Skúli ThóroddsenLegal Adviser

National Energy Authority of Iceland

Legal & Policy Framework for Geothermal Development

The Icelandic National Energy Authority• Advises the government on energy resources and related issues. • In charge of administration of energy issues, and directs research

on energy resources in Iceland.• Grants licenses for research and exploitation of energy, mineral

resources and hydrocarbons. • Collects and disseminates data on energy and other earth

resources, their utilization, and capacity. • Develops long-term scenarios for Iceland's future energy needs and

energy production. • Executes all administrative functions as assigned under the Natural

Resources Act, the Electrical Energy Act, and other energy-related statutes.

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Geothermal Fields in Iceland

Tavg = 0°C (january) to 10°C (july) in Reykjavík

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Initial use of geothermal heat and electricity

• During Reykjavik’s first 1000 years geothermal heat was primarily used for washing, bathing and cooking.

• The first uses of geothermal energy to heat houses can be traced back to a farmer in 1908 who led a pipe to his farm.

• Extensive distribution of hot water for heating homes began in 1930 in the capital area.

• The first hydropower turbine began operation in 1904.

A borehole at Sudurreykir. The houses in the background are the ones first heated with geothermal water in Iceland in 1908.

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Oil Crisis Changes National Policy

• When the oil crisis struck in the early 1970s, the world market price for crude oil rose by 70%.

• Heat from oil served over 50% of the population.

• In order to reduce the effect of rising oil prices, Iceland began subsidizing those who used oil for space heating.

• The oil crises in caused Iceland to change its policy, deemphasizing oil, turning to domestic energy resources, hydropower and geothermal heat. Space Heating in Iceland from 1970-2008.

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Why so successful?

• No private developers willing to fund• The National Energy Fund (NEF) provided risk insurance:

– NEF would reimburse up to 80% of cost of unsuccessful drillings.

– Later on it included grant support for geothermal development, mainly for exploratory activities.

• During the first three decades of geothermal development in the country, the NEF played a critical role in mitigating the exploration and drilling risks, thereby leaving project developers with minimal risk.

• Reservoir-risk insurance schemes reduce the need for equity through partial coverage of costs should the project become uneconomical and thus can proof to be an important means to reduce geothermal development costs.

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Comparison of energy prices for residential heating

• Geothermal power and heat is cost competitive with large hydro in Iceland and is not subsidised

• Direct oil and electrical heating is subsidized in Iceland for regional purposes

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Avoided cost by harnessing a domestic source of energy

Savings in 2008 equivalent to 91% of the total imports of refined oil products.

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Primary Energy Use 1940-2010

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Highlights for 2011• All stationary energy is renewable• 86% of primary energy is renewable

– Geothermal contributes 66% of primary energy (156 PJ)– Highest ratio in OECD - and probably in the world

• Oil still needed for 14% of the primary energy demand– About half to operate the fishing fleet– The other half mainly for motor vehicles

• Electricity generation amounted to 17.2 TWh– Hydro power plants 73%– Geothermal power plants 27%– 77% to the power intensive industry

• 90% of houses heated with geothermal energy,9% with electricity and less than 1% with oil

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Geothermal Energy Utilisation Sectoral Share

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Geothermal Electricity Generation

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Legal framework in Iceland• The ownership of resources in the ground is associated to private

land

• On public land resources in the ground are the property of the State of Iceland, unless others can prove their right of ownership.

• Even though the ownership of resources is based on the ownership of land, research and utilisation is subject to licensing according to:– Act on Survey and Utilisation of Ground Resources, No. 57/1998 – Electricity Act, No. 65/2003

• Survey, utilisation and other development pursuant to these Acts are also subject to the:– Nature Conservation Act– Planning and Building Act– Environmental Impact Assessment Act– Other acts relating to the survey and utilisation of land and land benefits.

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Act on Survey and Utilisation of Ground ResourcesThe Act on Survey and Utilisation of Ground Resources covers resources in the ground, at the bottom of rivers and lakes and at the bottom of the sea within netting limits. The Act also covers surveys of hydropower for the generation of electricity.

Electricity ActAccording to the Electricity Act a licence issued by the NEA is required to construct and operate a power plant. However, such a licence is not required for power plants with a rated capacity of less than 1 MW, unless the energy produced is delivered into the distribution system of a distribution system operator or into the national transmission grid.

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Role of the National Energy Authority (1/2)

• Contracts and conducts research in the field of energy

• Accumulates and maintains databases on the energy resources

• Disseminates knowledge on energy sources and utilization

• Administers energy affairs and advises the minister

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Role of theNational Energy Authority (2/2)

– Grants licences for research and utilisation of energy resources• Ownership of resources is based on the ownership of land• However research and utilisation is subject to licencing• Subject to the Act on research and utilization of natural

resources.– Grants licences for Power Development (to construct

and operate a power plant)• All power stations >= 1 MW and/or will be connected to the

grid• Subject to Electricity Act

– Is the official monitoring body

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Official monitoring

National Energy Authority is the official licensing and monitoring authority for research, utilisation and power plant licenses.

