Exporting green hydrogen

Iceland is starting to position itself as a producer and exporter of “green” hydrogen. Listen to a discussion on the potential for the island nation to export the clean fuel, expand wind power and on the difficulties currently faced by large industrial energy users. 

Host: 

• Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel, 

Guest: 

• Hordur Arnarson, CEO Landsvirkjun. 

Transcript

Anna Siwecka, freelance journalist/podcaster: 0:01

Did you know Montel uses artificial intelligence and machine learning to forecast spot prices, inflow to reservoirs, wind, and runoff river production. We can improve forecast for your individual power plants anywhere in Europe. Contact us at ai@motelnews.com for more info.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:34

Hello listeners and welcome to the Monte Weekly podcast. In this last episode before the summer break, we are in a country close to my heart. We're in my city of birth, and today we'll talk about energy matters in this island in the North Atlantic. It may not be physically connected to Europe, but nonetheless, there's plenty to get our teeth into. Joining me, Snjolfur Richard Sverrisson is Hordur Arnarson, the CEO of Landsvirkjun. A warm welcome to you her. Thank you. Maybe we should start by talking about Landsvirkjun, especially for those who are not so familiar with what's special about this country and your company in particular.

Hordur Arnarson, CEO Landsvirkjun: 1:14

Yes. Is the National Power Company of Iceland. It's fully owned by the Iceland I nation, and we are generating about between 70 and 75% of the electricity in Iceland, one other percent renewable. We started out with hydro, which is our main source of energy, but we have also developed in, in geothermal which is also a fantastic way to produce electricity. And also we have also touched up on, on wind where we have, quite a lot of possibilities and But you're starting to harness that resource.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:43

Absolutely. We'll come back to that later, but I think I'd like to start off by talking about something which is fairly hot at the moment in Europe, especially given what's happening on the European Commission level. And maybe in terms of the recovery post COVID turning into a green transition, and that's hydrogen. What's Lukin doing here?

Hordur Arnarson, CEO Landsvirkjun: 2:03

We have for many years been following the development in hydrogen. And we believe, and have believed for quite some time that this is very interesting technology to store energy. We see a lot of opportunities both for especially larger vehicles. We see direct electricity is especially good for the small vehicles. Við sem égjum það erum svo artur eða sér við hluti þar og verða gafu Það er það aðeins skilur ekki, og við þum það hlutna þá ég erum við út að finnst út á þá Takk So we are following very closely and we are definite that we will participate strongly in this revolution.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:44

Do you have any ongoing projects?

Hordur Arnarson, CEO Landsvirkjun: 2:46

Yes, we have a small project that we are working on mainly focusing on the domestic market that we have. We are now in the planning process. But then we are also looking at the possibility of export.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:55

That's my next question really. Could Iceland produce an export hydrogen to Europe or to other markets?

Hordur Arnarson, CEO Landsvirkjun: 3:02

Yes, I think so. I think the, if you look at the demand that Europe is facing and with this ambitious goals that they're setting them, that it's obvious that the hydrogen will mainly be coming from places outside Europe. I believe we'll have some production. In our continent, but you will have to import it because of all the renewable energy that you need to produce it. So I think Iceland can, with our na natural resources, I think we can contribute to that.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:28

And what kind of numbers are we talking here? If we're talking sort of megawatts or even megawatt hours, and if we're talking about green hydrogen, that is

Hordur Arnarson, CEO Landsvirkjun: 3:35

something that the country have to decide. It's, how much we want to harness. We are formulating how much we could produce. But if you look at the production in Iceland now it's about 20 terawatt towers and that could be increased significantly, especially with wind. So I think, if needed, we could be talking about five, 10, possibly more OTT towers, then

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:52

That's good. It

Hordur Arnarson, CEO Landsvirkjun: 3:53

is a significant amount. Of course, it would not solve what Europe. That Europe's needs. But I think it is it is a significant amount that Iceland can contribute. But this is also pol de depends on the policy of the government

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:04

and of course of what happens in elsewhere in Europe. Yes. Potentially. Yeah. Because in Europe you have the infrastructures already in place for gas, and that's quite, it is not so problematic. No. To the

Hordur Arnarson, CEO Landsvirkjun: 4:14

transport is more problematic course from Iceland. We see that also from other places that are being considered.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:20

What about the constraints? What are, what would be stopping that kind of number being produced?

