Accumulation of a resource fund for Iceland's renewable energy resources

Abstract

The Icelandic electrical energy resources are primarily based on hydroelectric and geothermal electricity generation. At present wind energy generation is negligible but has a certain potential for the future, in particular considering the synergy of wind generation and hydro reservoirs. Iceland has large resources compared to the size of it's island economy and with only about 350 thousand inhabitants the amount of energy resources per capita is among the highest in the world for any country. However, as the power system is presently isolated from any larger electricity markets, it is difficult to realize the potential economic benefit or rent of these resources. This rent may to some extent, due to market circumstances, be “locked in” with local utilization such as energy intensive industry. A future interconnector [2] may, however, link to established markets with energy prices independent of these circumstances and renewable energy prices in these markets may be rising in the future rather than declining.