Among all the countries of the world, Iceland has arguably the most interesting power generation system. While the country lacks the beaches, geographic location, and population that would make it a significant economic power in say, tourism or international trade, it does have a very unique feature; its volcanos.
The island is largely powered by geothermal heat emanating from under the surface of the volcanic landscape. That has always made Iceland unusually warm (for its location anyway) despite its intimidating moniker. Now, Great Britain is looking to capitalize on that natural advantage of Iceland through a possible undersea power cable that would help Iceland export clean green geothermal power to tens of millions of British consumers.
If it ends up coming to fruition, the UK/Iceland power project would be a monumental accomplishment, creating the world’s longest undersea power cable. With groundbreaking projects like that, it is always difficult to assess cost. Nonetheless, it’s worth estimating the price tag here to determine if the project is worthwhile. Undersea cable in other parts of the UK reportedly costs around $400 a foot. With the distance between the UK and Iceland coming in at around 750 miles or around 4 million feet, that means a simple estimate for the cost of the cable is around $1.6 billion. Alternatively, extrapolating the cost of the Iceland/UK project based on the BritNed cost of roughly $900 million for a 160M million connection, suggests a price tag of around $4.5 billion.
That’s fairly pricey of course, especially when compared to other major international cable projects like subsea internet cable. Yet it’s possible that, like subsea internet cable, the Iceland/UK project might be more efficient due to economies of scale versus smaller projects like the offshore Scottish windfarms. Those kind of efficiencies are really impossible to determine at this point though, as they depend a lot on the details of the project itself. For instance, the longer NorNed cable also cost around $900 million but for a 360 mile cable, so again, prices are relative and based on efficiency as much as project scope. In the past, when Icelandic politicians pitched the effort, they have cited a cost of around $7 billion.
Using a very rough cost of $2-9 billion for the Iceland/UK link, it’s worth asking about how economical the project would be. The BritNed cable has a capacity of 1000 MW or 1 million kilowatts. Assuming the UK/Iceland cable had the same capacity, and Iceland could produce enough power to supply it fully all year round, this would mean 8,760 hours of power or 8.76 billion kWh. That, in turn, implies a cost per kWh of carrying capacity of anywhere from around $0.22 to $1. These numbers are just theoretical, of course.
The current market turmoil has created a once in a generation opportunity for savvy energy investors. Whilst the mainstream media prints scare stories of oil prices falling through the floor smart investors are setting up their next winning oil plays. Iceland’s national power company has done a number of studies on the viability of a link with Scotland over the years, but until recently the proposal had not been deemed economically worthwhile. With rising power prices, this looks set to change. The Iceland/UK link would provide sufficient energy to power around 1.6 million British households according to the National Icelandic Power company Landsvirkjun.
The deal would supply the British with power at a cost 15 percent below market rates in theory, but the bill for the cable would likely have to be paid for by British taxpayers or industry rather than the 320,000 Icelanders.
The Iceland/UK proposal has been made before, but as the world continues to look to lower its carbon footprint and introduce new alternative energy sources, it is just possible that the time might be right to actually start forward on a subsea cable between the countries.