Monday, 14 March 2011

Iceland set to harness powers from below

7 March 2011, Page: 9

REYKJAVIK. ICELAND EUROPEANS left stranded at airports last year as an Icelandic volcano spewed ash across the continent may soon benefit from the power that seethes beneath the remote north Atlantic island. Iceland is doing a feasibility study into building a 1200 kilometre power cable to Scotland to transport as much as 18 terawatt hours of geothermal and hydropower a year enough to fuel 5 million homes.

"Icelanders live with earthquakes and volcanic activity, but the benefits are that now we can monetise these powers", said Valdimar Armann, an economist at Reykjavik based asset manager GAMMA, who estimates yearly clean energy exports could reach about a 10th of the island's $Al2 billion economy.

The nation is trying to emerge from Europe's biggest banking meltdown this century to restyle itself as one of the continent's main sources of renewable energy. The power cable, which would be the longest of its kind, would come as the EU strives to reach its target of 20% clean energy by 2020. Landsvirkjun, a state owned utility that produces 75% of Iceland's electricity, is driving the feasibility study for the $2.1 billion power cable project.

While investors are already more upbeat about Iceland's prospects of recovery, the island still has a long way to go before it can restore its former wealth. Its 2008 banking crisis sent the krona down 80% against the euro offshore and shaved almost a fifth off disposable incomes the following year. Iceland may be unable to realise its geothermal dreams without some form of foreign investment.