Landsvirkjun Restrictions to Last Longer than Expected

Landsvirkjun, the National Power Company of Iceland, has had to restrict power supplied to industrial production companies to a greater degree than expected, RÚV reports.

Though the power company often reduces its production in the winter, poor reservoir conditions have led to a greater than usual reduction in service. The reductions could have an impact in the hundreds of millions of ISK.

Nearly 10% of power

The reduction began shortly before the new year, and now amounts to around 10% of power delivered to industrial production companies.

In a statement to RÚV, Director of Management Valur Ægisson stated that the ongoing restrictions can be chalked up to poor water flow, as water levels in reservoirs have dropped rapidly. He cited that Blöndulón, a reservoir in North Iceland, has never been this low at this time of year.

The restrictions were initially applied to fish processing plants and data centres. However, restrictions were then also applied to industrial plants such as Elkem, Norðurál, and Rio Tinto.

Waiting for spring

Valur stated further to RÚV that the extent of the restriction amounts to tens of gigawatt-hours per month. The average monthly sales of Landsvirkjun are around 1250 gigawatt-hours.

The restrictions could result in considerable lost revenue for Landsvirkjun. “I can’t give an exact figure, but it measures in hundreds of millions,” stated Valur to RÚV.

Like much of the nation, the situation has the energy company waiting on the arrival of spring and the accompanying meltwater.  “That’s essentially what we’re waiting for, for warmer weather, rain, and see the snow melting in the highlands. When that happens, we can turn things around relatively quickly,” Valur stated.



Iceland to Address Natural Disasters with New National Fund

Minister for Foreign Affairs Þórdís Kolbrún Reykfjörð Gylfadóttir

Finance Minister Þórdís Kolbrún Reykfjörð Gylfadóttir plans to propose a bill establishing a national fund, financed with dividends from the operations of Landsvirkjun, Iceland’s National Power Company. The fund would be used to address unexpected challenges in the nation’s economy, such as those that have recently arisen following the geological unrest in Grindavík.

New urgency to old ideas

In an interview with RÚV earlier this week, Sigurður Kári Kristjánsson, former MP and current chairperson of Iceland’s Natural Disaster Insurance, stated that it was necessary for the government to establish a national fund to manage unconventional challenges, such as those facing the town of Grindavík (recent geologic unrest and a volcanic eruption in January have greatly damaged the town’s infrastructure). Such a fund would also be useful for unforeseen challenges related to climate change. 

Asked about this issue, Minister of Finance Þórdís Kolbrún Reykfjörð Gylfadóttir told RÚV yesterday that she agreed with this assessment and that she intended to present a bill for a National Fund (Þjóðarsjóður) that would undergo parliamentary processing this year. 

As noted by, the idea for such a national fund is not new. Former Finance Minister Bjarni Benediktsson proposed the establishment of a national fund in 2016 and that proposal was also included in the government coalition agreement of the Independence Party, the Left-Green Movement, and the Progressive Party in 2017. 

Þórdís Kolbrún herself delivered a speech at the annual meeting of Landsvirkjun, the National Power Company, in February of 2019, where she underscored this commitment to a national fund and explained how it would be financed:

“As you know, there has been discussion for some time about allocating dividends from the operations of Landsvirkjun to a National Fund, which will be used to respond to unexpected challenges in the nation’s economy. A bill regarding the National Fund has now been presented to Parliament, and I wholeheartedly support that we Icelanders show prudence and foresight in this manner.”

As noted by Þórdís Kolbrún, there were plans to present a bill about the national fund during the 2018-2019 parliamentary session, but it did not materialise.

Resolving the treasury’s debt first

Þórdís Kolbrún noted that the fund would not be established until the state’s debt situation following the pandemic improved. 

“We have dealt with a pandemic and now natural disasters, which Icelanders have, of course, experienced in the past. This is, nevertheless, an unprecedented situation,” Þórdís Kolbrún told RÚV, again underscoring that the fund would be financed by the profits of energy companies. 

