Electricity sector in Iceland

The electricity sector in Iceland relies primarily on renewable energy: hydro power and geothermal energy, with very minor contributions from thermal power stations. Iceland’s consumption of electricity was seven times higher than EU 15 average in 2008. The majority of the electricity is sold to industrial users, mainly aluminium smelters and producers of ferroalloy. Landsvirkjun is the largest electricity producer. In the retail market largest companies were in 2007: RARIK, Orkuveita Reykjavíkur and Hitaveita Suðurnesja. The electricity production was increased significantly between 2005-2008.

According to Statistics Iceland the total electricity consumption was 7,958 GWh in 2002, 11,480 GWh in 2007, and 17,068 GWh in 2012. The aluminum industry in Iceland used 71% of produced electricity in 2011.

The electricity supply and consumption were equal in 2008: 53.1 MWh per inhabitant when the European union (EU15) average was 7.4 MWh. Iceland’s consumption of electricity was seven times higher than EU 15 average in 2008. The domestic electricity supply promotes use of electricity.

Iceland's electricity is produced almost entirely from renewable energy sources: hydroelectric (70%) and geothermal (30%). Less than 0.2% of electricity generated came from fossil fuels (in this case, fuel oil). In 2012 there was no wind power installed in Iceland. Electricity production increased by 24 MWh/person from 2005 to 2008, an increase of 83%.

Generating electricity in Iceland with geothermal energy has increased significantly in recent years, in response to the rapid expansion in Iceland's energy-intensive industry. The following table shows the installed generation capacity in MW as of the end of the year:

The Icelandic Transmission System Operator (TSO) is Landsnet, a company jointly owned by three state-owned power companies: RARIK, Landsvirkjun and Orkubú Vestfjarða. All major transmission construction needs a special permission from the Ministry. The Icelandic TSO is compensated for all costs.

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