May 18 2010
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Landsvirkjun´s Spin on their Energy Prices to Heavy Industry


Aluminium PricesThe deals on energy prices between Landsvirkjun (Iceland´s National Energy company) and the aluminum companies working in Iceland have been kept secret from the public since they got signed. The only notion the public had was a pamphlet called ”Lowest Energy Prices”, published in 1995 to lure heavy industry to the country, which like the name states, was filled with promises about cheap, greenwashed, energy. Looking at surrounding countries many estimated that the prices were close to a half of what households in Iceland pay. But after Alain Belda, Alcoa´s president, had the now famous slip of his tounge in Brazil that revealed that they were paying $15 for the MWh (megawatt hour), and RUV´s (Icelandic National Broadcasting Association) exposure of Century Aluminum´s prices earlier in the year, Landsvirkjun decided to open their books in, what they call ”an attempt to create peace around the company´s actions”. In reality they´re just blowing smoke in people faces with well chosen figures in a desperate attempt to save the companies already ruined credibility.

The Price Revealed
Hörður Arnarson, president of Landsvirkjun, proudly presented that the aluminum industry in Iceland was paying $26 pr. MWh, or up to $50 cheaper then the most expensive energy in the U.S.A. But the prices he announced are not fixed prices, but bound to the price of a ton of Aluminum on the world market at 1% of the salesprice for the MWh, simply meaning that if the ton of aluminum costs $2000, the MWh will cost $20. The numbers revealed by Landsvirkjun were only from January and February of 2010, where the aluminum price stood conveniantly at $2600 pr.T., but fails to mention the plummet of 2008, where prices went as low as $1300 before slowly climbing back up to it´s current price. As the MWh prices are fixed at 1% of production, that means GWh prices from $13 when it was at it´s lowest, and no way of predicting what it will be in the future.

When he was comparing the prices between industry and households, he reclined from comparing the costumers final paying price with distribution and transport included, instead he picked out the amount the customers were paying for production costs only. In that case households only pay 3,5 crown (ISKR) pr. Kwh, a whole crown more than the aluminium companies. But if you take final cost into the equation the differnece grows considerably with households paying 11 crowns pr. Kwh, the aluminum companies 3, incidently revealing the fact that they´re practicly getting the energy transported for free, or half a crown pr.KWh. And keep in mind, the industry´s prices in this comparison only reflect the prices for these two months when the aluminum companies were paying above the average price of late.

In the year 2000 prices rocked around the $1500 pr.T. line with a small decline up untill 2004 where it started rising and climbed to record prices of around $3000 with dropping intervals until late in 2008 where the prices plummeted under the $1500 line again and have been on a slow increase since then. The average price for the last three years is around $2300, $23 pr.GWh, or $3 less than the ammount displayed by Landsvirkjun, and that´s the peak period within the last ten years, as can be seen in the graph at the top of the page. It´s been as cheap as $13 dollars with short $30 surges and is most likely to plummet again because of lower demand and rising stockpiles.

Like usual, none of the various media in Iceland have dared to point out these flaws in Landsvirkjun´s presentation, or question Landsvirkjun´s deals in any way. The lobbyism and the corrupted spirit of the pre-collapse industrial madness has not changed a bit and the media are still shamelessly hailing them on, blindly ignoring the results of the report of the Special Investigation Commission, made by order from the government to investigate the reasons behind the collapse of the financial system, which clearly draws up how the heavy industrialisation, especially the Kárahnjúkar / Fjarðarál (Alcoa´s smelter in Reyðarfjörður) projects, overexpanded a small and fragile economy and was a major catalyst in the following financial crisis the country is currently dealing with.

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