“The idea is that these additional revenues from dividends from energy companies would, for example, go into the fund,” Þórdís continued. She observed that the fund was already on the parliamentary agenda and that she would present the bill again so that it could undergo parliamentary processing this year.

(Landsvirkjun, the National Power Company of Iceland, is a state-owned entity that generates between 60-70% of all electricity used in Iceland. The company operates a total of eighteen power stations across Iceland, which include fifteen hydropower stations, three geothermal power stations, and two wind turbines. Landsvirkjun’s financial results for 2022 were exceptionally strong, marking the best financial results in the company’s history. In a recent interview with, Minister of Foreign Affairs Bjarni Benediktsson stated that now was an opportune time to put the strong financial results from Landsvirkjun to good use in the form of a national fund.)

Sale of Green Energy Credits from Iceland Suspended

AIB, the European company responsible for an energy certification system for power companies in the region, has suspended the sale of green energy credits from Iceland. According to a press release from the company, there are indications that a “double claiming of energy attributes was taking place.” The certificates are bought by foreign companies and are a huge source of income for Icelandic energy producers. RÚV reported first.

Last January, Iceland Review reported on the local impact of the energy credit market, which is intended to encourage investment in the production of green energy. While over 99% of energy produced in Iceland comes from renewable sources like hydroelectric and geothermal power, a majority of energy produced in Europe is still nuclear or fossil fuel. Some 90% of energy produced in Iceland is now sold on renewable energy credit markets, meaning consumers of non-renewable energy can purchase green energy credits even if their operations are powered by, for example, coal.

Sale of energy certificates could reach ISK 20 billion per year

AIB suspended the sales due to a suspicion of double counting: that some companies were claiming they had purchased green energy credits from Iceland that had already been sold to another party. AIB pointed to a lack of oversight on the sale of the certificates from Iceland, and that it needs to be better clarified who is responsible for the oversight.

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AIB stated that they intend to help Landsnet (the public company responsible for Iceland’s power transmission system) resolve the issue, “thereby securing Icelandic national interests.” The sale of such certificates nearly reached ISK 1 billion [$7.4 million, €6.7 million] in 2019. The National Power Company of Iceland (Landsvirkjun) estimates that sales could reach ISK 20 billion [$147 million, €133 million] annually.

Iceland’s Low-Cost Electricity in High Demand as Energy Prices Skyrocket in Europe

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

There is an increasing demand amongst foreign companies to base their operations in Iceland due to favourable energy prices, but the demand far exceeds what the country’s power plants can produce. RÚV reports that Landsvirkjun, the National Power Company of Iceland, says there’s a pressing need for increased electricity production.

‘New, potential customers are knocking on the door’

With Russia cutting off petrol pipelines to Europe, energy prices on the continent are skyrocketing. Meanwhile in Iceland, energy prices have remained almost unchanged. “It’s our renewable energy that makes this possible,” says Tinna Traustadóttir, Executive Vice President of Sales at Landsvirkjun. And as gas prices continue to rise, it’s not only consumers, but also companies, that are suffering. This has led to many enterprises—not least energy-guzzling aluminium smelters—going under as a result.

The state of Europe’s changing energy landscape is “reflected in high demand from existing customers,” explains Tinna, “and we also feel that there are new, potential customers knocking on the door.” At present, however, Iceland has no electricity to spare.

“As it stands now, you could say our electricity system is at full capacity, or as close to that as possible. And of course, it takes time to generate a new supply, but the situation is a pressing one,” says Tinna.

‘We will need to prioritize…but it’s clear we need to accelerate’

As a result, many foreign companies are clamouring to relocate their operations in Iceland, but the demand not only far exceeds the country’s current energy supply, it also exceeds Landsvirkjun’s plans for future  electricity production.

