News Extra: Iceland-UK subsea cable project passes “significant milestone”
15 September 2013
Icelandic state-owned power utility Landsvirkjun said in July it had handed over the findings of the advisory group on the feasibility of supplying electricity to the UK and Europe to the Icelandic Government.
The utility says the recommendations of the advisory group are a significant milestone for Landsvirkjun as it continues to assess the feasibility of connecting to the European electricity market via a submarine high voltage direct current (HVDC) cable.
The idea dates back to the 1950s, but the findings suggest that technological advances, higher electricity prices in Europe and an increased demand for renewable energy sources could now make the project economically viable. Landsvirkjun says a cable between Iceland and the UK could prove macro-economically profitable subject to favourable energy prices and secure long term contracts.
In an interview with Bloomberg in Reykjavik, Industry Minister Ragnheidur Elin Arnadottir said there was nevertheless a considerable degree of uncertainty over potential annual export revenue if the scheme were to go ahead. She confirmed a second study would be undertaken to firm up cost and revenue projections, as well as technical issues.
A government-appointed committee will deliver a report on the project this year and Landsvirkjun expects to make a final investment decision in 2015 or 2016. The cable would take five years to install at depths of up to 3,000 metres and could be in service by 2020. The utility has not published its cost estimates for the project, but the Sunday Times suggested a likely total of just under £4bn.
It said the cable would cost about £1.3bn to lay and a further £1.6bn would be required for the construction of geothermal plants and hydroelectric dams to generate up to six terawatt hours of energy for the UK annually. The Sunday Times estimated it would produce annual revenues of about £262m for Iceland.
The 700 or 1,100-megawatt cable would be the longest of its kind, stretching some 1,170 kilometres between Iceland and Scotland. The longest existing submarine HVDC cable is the NorNed between Norway and the Netherlands which is 580 km in length. McKinsey & Co estimates Iceland is harnessing only 20 to 25% of its hydro and geothermal energy potential, and the link would enable the North Atlantic island to develop its energy resources more fully and create a new source of export revenue.
Planned HVDC links to Europe - Landsvirkjun
Iceland produced 17.2 terawatt-hours of electricity last year, of which 79% went to power three aluminum smelters and a ferrosilicon smelter. Output could be doubled, or tripled, depending on whether Iceland exploits environmentally sensitive areas, the National Energy Authority estimates.
At a later date, extensions to the Iceland-UK cable could also be installed to supply other European countries, including Norway and the Netherlands. The Iceland-UK cable could eventually become an important part of the European Supergrid, the proposed mega-network of electricity interconnectors that would connect renewable power sources and regulate supply and demand across the continent.
Norway, which also gets almost all of its electricity from hydropower, also plans to build a 700 km power link to the UK by 2020.
Hordur Arnarson, chief executive of Landsvirkjun, said: “We can serve as a green battery for the UK. We believe it’s a win-win situation, because we have a flexible source of renewable power, which could be used to balance supply and demand in Britain. It will be the longest subsea cable in the world.”
Meanwhile in the UK, Former Energy Minister Charles Hendry, who signed a bilateral agreement to research the possibility of bringing Icelandic electricity to Britain when in Government, has now joined the Atlantic Supergrid Corporation, which is proposing a private HVDC cable between Iceland and the UK.