Nov 16 2011

Aluminium Smelter in Helguvík: Mere Myth of the Past?

Plans to operate a 250-360 thousand ton aluminium smelter in Helguvík, which has in fact been under construction since 2008, seem ever more likely to be nothing but an inoperable myth of the past, according to environmentalists as well as high ranking officials within the energy sector. Aluminium producer Norðurál (alias Century Aluminum, which already operates one smelter in Iceland), has not only been unable to guarantee the necessary minimum 435 MW of energy but is also stuck in an arbitration conflict with its planned energy supplier HS Orka (owned by Alterra Power, former Magma Energy), concerning energy price. Additionally, environmentalists’ warnings – that the geothermal energy planned to run the smelter can simply not be found – have gained strength and lead to the inevitable question if the damming of river Þjórsá has been planned for Helguvík.

During a recent meeting of chairmen from all the member unions of the Icelandic Confederation of Labour (ASÍ), Hörður Arnarson, the director of the national energy company, Landsvirkjun, said that due to the current situation on international markets it would be enormously difficult for Norðurál to finance the 250 billion ISK smelter project. According to Vilhjálmur Birgisson, who attended the meeting, chairman of the Labor Union of Akranes (near to Grundartangi, where Century’s currently operating smelter is located),  Hörður spoke of the Helguvík project’s likelihood as very negligible. Another representative at the meeting, Kristján Gunnarsson, chairman of the Labour and Fishermen Union of Keflavík, stated that when asked about the possibility of Landsvirkjun selling energy to Norðurál, Hörður answered saying that no energy is really available for the project.

While it certainly is true that Landsvirkjun has, especially in the nearest past, had problems with financing, due to the international financial crisis as well as the Icelandic economy’s instability, the latter point – that no energy is actually available for Helguvík – is of more importance here. Environmentalists have, from the beginning of the Helguvík project, stated that the plans to harness energy for the smelter in geothermal areas on the Reykjanes peninsula, are not sufficient, for two reasons. Firstly, as the alleged size of the energy extraction is not sustainable and is more than likely to drain these unique natural areas for good. Secondly, because even if fully exploited, the geothermal areas would not produce enough energy for the smelter. Another energy source will be essential in order for the smelter to operate and even though Reykjavík Energy (OR) has promised Century some energy from a planned enlargement of their power plant in Hellisheiði, the aluminium producer still faces a serious lack of electricity for Helguvík.

It is here that Lower Þjórsá enters the picture. In November 2007 Landsvirkjun announced that the company would not supply any further energy to aluminium smelting in the South-West of Iceland, meaning Rio Tinto Alcan’s smelter Straumsvík, Century’s smelter in Grundartangi and the one planned in Helguvík. But many have doubted the truth behind this statement. In early June of 2008, when Saving Iceland activists gate-crashed Century Aluminum’s lack-of-permission-party in Helguvík, Saving Iceland highlighted the obvious lack of energy and asked if the planned damming of the river was meant for the smelter. Though Landsvirkjun has always denied those suggestions, several different signs have suggested the opposite.

Geologist Sigmundur Einarsson has  for the last couple of years repeatedly called attention to the inaccuracy concerning geothermal energy’s alleged sustainability and efficiency. In a new article about Reykjanes’ energy resources, Sigmundur once again points out the real energy figures and reveals that even if H.S. Orka is able to go ahead with its energy plans for Reykjanes – as mentioned above currently on hold due to an arbitration conflict between H.S. Orka and Century regarding energy prices – the Helguvík smelter will still lack between 310 and 390 MW. Sigmundur theorises that Century has from the beginning been aware of its slack energy situation, but used the cheap trick to simply start construction and thereby create expectations among the inhabitants of the Reykjanes peninsula. “Shallow-minded Icelandic politicians,” says Sigmundur, “were then supposed to bite the bait and sort out the energy by ordering Landsvirkjun to dam Lower Þjórsá (c.a. 200 MW) and sell it to Norðurál [Century] for a price accepted by the aluminium company.”

Not only does this theory full confirm Saving Iceland’s and other environmentalists’ repeated warnings not to let Century start construction of the Helguvík smelter, but now it also seems that at least a few high ranking officials have come to the same conclusion. Following Alcoa’s recent announcement about the company’s withdrawal from its years long planned Húsavík smelter, both Katrín Júlíusdóttir, minister of industry, and Hörður Arnarson, Landsvirkjun’s director, stated that Alcoa and other interested parties had created unrealistic expectations way ahead the establishing of the project’s key foundations. Thus it should not take them long to put two and two together, realizing that the same story applies to Helguvík – something that neither of them has been willing to seriously address until now.

To officially state the dead end of Century’s Helguvík dreams, Landsvirkjun would have to confirm that the planned Þjórsá dams are not meant for the smelter but for quite a while the company has been unwilling to openly discuss the Þjórsá project. The Þjórsá conflict actually splits the sitting government: While favored by the social-democrats of Samfylking, of which the minister of industry is a member, it is opposed by the Left Greens (VG). When asked about Þjórsá, Landsvirkjun now cites the Master Plan for the exploitation and protection of Iceland’s natural resources, currently in making, of which conclusions the company will wait for before any further comments. In a draft for a parliamentary solution regarding the Master Plan, the three planned Þjórsá dams are given a green light for construction. But this might change due to strong local opposition to the dams as well as the comments of a considerable number of people who protested against the project during a three months long open reviewing process, which was a part of the Master Plan’s making.

Albeit not necessary being the project’s one and only fundamental foundation, the protection of Lower Þjórsá would almost certainly mark the end of Century’s fantasies of a smelter in Helguvík. Until then the myth might live a bit longer.

For more information about Century Aluminum, its operations in Iceland and the Helguvík crisis, see:

Century Aluminum Energy Questions

From Siberia to Iceland: Century Aluminum, Glencore and the Incestuous World of Mining

Believes Aluminium Plant Is Poisoning Sheep

National Energy Authority Fears Overexploitation of Geothermal Areas in Reykjanes