Hordur Arnarson, CEO Landsvirkjun: 4:25

I think the constraint is one thing is transportation. How would it be transported from Iceland to Europe? And I think, but I think that is so war. There's a lot of ongoing development that we are following. It is also the constraint is, how much energy will we be allowed to harness in Iceland? What will the government and the Iceland Nation. Accept. So I think that is the main constraints I see.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:46

And of course, crucial to new build or new development. Hydrogen would be wind power. Yes. So Iceland's got huge resources. It's, it is quite a windy country. Yes. But not many projects in the pipeline. Is that a fair,

Hordur Arnarson, CEO Landsvirkjun: 4:58

Assumption? There are several projects in the pipeline, but they're not far in the pipeline. The permitting process is not quite clear in Iceland, but the government is a clear goal that they want to clarify that. And I, and I hope that will be solved within few years. But there is, the wind conditions are extremely good in Iceland, and we have a. Quite a lot of possibilities in building in remote areas where there are know it's not close to people and that, and should not affect people as we see the problem and follow the problems closely. In Europe, people are opposing this more and more. So we hope that we find ways of balancing the conservation of nature and the harnessing of wind. And we think that is doable, but it's, it is important to have good guidelines where to build it and where not to build it. But Iceland is a big country with a lot of wind.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:44

What's the public view here of wind? There's been, I don't know if you've followed what's happening in Norway or in Germany, that it seems to be growing opposition to onshore wind. What's the feeling here in Iceland?

Hordur Arnarson, CEO Landsvirkjun: 5:55

We follow that very closely. Now. It's it's very, quite positive, I would say, but that's also because we have not built big wind farms in Iceland yet. But I think if we do this in the proper way I think we can do it. So in such a way that the vast majority of people support it. Of course, it depends on also what is the energy use for, and I think participating in the Green Revolution, fighting climate change in the world, I think that is, or I hope that that will create report. With the Iceland community,

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:24

what's the role that Wick can, could have here in developing wind?

Hordur Arnarson, CEO Landsvirkjun: 6:27

We have been leading the development. We have already built the two. We built the first two in 2013 to introduce these two iceers. At that time, people said that, the wire doing this, this will never be competitive to hydro and geothermal. But we had foreseen the development we were expecting with the cost and the reliability of wind. And that has developed as we expected. So now it is. Is competitive and to, and we have been, the projects that are further in the permitting process, they have all largely project we see we have a role, but we are pleased also to see other parties participating. I think it's quite positive for Iceland if it's not only land that is building wind farms.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:05

So you're quite opening to other developers coming in potentially here. Yes. Yes.

Hordur Arnarson, CEO Landsvirkjun: 7:09

I think that would be very good for the Iceland market

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:11

and certainly big driver. In Europe and in the Nordics have been power purchase agreements. For wind and for solar, but for wind particularly, do you see a role for these kind of agreements in Iceland?

Hordur Arnarson, CEO Landsvirkjun: 7:22

Yes. That is a challenge because we are not linked to a market. And if there, if we gonna make a contract with new wind farm, that has to be a new offtaker and hydrogen could, for example, be one, one kind of an offtaker. But I think that is something that we have to solve in Iceland. How do the especially the other companies get access to the customers? But we are willing to support that either with, flexible power or some other means, but the important part is there has to be. More demand than we see today.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:48

You signed a PPA with, did you? Yes. Yeah. And that's linked to the Nor Pole Yes. Price. Is it not, what's your view of this deal now, given the very low Nordic prices? We've seen on several occasions, prices, the system price outturn below one, one Euro.

