Jul 05 2007

Century Smelter to Pay Less for Energy than Farmers

Iceland Review

Reykjavík Energy Company (Orkuveita Reykjavikur) revealed yesterday that Century Aluminum Iceland (Nordurál) would pay ISK 2.1 (USD 0.03, EUR 0.02) for each kilowatt-hour (kWh) for a planned smelter, while greenhouse farmers pay twice as much.

OR and Century Aluminum reached an agreement on energy sales on Monday.

Director of OR Gudmundur Thóroddsson confirmed the energy price of the planned smelter in Helguvík on Reykjanes peninsula, southwest Iceland, in an interview with Fréttabladid.

Energy prices that large-scale industrial companies pay public institutions have never been revealed in detail like this before on the grounds that the information may give competitors an advantage.

Bjarni Helgason, head of the Garden Farmers� Union (Samband Gardyrkjubænda), said farmers who grow vegetables in greenhouses are considered heavy energy users and they pay OR ISK 4.0 (USD 0.06, EUR 0.05) for each kWh.

According to Fréttabladid, smelters require much more energy than vegetable farmers.

OR has agreed to provide Century Aluminum with 100 megawatts of energy for 25 years for the smelter in Helguvík, from January 1, 2011. OR will provide 40 percent of the energy the smelter requires while Sudurnes Energy Company will provide the remaining 60 percent.

Thóroddsson said OR�s agreement with Century Aluminum is probably worth ISK 41.5 billion (USD 700 million, EUR 500 million), with a utilization period of 95 percent, meaning that 95 percent of the power sold to the smelter would be utilized.

Thóroddsson said it is convenient to produce electricity alongside hot water production. According to the director, the agreement with Century Aluminum secured a new heating facility near Reykjavík and a 30-km water pipe to the city, which would not result in higher heating prices.

Without the agreement with Century Aluminum, heating prices would increase, Thóroddsson stated.

MP for the Social Democrats (Samfylkingin) Dagur B. Eggertsson disagrees. He said low heating prices could be achieved with different solutions and said other options should have been considered, such as server farms.

�There are many indications that computer companies [i.e. Microsoft] are prepared to pay more for energy than aluminum companies. This is an environmentally friendly operation that should be looked into more thoroughly and I don�t think it�s responsible to designate the energy without doing that,� Eggertsson said.

The Social Democrats, which are now part of the coalition administration of the Icelandic government, had campaigned for putting a stop to large-scale industrial operations, like the smelter in Helguvík and by Húsavík in northeast Iceland.

Fréttabladid was unable to reach Minister of Industry Össur Skarphédinsson to respond to the news.