“We will need to prioritize,” says Tinna, listing off Landsvirkjun’s competing energy interests. “Domestic energy exchange, domestic food production, technological progress, supporting our current customers. But it’s clear we need to accelerate.”

Reservoirs Swell, Leading to Possible Overflow for Several Hydroelectric Dams

blönduvirkjun power plant iceland dam

In a recent report by Iceland’s national energy company, Landsvirkjun, reservoirs throughout Iceland are said to be reaching full capacity.

The public report can be seen below in  Facebook post from Landsvirkjun. 

According to Landsvirkjun, Blönduvirkjun power station, located along the Blanda river in North Iceland, began to overflow this past Thursday, September 1. 

Hálslón, one of the reservoirs for the Kárahnjúkar hydroelectric dam, also began to overflow September 5, causing the 100m man-made waterfall known as Hverfandi to appear. Hverfandi, known literally as “vanishing” or “disappearing,” is called this because it only flows when the reservoirs spills over.

According to Landsvirkjun, it has been a good summer for energy production, with nearly all reservoirs nearing capacity. Hágöngulón, a reservoir in the central highlands, and Kelduárlón, a part of the Kárahnjúkar system, were both full already in July. Þórisvatn remains the only other major reservoir to not reach its peak capacity.

Þórisvatn is currently rising by some 3-4cm per day, but it is unclear if it will reach its overflow point this year. Last year, its highpoint was reached at 576m, 3m shy of its 579m capacity.

Rio Tinto Iceland Aluminium Smelter Energy Price Negotiations Settled

Hörður Arnarson forstjóri Landsvirkjunar Rannveig Rist forstjóri Rio Tinto á Íslandi Tinna Traustadóttir framkvæmdastjóri Orkusölusviðs Landsvirkjun Sigurður Þór Ásgeirsson fjármálastjóri rio tinto

The National Power Company Landsvirkjun and Rio Tinto Iceland have reached an agreement on energy prices for the Straumsvík aluminium smelter, amending the power purchase agreement (PPA) between the two companies dating back to 2010. Rio Tinto Iceland General Manager Rannveig Rist states that the amended contract means the smelter’s closure has been avoided.

Rio Tinto Iceland filed a complaint to the Competition Authority in July last year, claiming Landsvirkjun was abusing its position in the energy market. They have now decided to withdraw it.  The company also heralded the closure of the Straumsvík Aluminium smelter, were Landsvirkjun not to comply, and for the past few months, the smelter has not been running at full capacity.

“It’s a huge step for us to have a deal that makes ÍSAL a competitive force, avoiding the risk of the factory’s closure,” stated Rannveig Rist, General Manager of Rio Tinto Iceland.

The energy prices are confidential but the nature of the agreement’s amendment has been disclosed. Instead of a fully fixed-price based agreement, the base power price has been adjusted and remains in USD and linked to the US Consumer Price Index (CPI). It will also be partially linked to global aluminium prices. Landsvirkjun Director Hörður Arnarson stated, “This will make it easier for the aluminium smelter to adjust to fluctuations in the aluminium market.” As before, the contract specifies the sale of 390 MW or 3.416 GWh a year and expires in 2036.

Rio Tinto is Landsvirkjun’s second-largest customer, purchasing around 20% of its energy output. Hörður told RÚV that it is likely that the company’s revenue from the Rio Tinto deal will remain the same. When asked if they were giving the company a covid-19 discount, Hörður replied that they weren’t, although they did last year, a special discount due to the situation in international markets. When asked why the energy prices were confidential, Hörður stated that the contract was an old one and included confidentiality clauses and that the companies needed to come to an agreement on when and how they are made public.

Strike at Rio Tinto Begins Tomorrow

ISAL aluminium smelter

A planned strike of 400 employees of the Rio Tinto aluminium smelter in Straumsvík, not far from the capital, will go ahead as planned tomorrow, Friday, October 16, RÚV reports. The chairman of the Hlífar labour union says that negotiations have not been productive and employees are tired of waiting of a promised cost of living increase.