Hordur Arnarson, CEO Landsvirkjun: 8:02

Yeah, that's of course was I think the, everybody's a little bit surprised about the market condition in the market now, and this kind of mar the market has just collapsed. Og ég finn að þetta er kannski aðra problemið fyrir landvöldu enn energy-kampanjum í Skandináfíka við erum bara að hafa einn smá partjum af hlutum við Njálsborg. Við þáðum við að hafum ekki hlut aðra ég, en við verðum að það þarf að hluta upp hlut So this is a challenge that that the market participants, I think both buyers and sellers should be concerned about,

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:43

because

Hordur Arnarson, CEO Landsvirkjun: 8:43

this is not sustainable.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:44

There's no sort of physical interconnection here, but they're quite a strong connection in terms of market and the pricing. Yeah. Yes. Contracts in place. Yes. Yeah. Most

Hordur Arnarson, CEO Landsvirkjun: 8:53

of our contracts, PS contracts are fixed price contracts, so that is what we have been. We used have been moving into a fixed price contact. Historically, we had quite a lot of contracts linked to the price of aluminum. We have moved away from that, and we would prefer fixed price, but we agreed to try this out for only for four years with one of our customers. But I think the experience that we have had this, that we've also seen high prices that would be almost too high for our customer, but then we see this very low prices. And the, this is of concern for the long-term PPAs based on,

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:26

so what, that's one of the lessons learned that perhaps you wouldn't want to repeat this kind of this kind of deal again, or

Hordur Arnarson, CEO Landsvirkjun: 9:32

No, we have to at least to consider that, you know that because of this big fluctuation both down and then we can also expect it to go. We will reevaluate that, but this is one for more portion of our sales. Okay.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:43

So it a out of your sales and of your portfolio there, but yeah. What are the alternatives? You mentioned linking to the aluminum price. Yes.

Hordur Arnarson, CEO Landsvirkjun: 9:50

But but we prefer fixed prices. We want to be competitive with predictable prices and I think that is also what many industrial players like. We have to have stable working environment, market environment, so that is what we want to offer. And, but at the same time, offer very competitive prices.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:07

That's traders like the volatility, but maybe the producers and the industrials want more stability, like volatility.

Hordur Arnarson, CEO Landsvirkjun: 10:14

The buyers are happy now. But that, last year they were not happy. Then the price was quite high.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:19

There was a lot of talk many years ago, and there has been since about cable from Iceland. The Iceland cable. What's the status now? I remember you telling us four years ago, I think that the Iceland was still keen on developing this. What's the current status?

Hordur Arnarson, CEO Landsvirkjun: 10:33

Yeah, we still this is a very interesting project because it could be quite feasible both for Iceland and for the uk. To provide the flexibility and the reliability of the hydro system to back up the wind in Scotland and the uk. But the status of that this is on government level now, and the governments have been looking at it. This is not a high priority. They have, we have had many other issues that people have been facing lately the COVID issues. But I think hydrogen is also a very interesting option. This is in many ways the same for Iceland to get connection, to export directly power to Europe, either, either as hydrogen or directly with the link. And this also allows us to avoid the surplus energy that we are bound to have in our system. Many people don't know that, you know what Iceland is the one of the fuel system or almost the only system, isolated system, electricity system that is 100% renewable with no backup from fossil fuels. And many people say that this is impossible to do because of the unpredictable nature of renewable. But we solve this with having surplus energy that we, we have always enough energy within the system, especially the hydro system, to withstand the most difficult water year that we have experienced. But this means that we have an average 10, 15% surplus in the system with an interconnector or with export of hydrogen. We could create value out of the surplus without, and at the same time have the reliable system that we want to have. So an interconnector would allow us to use our resources much better, but we see hydrogen also as an interesting option,

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:09

Besides the more torque turned to hydrogen and away from the cable here, or

Hordur Arnarson, CEO Landsvirkjun: 12:13

no I would say that these are two good options. We see also that our customers now we see the aluminum industry, not only in Iceland, just in Europe and in the western world. Er aðstersvala significant difficulties because of the exports from China And countries like Iceland that are relying heavily on selling energy to the aluminium industry have also to think if China continues to operate like this without any The european Repeção not gonna fight back How will our customers survive in the future? It is a very tough market and China has been pushing the price very low So I think we also see, and we have to look at the total market, the aluminum industry, the interconnector, the hydrogen data centers all, and we want to have as diversified customer base as possible.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:02

Are your customers feeling the squeeze here as well, and they're putting pressure on you as a company as well? Yes. We

