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.

Cryptocurrency Not Supervised By Financial Supervisory Authority

Central Bank of Iceland

The Central Bank of Iceland’s Financial Supervisory Authority has no supervision over cryptocurrency mined in Iceland, Fréttablaðið reports. A considerable portion of the world’s supply of bitcoin, or up to 8%, is mined in data centres in Iceland.

The Financial Supervisory Authority has no information on and does not supervise cryptocurrency mined in Icelandic data centres. It’s believed that up to 8% of bitcoin is mined in Iceland. Around 60 companies mine bitcoin in Iceland but only the three service providers offering electronic currency trade and digital wallets are required to register with the Financial Supervisory Authority.

While cryptocurrency has been lauded as an ultra-secure decentralised mode of payment, it has come under fire for being ill-regulated and wasteful of energy. US authorities have increasingly tried to supervise the use of cryptocurrency as they are thought to be the cornerstone of various illegal operations, including terrorism, drug trade and the distribution of child pornography. Mining cryptocurrency requires a great deal of energy use. Around 5% of Iceland’s energy production is tied in data centres and around 90% of data centre operations centre on cryptocurrency mining.

When asked about cryptocurrency supervision, The Central Bank of Iceland’s Financial Supervisory Authority replied that as cryptocurrencies aren’t legal tender or currency in Iceland so they aren’t subject to legislation on payment services or electronic currency. “Cryptocurrency markets don’t require a licence, they are not subject to laws no. 108/2007 on stock exchanges and aren’t subject to Central Bank of Iceland’s Financial Supervisory Authority’s supervision.” Furthermore, the Central Bank does not have any information on the extent of cryptocurrency trade. Even if the Financial Supervisory Authority does not supervise cryptocurrency trade, they warn against its use.

Read more on bitcoin mining in Iceland.

First Cryptocurrency Exchange Registers with Financial Supervisory Authority

The first company to specialize in cryptocurrency commerce and services is now registered with Iceland’s Financial Supervisory Authority, or FME, reports KjarninnMorgunblaðið reported first.

The company, Skiptimynt, is a cryptocurrency exchange dealing in Bitcoin and Auroracoin. Cryptocurrency firms are now required to register their activities with FME, following new legislation intended to combat money laundering and terrorist activities.

Crypto- or digital currencies have gained increased popularity on the international market in recent years, although the value of most have been subject to extreme fluctuations. The value of one Bitcoin is now roughly ISK 770,000 ($6,958/€5,986), but was worth as much as ISK 2,216,800 ($20,000/€17,208) at one point last year.