Five of the six labour unions that represent Rio Tinto employees voted to strike last week. If nothing changes, the first strike action will take place tomorrow, followed by an indefinite general strike to begin on December 1. According to Reinhold Richter, a union representative, the striking workers are demanding the same wage hikes as are outlined in the “standard of living contract” signed by unions and the Icelandic Confederation of Enterprise (SA) in 2019.

Read More: Rio Tinto Considers Suspending Production at Iceland Aluminum Smelter

Rio Tinto’s employees have been without a contract since the beginning of July, although they were promised a wage increase in March, with the proviso that in order for the raise to go into effect, the company would first need to finalize new electricity agreements with Landsvirkjun, the National Power Company of Iceland. The smelter failed to come to an agreement with Landsvirkjun, their contract expired, and the dispute was referred to a state mediator. This means that the promise raise been on hold.

Rio Tinto is one of the largest metal and mining corporations in the world. Its executives have long expressed dissatisfaction with its electricity prices and even raised the idea of permanently closing the smelter. They say that that high power costs have contributed to the company’s losses and are preparing a lawsuit against Iceland’s National Power Company.

Aluminium Workers’ Contract Hinges on Price of Energy

ISAL aluminium smelter Straumsvík

Three hundred workers in Rio Tinto’s ISAL aluminium smelter could see their collective agreement nullified in June if the National Power Company and Rio Tinto do not reach an agreement about the cost of power supplied to the smelter, RÚV reports. The National Power Company’s CEO says it is “unreasonable” for the contract to hinge on that factor, but says the company will not let it impact their negotiations with Rio Tinto.

Rio Tinto says energy costs hamper competitiveness

The workers’ collective agreement, which was signed in March, is valid for two years. It contains a clause, however, that makes it invalid as of June 30 if an energy supply contract has not been renegotiated between Rio Tinto and the National Power Company. The ISAL smelter, located in Southwest Iceland, has been running at a loss for the past eight years, and its executives point to high energy costs as one of the reasons.

National Power Company CEO Hörður Arnarson says his company did not know about the contract clause until it was reported on yesterday by Morgunblaðið. “I find it a very unreasonable development, both in collective agreement negotiations and in negotiations of energy contracts, to connect two unrelated parties in this way,” Hörður stated. “The only reason I can see for doing this is that they believe it will put added pressure on the National Power Company, but it won’t have that effect.”

“These are difficult conditions. Markets are closing for them,” Hörður added. “We will look for ways to find a common solution but it’s completely unclear whether we will agree on one.”

Smelter may close for two years

Rio Tinto is considering suspending production at the ISAL plant for two years due to the downturn in the market caused by the coronavirus pandemic. The metal and mining company is also preparing a lawsuit against Iceland’s National Power Company intended to release Rio Tinto from a large part of the electricity purchase obligation to which it is subject.

The ISAL smelter is one of the largest employers in the town of Hafnarfjörður and according to its mayor, has a “synergistic effect on other companies in town.”

Landsvirkjun Announces Plan to Become Carbon Neutral by 2025

Today, Landsvirkjun – the National Power Company of Iceland – will introduce plans to become carbon neutral by 2025, RÚV reports. According to Hörður Árnarson, CEO of Landsvirkjun, the company has monitored greenhouse gas emissions closely over the past ten years. Landsvirkjun’s initiative forms a part of the government’s plans to become carbon neutral by 2040.

Emissions  Halved Since 2005

In an interview on Rás 2 this morning, Hörður Árnason stated that Landsvirkjun’s emissions have halved from 2005 when greenhouse gas emissions were approximately 45 thousand tonnes per year. According to Hörður, today Landsvirkjun emits approximately 22 thousand tonnes annually. Most of the emissions can be traced to geothermal power stations, especially Krafla. Landsvirkjun aims to reduce emissions from these sources, while also cleaning emissions.

