Iceland’s new government is moving to significantly boost the nation’s renewable energy capacity, announcing plans to approve three new power plant projects this year, Bloomberg reports.
The move comes as the island nation grapples with rising electricity demand and debates the role of foreign investment in its energy sector.
Johann Pall Johannsson, Minister of the Environment, Energy, and Climate, stated that he will propose lawmakers approve the construction of plants with a combined output of 1.8 terawatt hours (TWh) per year. This represents more than a third of the 5 TWh per year increase pledged by his Social Democratic party over the next decade prior to their election victory in November.
The decision to expand energy production follows years of political gridlock that has hampered the development of new power sources. With no connections to other countries’ energy grids, Iceland has struggled to keep pace with growing demand, particularly from energy-intensive industries. Johannsson emphasized that the move is intended to attract investment by enabling the growth of data centers and sustainable food production, such as land-based fish farms.
“For the first time in a long time, we have a government in Iceland that agrees on facilitating increased energy generation,” said the 32-year-old lawmaker.
The new capacity is expected to be a mix of hydro, geothermal, and wind power, he added.
Balancing Growth, Environmental Concerns
Iceland, known for its abundant renewable resources, currently generates about 20 TWh of clean energy annually, making it the world’s largest producer of green electricity per capita. Hydropower accounts for 70% of the country’s output, with the rest coming from geothermal energy. The nation’s first wind farm, operated by national power company Landsvirkjun, is also expected to come online next year.
While Iceland is keen to increase its renewable energy production, it is also grappling with concerns over the potential impact on its pristine wilderness, a key selling point for its tourism-driven economy. There has been particular debate over the role of foreign investors in developing wind power.
“We are not categorically against letting foreign parties enter the power generation market,” Johannsson clarified.
However, he stressed that this would only be permitted under strict conditions that serve the public interest and ensure the nation receives fair compensation for the utilization of its resources. “
Streamlining Approvals, Addressing Rising Costs
The new government also aims to reduce the number of institutions involved in the licensing process for new power plants, responding to industry pleas for more streamlined approvals. The three-party coalition formed last month has also faced mounting pressure to address rising energy costs. Household prices have increased by 13% over the past year due to competition with industrial users. Currently, approximately 80% of Iceland’s energy production goes to heavy industry, primarily aluminum smelters.
In addition to increasing supply, Johannsson said that the government may empower its environment and energy agency to monitor prices and is preparing legislation to regulate power exchanges to prevent market manipulation. However, he expressed skepticism about the effectiveness of price caps.
