Electricity Shortage “Unacceptable” Says Environment Minister

Low cost of electricity in Iceland compared with the rest of Europe

Icelandic fish processing plants will need to power their operations with oil and diesel generators for the third winter in a row due to an electricity shortage, Vísir reports. This burning of oil and diesel cancels out all of the emissions saved by electric cars in Iceland thus far. Minister for the Environment and Natural Resources Guðlaugur Þór Þórðarson says the lack of green energy is unacceptable in a country that’s aiming for a green energy exchange.

Guðlaugur Þór says that the current shortage is the result of very few power plant construction projects in Iceland over the past 15-20 years. “This is not acceptable at all and we must do everything we can to resolve this as soon as possible,” he told reporters. The Minister criticised the red tape that delayed the approval of the construction of new power plant projects and called for streamlining the system.

Read More: 2021 Electricity Shortage Impacts Local Industry

Last June, the Environmental and Natural Resources Board of Appeal revoked the construction permit for the proposed Hvammsvirkjun hydropower plant in South Iceland, after the local council decided to review new information on the plant’s potential environmental impacts. The Board of Appeal emphasised that the National Energy Authority (Orkustofnun) had not followed the guidelines of the Water Council when preparing to issue a permit to the hydropower plant.

The Hvammsvirkjun plant would have an estimated capacity of 95 MW. For comparison, Iceland’s largest hydropower plants are the Kárahnjúkar and Búrfell plants, with respective capacities of 690 KW and 270 KW. Both were built to provide power to aluminium smelters. Hellisheiði Power Station is Iceland’s largest geothermal power plant, with a capacity of 303 MW.

Data centres use more electricity than Icelandic homes

There are also those who are sceptical of the need for additional power plants in Iceland, shifting the attention to energy-intensive industries that arguably contribute little to the country’s GDP. Snæbjörn Guðmundsson of the nature conservation organisation Náttúrugrið has expressed concern that the proposed Hvammsvirkjun hydropower plant would be used towards Bitcoin mining, a growing industry in Iceland. The National Power Company has stated that it would not build power plants for the express purpose of providing energy to Bitcoin mining companies.

Data centres (of which Bitcoin mining centres are a subcategory) in Iceland use 30% more energy than all Icelandic homes put together, and while the percentage of this energy that goes toward Bitcoin mining is not public knowledge, it could be as high as 90%.

Bitcoin Mining a Growing “Waste of Energy” in Iceland

Neither Icelandic authorities nor data centres in Iceland will reveal how much energy is used to mine Bitcoin or other digital currencies in Iceland, Snæbjörn Guðmundsson of nature conservation organisation Náttúrugrið told Vísir. Data centres use 30% more energy in Iceland than all Icelandic homes put together, and while the percentage of this energy that goes toward Bitcoin mining is not public knowledge, it could be as high as 90%.

Iceland’s abundance of renewable energy and cheap power has had both data centres and Bitcoin mining operations flocking to the country in recent years to set up shop. Iceland’s cool climate is another benefit, as data centres produce a lot of heat that would require additional energy to cool if located in a warmer climate. Both politicians and environmental activists have questioned the benefit of Bitcoin and digital currency mining operations for the Icelandic nation as well as their impact on the environment.

New hydropower plant could be used to mine Bitcoin

A 2018 report by KPMG stated that around 90% of energy used by data centres in Iceland had gone toward mining Bitcoin. In a column in Vísir, Snæbjörn refers to a recent analysis by Bitcoin expert Jaran Mellerud, who estimates that Bitcoin mining in Iceland uses around 120 MW of power, or around 85% of the 140 MW of power used by the country’s data centres in 2022. These figures have not changed much in recent years despite assertions from Iceland’s National Power Company (Landsvirkjun) that they would reduce the sale of Iceland’s energy to Bitcoin mining operations.

Snæbjörn is concerned that the proposed Hvammsvirkjun hydropower plant in South Iceland’s Þjórsá river would be used to power further Bitcoin mining in Iceland, although the National Power Company has stated that power plants would not be built solely for the energy needs of Bitcoing mining centres.

New York-based Bitcoin mining company told the Wall Street Journal last month that they would expand their operations in Iceland in response to an impending tax on Bitcoin mining in the United States. At the same time, Icelandic energy companies have stated there is no capacity for increased digital currency mining in the country.

“This is a waste of energy that should not be happening in a society like the one we live in today,” Snæbjörn stated.

Electricity Shortage in Iceland Impacts Local Industry and Data Centres

Low cost of electricity in Iceland compared with the rest of Europe

Iceland’s National Power Company has made a sudden decision to reduce electricity supply to industrial operations, including fishmeal factories, aluminium smelters, and data centres, RÚV reports. The decision was made due to an energy shortage caused by a series of issues, including a problem at a power station, low hydro reservoir levels, and limited transmission capacity. The affected companies have either had to reduce operations or switch to other power sources such as oil.

Data centres reduce operations

The National Power Company initially stated that cuts would be made in January, but decided yesterday that the supply would be reduced immediately. Sigríður Mogensen of The Federation of Icelandic Industries (SI) says the cuts have had an immediate effect on data centres. “We know of cases where Icelandic data centres have unfortunately had to close down customer service [yesterday]; early in the morning after this information became available. That means an immediate loss of revenue and we can keep in mind that the data processing industry generates at least ISK 20 billion in foreign exchange earnings for the national economy annually.”

Iceland’s abundance of low-cost, renewable energy and low average temperatures that minimise the need for cooling systems have made it an attractive destination for data centres and cryptocurrency mining operations in recent years. Sigríður added that the current cuts could have a long-term impact on the industry by leading potential customers to question energy security in Iceland. “This main this is that this is a definite loss for the economy and we need to learn the lesson from this to plan further ahead.”

Fishmeal factories switch to oil

CEO of Síldarvinnslan fishmeal factories, located in East Iceland, says the cuts will not impact production levels but will affect cost for the company, which will have to rely on oil for power. “Oil prices are high at the moment, whereas the price of electricity has taken into account that it is curtailable as it is now. So this will bring a rise in cost.” The capelin season is around the corner, meaning that fishmeal factories will have high energy needs.