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Master Plan for hydro and geothermal energy resources in Iceland

• Parliament started the work in 1997• Proposed power projects are

evaluated and on the basis of:– Environmental impact– Social impact– Economical impact

• Projects are then categorized– To be developed– To be protected– To be considered

• Has been presented to the Parliament for legislation

PotentialPower

Hydro TWh/a

Geoth. TWh/a*

Existing 13 5 26%

To be developed 3 10 20%

To be protected 8 18 39%

To be considered 6 3 14%

Total 31 35

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50 MW100 MW200 MW

Geothermal Power Plants to be developed

National Energy Authority, Kristinn Einarsson, September 2011

ExistingTo be developed

100 MW200 MW

50 MW

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ConclusionGeothermal energy plays an important role in providing the nation with clean and reliable energy and is fundamental to the Icelandic economy as well as Icelandic welfare and independence.

Master Plan a road map to further development in Iceland

The legal framework itself is extensive and counting derivative regulations the law on the matter is vast. Some of the legislation is recent while other branches are long-standing.

Effective policy making and official monitoring of geothermal development for sustaining a renewable energy society in Iceland is crucial for sustaining a long-term lifespan of the resource.

A solid policy framework should support geothermal deployment.

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United Nations UniversityGeothermal Training Programmeis hosted at

Orkustofnun – National Energy Authority• has operated in Iceland since 1979• aims at assisting developing countries with significant

geothermal potential to build up or strengthen groups of specialists that cover most aspects of geothermal exploration and development

• offers annually six month specialised courses for professionals in geothermal work

• MSc and PhD programmes in cooperation with the University of Iceland

• short courses for geothermal professionals in Africa, Asia and Central America

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Candidates and Fellowships• Selected by personal interviews in their home country by

UNU-GTP representatives

Candidates must have:• A university degree in science or engineering• A permanent position at energy company or research institution • A minimum of one year practical experience in geothermal work• Under 40 years in ageFellowships:• Fellowships are awarded to candidates from developing countries

and some Central and Eastern European countries• Financed by the Government of Iceland and UNU

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WEEK

GeologicalExploration

BoreholeGeology

Geophysical

ExplorationBorehole

GeophysicsReservoir

EngineeringEnvironmental

StudiesChemistry of

Thermal Fluids

GeothermalUtilization

DrillingTechnology

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Introductory Lecture CourseAll main aspects of geothermal energy, exploration, and utilization

Practicals and short field excursions

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6Field Geology

Maps and photos

Structural Analysis

Hydrogeology

DrillingPetrological

loggingAlteration

Mineralogy

Resistivity methodsThermal methods

MagneticsGravity

Course on well logging andreservoir engineering

including logging and well testing, reservoir physics and stimulation,

tracer tests, and computer programs

EIA planningChemistryPhysicsBiology

RevegetationHealth & safety

Sampling of fluids and gasScaling and corrosion Drilling equip. &

proceduresWell design

SafetyManagement

Rig operations

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8Analytical methodsThermodynamicsGeothermometers

Heat transfer & fluid flow

Control systems9

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11Excursion to the main geothermal fields of Iceland

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13 Field work in deeply eroded

strata

Aquifermodelling

Data processingtechniques

Logging methods

Data eval.

Responses to exploitation

Gas dispersion and abatement

Water rockinteraction

Design of plants and systems

Cementing Completion14

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Projectand

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LINES OF TRAINING AND TIME SCHEDULE

UNU-gtp Fellows in Iceland1979-2011

Kenya 45

Tanzania 5Burundi 1

Romania 5

Greece 3

Egypt 4 Jordan 6

Mongolia 9

Mexico 6

China 72

Russia 9

Philippines 31

Indonesia 24

Turkey 10

Thailand 5

Ethiopia 26

Poland 14

Honduras 2

Uganda 13

Eritrea 6 Djibouti 5

Vietnam 5

Latvia 1Lithuania 2

Slovakia 2 Ukraine 2

Georgia 1Iran 20

Pakistan 4

Nepal 2

Algeria 4Tunisia 6

Macedonia 1

Serbia 3

Nicaragua 8

Costa Rica 16El Salvador 28

Guatemala 3

Bulgaria 5Azerbaijan 1Albania 2

Yemen 3

Rwanda3

Zambia 1

Kenya 62

Tanzania 7Burundi 1

Romania 5

Greece 3Egypt 4 Jordan 6

Mongolia 11

Mexico 7

China 78

Russia 9

Philippines 31

Indonesia 29

Turkey 10

Thailand 5Ethiopia 27

Poland 14

Honduras 3

Uganda 14

Eritrea 7Djibouti 6

Vietnam 5

Latvia 1Lithuania 2

Slovakia 2Ukraine 2

Georgia 1

Iran 21

Pakistan 4Nepal 2

Algeria 4

Tunisia 6

Macedonia 1Serbia 3

Nicaragua 11

Costa Rica 18El Salvador 32

Guatemala 3

Bulgaria 5

Azerbaijan 1Albania 2

Yemen 4

Rwanda 5

Zambia 1

Comoros 1

Dominica 1Nevis 1

Morocco 1

Sri Lanka 1

Bangladesh 2

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Participation in UNU-GTP

• 482 scientists and engineers from 50 countries have completed the 6 month specialized course

• Thereof 89 women (18%)

• MSc programme offered with University of Iceland since 2000 - 28 graduates

• PhD programme offered with UI from 2008

1979 - 2011Central & Eastern Europe 13%

Central America 16%

Africa 30%

Asia41%

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ICELANDIC GOVERNMENT CONTRIBUTION TO UNU 1979-2011

UNU Geothermal UNU Fisheries UNU Land Restoration

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Takk fyrir

Skúli Thoroddsen <skuli.thoroddsen@os.is> 27