“The steam is separated and mixed with fluid whereupon it is injected back into the site of its retrieval … it’s not a simple operation and it involves considerable innovation. We believe that such efforts, however, will lead to an accumulation of knowledge that Icelandic engineering firms and others can use to sell to foreign parties.”

A Comprehensive and Costly Initiative

Hörður stated that the operations will be comprehensive and costly. “It’s a big project that we divide into three parts. Prioritisation is key. First, it is important to prevent emissions, which Landsvirkjun has done by adopting an internal carbon price. We’re probably the first company in Iceland to have done so. For all of our projects, we equate greenhouse gas emissions with cost; for every tonne of greenhouse gas emissions we estimate that it costs us approximately $33,” Hörður stated, admitting that the carbon price was relatively low. The second most important aspect of Landsvirkjun’s project is reducing emissions, Hörður added, with carbon sequestration coming third.

Landsvrkjun aims to update all of its cars, machinery, and engines so that in ten years they will be powered by electricity, methane, or hydrogen.

Iceland’s Largest Producer of Electricity

Landsvirkjun’s presentation will be held at Nauthóll at 2.00pm today. The panel of speakers will include Halldór Þorgeirsson, Chair of Iceland’s Climate Council; Kristín Linda Árnadóttir, Deputy CEO of Landsvirkjun; and Eggert Benedikt Guðmundsson, Director of Grænvangur, among others.

Landsvirkjun is Iceland’s largest electricity generator and one of the ten largest producers of renewable energy in Europe. Landsvirkjun operates 17 power plants in Iceland concentrated on five main areas of operation. It is owned entirely by the Icelandic state.

Proposal for Expanded Highland Protections Protested

Energy companies and some local municipalities are hotly contesting a new proposal to expand environmental protections within the Icelandic highlands, RÚV reports. Per a proposal put forth by the Ministry for the Environment and Natural Resources, a new and expanded national park would include Vatnajökull National Park – already the largest national park in Western Europe – as well as 85% of the central highlands.

The boundaries for the new national park were suggested by a bipartisan committee appointed by the ministry in April 2018. The committee, which included MPs from all of the sitting parties in Alþingi as well as representatives from the Icelandic Association of Local Authorities, maintains that expanding the boundaries of the protected area would not negatively impact Vatnajökull National Park’s recent designation as a UNESCO World Heritage site. The proposal has since been opened for public comment, but will only remain so for the next two weeks, or until August 13.

Although the Association of Local Authorities has been part of the proposal process, however, many municipalities whose boundaries fall within the proposed national park feel that they were not appropriately consulted.

Ásta Stefánsdóttir, head of the district council of Bláskógabyggð in West Iceland says that it was the committee’s job to make proposals about the new national park, not to specifically evaluate the pros and cons of whether this should be done at all. Bláskógabyggð feels that this evaluation has yet to be done and that the current proposal represents an encroachment on the zoning power of local municipalities.

“There are large areas within the highlands that are within Bláskógabyggð and farmers and residents have put a lot of work into reclaiming the land, for instance, in marking riding trails and guiding traffic there, i.e. ensuring that people don’t enter sensitive areas and the like. People are only concerned because if there is some kind of centralised agency, some kind of government agency, which oversees this, that that will somewhat undercut all this volunteer work that people have done.”

Energy companies have also expressed opposition to the proposal. Samorka, the federation of energy and utility companies in Iceland, says that under the new protections, that all new energy generation and transmission would be prohibited in almost half of the country, making current laws about energy protection irrelevant.

For its part, Landsvirkjun, the National Power Company of Iceland, says that it is necessary that all of its power plants remain outside of protected areas and says that the utilisation of energy resources in the highlands have considerable economic significance for the country overall. The renewable energy produced in the highlands, it says, is the foundation of the nation’s economy and overall quality of life today.