Can Geothermal Power in Iceland Thaw a Frozen Economy?

[depakid]

HOT ROCKS: Geothermal power plants--like the one pictured here--might help Iceland power its way out of its present economic difficulties.
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Every day when David Oddsson goes to work, the head of the Central Bank of Iceland must brave a crowd of jeering protesters, angry that the man they view as the chief architect of Iceland's near-total financial collapse refuses to step down. This tiny country of 300,000 spent the past decade becoming a financial hub of Europe, loading its banks with so much debt that when they finally collapsed, their inability to pay back account holders in the U.K. led that country's prime minister, Gordon Brown, to freeze Icelandic assets under a law designed to fight terrorism.

Iceland Prime Minister Johanna Sigurdardottir has said the country still has two valuable natural resources that could help it climb out of the current crisis—fish and renewable energy. Many believe the country's fishing stocks may already be overtaxed, however, and the vast swathes of land required to build additional hydropower dams in Iceland make them politically unpopular. That makes the exploitation of the thousands of megawatts of untapped geothermal power lying just beneath the feet of Iceland's citizens very appealing.

"When I started in this industry in 1995, we produced under 50 megawatts of geothermal power, and today it's 10 times that," says Ásgeir Margeirsson, CEO of Geysir Green Energy, which is a shareholder in one of the leading geothermal power companies in Iceland.

Domestically, several hundred more megawatts of geothermal power are set to come on line in the next few years and, owing to the excellent balance sheets of Iceland's power companies, not even the nationalization of its banks, collapse of its currency, and impending indebtedness to the International Monetary Fund can stop it, Margeirsson says. (Nor has the economic crisis affected the highly experimental Iceland Deep Drilling Project, whose long-term goal is to dramatically increase the efficiency of existing geothermal fields.)

But Iceland's plan to become the dominant player in global geothermal power production through financing such projects, on the other hand, is as dead as the 50 percent of the country's livestock that were snuffed out by the eight million tons of sulfur dioxide- and fluorine-laced aerosol released by the volcanic Laki fissure in 1783.

"With another two years, we would have been in a position to be the strong player we've always believed was needed in the market," says Alexander Richter, a former director in the Global Geothermal Energy Team of Glitnir Bank, which financed geothermal projects in the U.S., China and elsewhere, and is one of the three banks the Icelandic government recently nationalized. "The sense in the seafood and energy industries is that basically all disappeared overnight. ... We were in Reno, Nev., at a geothermal trade show on basically the same day it went down here—it was surreal."

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