Hordur Arnarson, CEO Landsvirkjun: 13:07

see, and not only here, but all, all over Europe. We see that the metals smashing industry, aluminum, silicon, metal, they are under heavy pressure from China, 2000 China, the market share of China aluminum. China's aluminum manufacturer was 10%. Today it's about 60%. So China is, and to for European producers to compete in production with China is difficult. And Iceland and other power producers, we have to create as many options as we possibly can. In this challenging market.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:37

Absolutely. Post COVID, we're long way outta the woods yet, but once we get, into a recovery stage, I know there are concerns in the Nordic and in Sun North European markets that you know the demand for. Aluminum or these products could Wayne, it could not recover to the strengths as been seen before. Is this something that is also, that is a concern for you? Yes. Yes.

Hordur Arnarson, CEO Landsvirkjun: 14:01

I think that's a concern in how will the economy recover and how will these European companies compete with, the Chinese competitors, which are, working in a completely different market environment.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:11

Absolutely. So I think Iceland hasn't been that badly hit by the COVID-19 crisis, although the tourism industry, the hotel, the restaurant of course very badly damaged and the hospitality. But as far as industry, this is obviously a concern.

Hordur Arnarson, CEO Landsvirkjun: 14:23

It's a concern. We are very concerned about the difficulties that our customers are facing.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:27

And if we just return to the interconnector, so it's not on ice. Would it be fair to say it's on ice or

Hordur Arnarson, CEO Landsvirkjun: 14:32

No, it's not on ice, but it's it's not it's not with a lot of focus, but there, there is there is still strong interest, especially from the uk. To work on this project, but the Icelandic kind of government has to decide, what is there, how do they see the project? And that is still an ongoing discussion

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:48

because it's. Probably cheap. Probably don't really know, but probably cheaper than the Hinkley point. Deal. Yes.

Hordur Arnarson, CEO Landsvirkjun: 14:54

Much cheaper.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:55

Much cheaper. But

Hordur Arnarson, CEO Landsvirkjun: 14:56

at the same time, the, the low prices in Europe, they are, they're not helping big infrastructure property projects like this. The expectation for power prices in the coming years is much lower now than it was five years ago. So that is. Making it more difficult to justify by a big project like the Intercon, but I think it still is, could create value for both UK and Iceland.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:16

And of course, there are other priorities that you mentioned. You've got the COVID recovery, you've got Brexit et cetera, et cetera. So

Hordur Arnarson, CEO Landsvirkjun: 15:23

then you have also new possibilities. You have the data center industry, you have the high hydrogen possibilities. There are many very interesting prospects that we can work on.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:32

That brings me to my next question. You obviously, we've talked about these large industrial companies in Iceland that are mainly aluminum producers, but. What is L doing to attract new demand? So data, for example, data centers

Hordur Arnarson, CEO Landsvirkjun: 15:44

of course, we want to work with our new cus our current customers, and we want to support them as well as possible. And we have been able to make them more competitive by selling them more energy and supporting them and moving more to value add products. And we want to continue to that. But I think we also see, I is also a very good place for data centers because of the. For cool ambient temperature, we have lot of space, we have quite good connections with data cables, although we would like to strengthen them further. But we are just, there is a strong growth in this area and I think Iceland can be an interesting option for some of those companies that also wants to operate in several different places. So we have good connection con contact with several of the big IT companies in the world that are hopefully at least long term looking at Iceland as an interesting one of the places to, to operate

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 16:33

because it's quite a competitive. Segment, isn't it? I think, we've got Finland and northern Sweden, they're also attractive. I

Hordur Arnarson, CEO Landsvirkjun: 16:39

think all markets are competitive. You'll never find a market that is not competitive. Especially with in industries like data centers, which is generally good acceptance in, in all communities to, to attract them because of the cantor. Types of jobs they create. So that is just a competitive market then. And I've never seen a market that is not competitive.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 16:59

How do you make, unique for Avi and how do you attract them to Iceland rather than, to other parts of Europe or the world? I

