A long, slow cooling trend over the past 5,000 years was interrupted in the Northern Hemisphere by a fairly brief spike during the Middle Ages known as the “Medieval Warm Period.” It was then the Vikings settled Greenland and Iceland.
Today on these barren North Atlantic stretches, glaciers are melting at an alarming rate.
The sober reality of climate change is causing businesses the world round to rethink the risks and opportunities of a world with increasingly constrained resources. Like Peak Oil, “Peak Everything,” as author Richard Heinberg calls it, doesn’t mean we don’t have resources; it just means many resources are getting progressively harder and more expensive to get and, in many cases, their quality is declining. The environmental cost of getting them out of the ground is also rising.
Just as the Vikings discovered centuries ago, Iceland is one place where some vital resources remain abundant. As such, the nation is looking to green-themed economic development with a message arguably no other nation can match: 100 percent renewable energy, competitive and long-term energy pricing, a stable circular grid, abundant clean water resources, plentiful inexpensive land, a skilled workforce, a strategic location between Europe and the United States, and a 20 percent corporate tax rate on net profit, with layered on incentive schemes.
These attributes are not only helping foster economic growth spurred by international business recruitment, they’re also fueling a domestic entrepreneurial spree focused on sustainable business. While not best known for their cultural or racial diversity, Scandinavians’ socially minded democracies and clean, efficient design aesthetic has helped fashion them global leaders in sustainability. And while Sweden, Denmark and Norway are often the first to come to mind, it appears the nation of Iceland – population 320,000, with more than half living in the small but stylish city of Reykjavik – has something unique to add to the mix.
More than four years ago, Iceland's banking system famously collapsed as the global economy fell into recessionary turmoil. All three of the country's major privately owned commercial banks imploded as they were unable to refinance short-term debt and a run on deposits in the Netherlands and United Kingdom. Relative to the size of its economy, Iceland’s banking collapse is regarded as the largest suffered by any country in economic history.
[pagebreak]Now, President Ólafur Ragnar Grímsson says the country is spearheading an impressive turnaround by focusing on a sustainable, low-carbon future – not by utilizing conventional Western models for economic recovery. That meant favoring currency controls and protection of the welfare system, he says, rather than orthodox austerity measures and high-priced bailouts (which realistically were not feasible anyhow).
“We have seen the bottom and we are recovering quite fast,” says Thordur Hilmarsson, director of Invest in Iceland, a government-supported organization that invited Sustainable Industries and journalists from eight other U.S. and U.K. industry trade publications to Iceland in early March for site visits and interviews.
Tourism has been buoyed by a highly successful promotional campaign with IcelandAir, and the country has remained stabile in other core industries such as fish farming, biotech (not without its controversy), ferrosilicon production, and perhaps most prominently, aluminum smelting. Rio Tinto Alacan and Alcoa both maintain a major presence here. The former recently modernized its kilometer-long smelting facility just south of Reykjavik when it was shutting down smelters in other markets, according to Grímsson, and the latter attempted to build a second 400-500 megawatt smelter but was rebuffed by Icelandic leaders intent on diversifying the economy.
While it won’t prove a major long-term boon to Iceland’s 7 percent unemployment rate, one such sector of interest is data centers. Invest in Iceland says within a decade it wants to make Iceland one of the 10 largest concentrations of data centers in Europe, which owns of one-third of the global market – and sucks up about 5 percent of Europe’s energy. While the United States remains the global leader in data centers, its “greenest” data centers are located in states as Arizona, where a large amount of energy and water are required to run and cool them.
Iceland currently maintains two major data center facilities on the island: Verne Global and Advania, which because of their remoteness serve the needs of customers (including BMW at the former and John Deere at the latter) seeking redundancy and a reliable energy grid.
Reykjavik Energy, a public-owned energy company that bills itself as the largest geothermal utility company in the world, is finalizing plans to secure a 50 to 70 acre site outside of Reykjavik in the hope of luring a big-name data center operator that will incentivize others to follow suit. Invest in Iceland is targeting tech giants in Silicon Valley, among other global markets, who are interested in enjoying “free” ambient cooling (no chillers and compressors needed in Iceland) and subsequent lower Power Usage Effectiveness (PUE), a blunt industry measurement created by the Green Grid.
[pagebreak]The world emits 48 percent more carbon dioxide (CO2) from the consumption of energy now than it did in 1992 when the first Rio summit took place. For data center operators weary of future environmental regulations, CO2-free geothermal power is also touted as a draw. President Grímsson, who met with Sustainable Industries and other journalists in his home outside Reykjavik earlier this month, said geothermal has been a pillar of the country’s economic recovery to date.
Situated on the mid-Atlantic ridge, which is spreading apart roughly 3 centimeters per year, Iceland is the world leader in the use of geothermal energy for domestic and industrial purposes. Some 87 percent of the population enjoys district heating by geothermal energy at a price usually one-fifth of the comparable cost of electric heating. And enjoy is the key word – geothermal’s steam and radiant heat applications have spawned a spa culture with more than 170 public swimming baths, including the famous Blue Lagoon, which welcomes more guests per year than the entire population of Iceland. “Just imagine coming to Iceland without geothermal facilities,” Grímsson says.
At present, one-fourth of Iceland’s electricity demand is met by geothermal, with hydropower supplying the remaining three-quarters. Although Reykjavik Energy sometimes over-enthusiastically refers to this as 100 percent “green” power, the utility is transparent and proactive in recognizing the adverse environmental impacts of geothermal construction, runoff, and hydrogen sulfide emissions.
Iceland also offers vast wind power potential, but geothermal remains far more efficient than wind and even solar, says Reykjavik Energy CEO Bjarni Bjarnason. “There’s only one little problem – how to get at it,” he says.
Deep drilling can lead to 10 times the potency of geothermal energy tapped by larger power plants, but the exploration risk similar to that of oil, Bjarnason says.
Of course, geothermal power providers do not have access to the abundance of subsidies, loopholes and externality write-offs afforded oil giants. And while geothermal has been languishing as a renewable resource internationally, President Grímsson maintains “geothermal doesn’t need subsidies.”
“It’s good business,” he says. “It’s extraordinarily good business.”
[pagebreak]Although energy use in Iceland nearly doubled in the past decade alone, there remains plenty to go around. Recent debate has emerged over a proposed billion-dollar underwater electricity interconnector that, if built, would export Iceland’s clean geothermal electricity to the U.K. to help it meet renewable energy goals. The two countries signed an MOU last summer to explore the possibility, and a report is due in May. Grímsson says the proposal is “fascinating.”
With its culture of self-reliance, many Icelanders say export is not as palatable as growing domestic sustainable businesses while attracting large energy end-users to the country. “We already do export the power … through the products that are created by energy-dependent industries,” Hilmarsson says.
Meanwhile, Iceland is “just seeing the beginning of entrepreneurial innovation” stemming from the abundant of low-cost geothermal energy, Grímsson says.
When asked if Iceland could play a leadership role in the United Nations on renewable energy and climate change, he says he supports the UN but it’s not necessary to wait for their protracted negotiations.
“I don’t think we have the time to wait and for the UN to meet and figure it out,” he says. “We can start here now.”