Jul 14 2008

Landsvirkjun Wants to Reactivate Whole Energy Masterplan

Court Delays Hydropower Projects in Þjórsá

If all heavy industry projects that are planned in Iceland will be executed, the sector will require the double amount of energy that is uses today. The heavy industry sector currently uses about 61 percent of all energy produced in Iceland. Landsvirkjun has stated that the planned Þjórsá and Tungnaá (Langisjór) dams and geothermal exploitation (þeistareykir, Krafla, Hengill and Reykjanes) will not be sufficient and more power projects are needed. Landsvirkjun is basically suggesting that the whole original energy masterplan would need to be reactivated, contrary to supposed government policy.

In the mean time, the court case between landowners by Þjórsá river in south Iceland versus the state, on the harnessing rights of the river, will delay the construction of three planned hydropower plants, because of so-called Titan Agreements (an old water agreement).
The case will be given an express treatment at the District Court, but it has already caused delays to the application process (1) for harnessing rights of the energy in the river, Fridrik Sophusson, director of Landsvirkjun, said. Furthermore he said that because of these uncertainty surrounding the three plants in the lower Þjórsá river, Búdarhálsvirkjun hydropower plant in Tungnaá river will likely be to constructed first.

According to Helgi Bjarnason, an engineer at Landsvirkjun Power, energy from Búdarhálsvirkjun will probably be sold to Rio Tinto Alcan, which plans to increase its aluminium production in Straumsvík, near Hafnarfjördur. One of the buyers of the possible energy from the Þjórsá dams will be Verne Holding (who plans to build a data center in Reykjanes).

If Búdarhálsvirkjun will be prioritised, tender offers can begin next fall, Bjarnason said. Then the power plant could launch its operations in late 2011. But Landsvirkjun would prefer making tender offers for all four power plants at the same time.

(1) Landsvirkjun has not applied for the construction permit, which should be given by the Minster of Industry, Össur Skarphéðinsson (Social Democrats, Samfylkingin) who announced that he will not stand in the way for the construction of the three Þjórsá dams. Sophusson said recently that Landsvirkjun would consider to use forced expropriation if the court case between the company and the landowners will not lead to an positive agreement for Landsvirkjun.

Iceland Review