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The Guardian has written that it expects Iceland’s president Olafur Grimsson to this week ask the British government to hand over the finances necessary to begin construction of the £4.3 billion subsea electrical cable that will link the two country’s energy grids, providing the UK with a source of clean, cheap energy.
Iceland has the cheapest electricity prices in Europe thanks to its abundant sources of geothermal, hydropower, and wind energy. It produces over 12 gigawatt-hours of energy, which is nearly five times the demand of the islands tiny population of 317,000 people.
A geothermal power plant in Iceland.
Landsvirkjun, the state-owned electricity company, said that this over-supply in the market will allow Iceland to deliver five terawatt-hours of electricity a year to the UK via the world’s longest subsea interconnector cable, and at a cost 15% lower than the price of offshore wind energy. The cable will be around 1,000km long, and sit up to 1,000m below the surface of the sea, providing as much as 1.5% of the UK’s electricity demand. It will not be built until 2022.
Related article: Cameron to Cut Green Taxes in Battle over Rising Energy Prices
At the end of May 2012 the Icelandic and British governments signed a Memorandum of Understanding to join the two energy grids via an interconnector cable, but before the contract can be put out to tender the British government must stump up the funds to cover the huge costs of the mammoth infrastructure project.
For years Iceland made use of its huge energy over-supply by encouraging power-intensive industries, such as aluminium production (with Rio Tinto, and Alcoa), to set up plants and take advantage of the cheap energy. Just a few large aluminium processing plants use more than 70% of all electricity generated on the island, but a recent downturn in the aluminium market has caused them to look elsewhere for customers, and the UK could provide a long term, reliable client.
Subsea energy cables in Northern Europe.
The UK is keen to secure a reliable source of renewable energy that will nicely complement its growing offshore wind energy sector, and help its reach its renewable energy targets and reduce carbon emissions.
The Guardian suggests that the deal might help to repair relations between the two countries which were stretched thin after the 2008 Icesave scandal in which the Icelandic government refused to honour a promise to guarantee the money of hundreds of thousands of UK citizens that had been deposited in failed Icelandic bank, Landsbanki.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com