Hordur Arnarson, CEO Landsvirkjun: 17:06

think we can, we offer very competitive prices. The, we have a lot of space that we can offer them. We have highly trained people who work in these data centers. So I think we have a very good value proposition. En ég veit að við erum bara að lífja að við þessari ístofu smá ístofu og notum ekki layn á þessari ístofi Það er mikilvægt mikill Íslandi, í þessari ístofu. En við finnum í þessari að hægt að ístofa eru Trying to attract these companies, and these companies know that. They know, which is good for them.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:39

I'd like to also ask you about a big part of corporates and becoming more green and aware of wanting to source their electricity from renewable energy is the guarantee of origin that comes with it. I know that the, certainly the. You've had a lot of revenue from this segment over the past years. How do you feel about this market? Is this something that you want to grow further or, yeah,

Hordur Arnarson, CEO Landsvirkjun: 18:01

of course. We want to, all our production is certified, that it is green, so that when the customers that, that want to have that can have that as a part of the energy that we supply to them. But then there are other companies that are, don't see the value of this and don't want to pay any premium for that. So we are participating also in just selling the deals. I think that's a very interesting market and I, it'll be interest to see in the aftermath of the COVID, one possibility is that consumers put more pressure on on, on the sustainability and the green part of all our products. So I think that we might see more demand. But we have seen the demand has been increasing in recent years. But the supply has been increasing faster, which is good in many ways. That means that we are seeing increased production of green energy. So the prices have been going down, but I think, it will be interesting. But there, and there is a good possibility that the value of this will increase again, especially because I think the consumers will. We'll put more focus on it.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 18:58

Is it at all controversial in Iceland? Because, it's the lack of interconnection to any part of Europe, and then, and of course you, as you mentioned, a hundred, 115% of the country is already green. Yeah. So you do we need, does it need these geos? I think

Hordur Arnarson, CEO Landsvirkjun: 19:11

the whole system in Iceland in other places is, it's a little bit controversial. People confuse it that it is easy to distract the discussion on, on, on green effect. But this is a good system to connect. A responsible consumers with responsible power producers and this is the only way to do it so I think we just need to continue to educate it but it is controversial in Iceland but we see that also in all other countries where it is But it did where it is practiced.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:38

Are you at all concerned that the commission could maybe tighten the rules to the link, the sale of GOs to a level of physical interconnectivity?

Hordur Arnarson, CEO Landsvirkjun: 19:47

I think that would be, of course you never know what happened with politicians, but I think that is against the true goal of the system to support development of green energy. Because despite if you have any connections you could never get the same electricity. You know how we're gonna buy green energy from wind farm that produces only 30% of the time, but you buy all the electricity from there, you know the electricity is not green that you sometimes get. So the, it is never connected. The delivery of the electricity and the green certificate, even if you have a connection that has a very limited capability of transmitting power. So I think if you truly want to support. Development of green energy, you should not limit the system and this system is functioning.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 20:32

A final question here in Iceland and especially at Swick, you have a lot of expertise, knowledge of renewables, geothermal, hydro, now wind. Do you have any plans to take that knowledge or expertise to other parts of Europe or the world?

Hordur Arnarson, CEO Landsvirkjun: 20:46

Sjá við hefum einhverjum kompæni Landsvíðingjarpára, sem við hefum verið mjög áherslu á og við erum að partnjáða með byggjarlega í Íslandi í að byggja sérstaklega hídropára og vind og geotermál fyrir það sem það er það er það er það Big contribution to providing the climate change, but also as a value creation for Iceland.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:07

Where, which countries are you in involved in there?

Hordur Arnarson, CEO Landsvirkjun: 21:10

We are in several places. We are working in Greenland Canada, in Georgia, in Baskins, in Australia, in Africa. In several, and mainly selling consultants. But also participating with others and developing new projects directly.

Snjolfur Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:26

Excellent turn. Thank you very much for joining the Monte Weekly podcast. Yes, thank you, Trevor. Thank you. Listeners, that's about all from the Monte Weekly podcast. This week we will return on August the seventh, so make sure to tune in then. Remember to keep up to date with all our stories. Tel News in the meantime, and follow us on Twitter, LinkedIn, and subscribe on Apple Podcasts, Spotify, or wherever you get your podcast from. Goodbye.