Energy System at Full Capacity

Landsvirkjun always aims at maximising the yield of the natural energy resources the Company is entrusted with, guided by sustainability and efficiency. Landsvirkjun has entered into many power purchasing agreements of various sizes, dependent on available capacity in the Company’s energy system. Landsvirkjun must uphold its obligations and, at the same time, allow for natural fluctuations in water levels. Iceland offers unique conditions where electricity is generated from renewable energy sources in an isolated electricity system.

Currently, Landsvirkjun's electricity system is running at full capacity, but the Company has managed to deliver energy in accordance with agreements. However, a situation might arise where all obligations cannot be met under such circumstances. Curtailment of this kind has happened in the last few years and is becoming more frequent now that electricity demand is so high that the system is fully utilised. Landsvirkjun’s customers know of the possibility of curtailment, as stipulated in the power purchasing agreements.

Although energy demand is currently high and occasionally higher than energy supply, some years, when water levels are high, supply surpasses demand as per agreements. Landsvirkjun has offered this surplus energy to, e.g., fish meal factories and district-heating plants, which can enter the energy transition by stopping burning fossil fuels. In the last few years, this has been like the hybrid cars that mainly use electricity but switch to fossil fuels when needed. Indeed, it is unfortunate when that happens; however, it is entirely in line with the premises of the power purchasing agreements.

One of the fundamental features of Landsvirkjun’s operations is estimating how much energy generation can be sold. Between 2010 and 2020, energy generation increased by 18%, resulting from the construction of Búðarháls Power Station and Búrfell II Power Station, as well as Þeistareykir Geothermal Station. At the same time, more energy generation was made possible with increased inflow to reservoirs due to global warming and increased ablation. Landsvirkjun utilised the increased inflow, using the natural resources and investments even better.

However, the tables have turned, with energy shortages becoming a concern. There is plenty of energy most often, but power is needed. This is like a bus that is driven on a highway. The bus has enough petrol (energy) but requires an engine (power) that will drive up all the mountains. The electric generation system needs more power to utilise increased inflow and, at the same time, supply greater demand with flexibility, e.g., due to the energy transition. Landsvirkjun is preparing to extend Sigalda Power Station to meet this increased demand. However, increasing power in the electricity system is not a simple task, e.g., licensing processes take a very long time, and the construction phase is prolonged.