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New opportunities
There is a growing emphasis on the need to tackle climate change through ambitious action at the global level. Governments and international organisations have set clear targets for reducing emissions. Consumers have become increasingly aware and now insist that the companies they trade with demonstrate responsibility, ensure sustainable operations and increase the use of renewable energy sources in their operations.
The future will offer Landsvirkjun and Iceland opportunities for value creation by meeting the demand for renewable energy.
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International unity in tackling climate change
One hundred and seventy two countries have now ratified the Caring for Climate agreement. They will now work together to keep global warming well below 2 ° C. This is an ambitious target and such an extensive international climate agreement is unprecedented.
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Pressure from the public
Climate change can mostly be attributed to fossil fuel consumption. Approximately 40% of total carbon dioxide emissions originate from fossil fuel utilisation in electricity generation and approx. 25% from fossil fuels consumption in transport. Global climate action is focused on reducing emissions in these two sectors by increasing renewable energy generation and increasing the use of this type of electricity in transport.
The initiative to take action on climate change is no longer reserved for just governments and businesses. The public now makes increasing demands on companies to act on climate change. Companies are increasingly more responsive to this trend and have in many cases set environmental goals far beyond legal requirements. These companies also make demands on their own suppliers with regard to increased corporate responsibility.
IKEA, Apple, BMW
Many of the world's largest companies have already outlined their intentions to eventually only use renewable energy in their operations. These include IKEA, Apple, BMW, eBay, Facebook, Google, H & M, Hewlett Packard, Johnson & Johnson, Kellogg's, Lego, Microsoft, Nestlé, Nike, Starbucks, Tesco, Tetra Pak and Walmart. These companies are also insistent that this electricity be supplied by new power stations, therefore ensuring that their business really contributes to the increased share of renewable energy at the global level.
Iceland's positive contribution to climate change is already significant. Renewable energy is used for the production of aluminium, silicon and to store computer data. Further participation in providing renewable energy for these industries is a choice for Icelanders but various opportunities are available.
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International participation in the procurement of renewable energy
Landsvirkjun is well aware of increased international corporate action on climate change and the increasing importance of renewable energy worldwide. The data center industry has grown rapidly in Iceland in recent years and data centers now use significant amounts of electricity. The industry is relatively new in Iceland and many of its clients are committed to using renewable energy. Iceland’s ability to provide renewable energy has proven to be a clear advantage.
The fourth industrial revolution
Data centers are at the centre of the fourth industrial revolution and are a fundamental part of mankind’s ever-increasing demand for information. The development of the data center industry in the world has been rapid and annual investment currently amounts to 150-200 billion dollars. This type of growth inevitably calls for new power stations and the data center industry could use up to 3% of the electricity available worldwide, within a decade. The development of the industry in the Nordic region is a clear example of this as companies such as Amazon, Apple, Facebook and Google have announced their intentions to invest heavily in the region.
The opportunity for Iceland to take a central role in this exciting development is significant. Landsvirkjun has in recent years invested in marketing and has participated in various conferences and meetings to create valuable networks and acquire expertise. These measures have proved lucrative and Landsvirkjun currently supplies energy for two rapidly growing data centers.
Excess demand
A diverse range of sectors are interested in investing in Iceland and it could be said that the demand for Landsvirkjun’s services presently outweighs the available supply. Many of our current and dedicated customers are interested in expanding current contracts.
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Reduced emissions alongside increased national electrification
Iceland has committed to joining the European Union countries in significantly reducing greenhouse gas emissions. A key factor in Iceland's pursuit of its own objectives is the reduction of emissions from transport. The electrification of all vehicles in Iceland over the next decade would probably suffice for Iceland to meet its commitments for the reduction of emissions but the country would need to generate energy that could amount to 1.5 TWh or approx. 8% of the current capacity of the Icelandic electricity system to meet these demands. Assessing the timeframe for this type of development is difficult but Landsvirkjun will inevitably take an active part in the electrification of transport as it is Iceland’s largest energy producer.
Landsvirkjun has encouraged energy exchange in transport in Iceland. The Company has been involved in financing the Icelandic initiative NýOrka, which conducts research, provides expertise on energy exchange and also acts as an advisor to the Icelandic government. Landsvirkjun has also set ambitious targets for the electrification of its own fleet.
A further example of Landsvirkjun's contribution to achieving the country’s national goals is an agreement that was reached between the Company and the Icelandic Fishmeal Producers Association in 2017. The agreement is intended to promote the further use of electricity instead of oil for fishmeal production and to encourage further investment in the electrification of such operations.
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Increased utilisation
In recent years, Landsvirkjun has invested in its own power generation system to improve utilisation and maximise performance. The Búrfell Power Station II, which will begin operations in 2018, is a clear example of this. The power station will contribute towards fully utilising the water flow in the Þjórsá River which has previously flowed untapped past the old power station.
The production and sale of electricity from geothermal power stations only represents part of the value of this resource. The operation of geothermal power stations generates a large amount of thermal energy, water and diverse material streams. Landsvirkjun is working hard to develop methods to utilise the by-products of power generation from its three geothermal power stations in Northeast Iceland.
The Nature Baths at Lake Mývatn are a good example of a project based on Landsvirkjun's geothermal production, where visitors bathe in the runoff water of the Bjarnarflag Power Station at Reykjahlíð. The company, which is partly owned by local residents, receives over 200,000 visitors annually.