energy. Use of geothermal energy for electricity generation and heating represents about 85% of all geothermal use in the country.

According to the report, the geothermal energy market is well advanced and many companies are servicing the sector, e.g. with engineering, consulting and drilling services. Privately owned companies are an important element of the geothermal industry in Iceland.

Iceland is also a very active member of the international geothermal energy sector through its research and development abroad, as well as advisory on the use of geothermal energy resources world-wide. Icelandic companies are also working internationally and their services and expertise is in demand globally.

Increased investment needs calls for new ideas

The report also addresses the current political debate on the issue of energy and the utilisation of natural resources. This debate has intensified, as it is clear that energy and energy intensive industries will play a key role in Iceland's efforts to strengthen its economy. Topics of lively debate are ownership and usage rights for the natural resources of the country and how to use those resources responsibly.

A large number of companies in the energy-intensive industrial sector are looking at establishing operations in Iceland. The energy companies are planning a large number of new power plants and extensions to existing installations. Governments and their agencies and organisations have played a major role in research and development of geothermal energy.

The report also notes that the risk profile of early stage geothermal explorations and development has always been an obstacle in attracting private money to the market.

For all the projects that are currently planned in Iceland, about USD 2,400 million of financing is needed, therefore capital from sources outside the current ownership group is needed for increased development of energy projects in Iceland.

Iceland also competes with other countries for financing for geothermal projects. While the nation is competitive in terms of development cost, electricity pricing is considered low.

The report is available online at:

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