Iceland Unveils Major Power Infrastructure Investment for Northeast Region

Significant Investment to Transform Northeast Iceland's Power Grid

A substantial investment in power infrastructure is slated for Northeast Iceland in the coming years, aiming to invigorate regional development and facilitate the production of new energy, including wind power. This strategic initiative seeks to bolster electricity supply capacity and enhance reliability across the region. Key entities involved in this endeavor include the Icelandic government, the national transmission system operator Landsnet, and the regional power company RARIK.

Key Projects and Financial Commitments

The Icelandic state plans to allocate 2.2 billion ISK next year in additional share capital to Landsnet and RARIK, boosting their investment capacity. This funding is part of a broader effort that includes significant loans from international financial institutions. The Nordic Investment Bank (NIB) has provided loans totaling USD 35 million and USD 50 million for various grid upgrades, while the European Investment Bank (EIB) has extended a USD 63.7 million (ISK 9 billion) loan to Landsnet for new generation power lines.

Specific projects underway or planned for the region include:

• The construction of a 132 kV transmission line by Landsnet across Melrakkaslétta to Langanes, which will be immediately added to the national grid plan.
• RARIK will commence construction next year on a 33 kV underground cable connecting Vopnafjörður and Þórshöfn, establishing a full ring connection around the Langanes peninsula. This is expected to enable an additional 10–11 MW of electricity demand.
• A new substation will be built at Bakki to replace the older facility that served PCC's silicon plant.
• Landsnet is also constructing a 66 kV underground cable between Akureyri and Dalvík in Northern Iceland, spanning 42 kilometers.
• Ongoing projects include the 121-kilometer Kröflulína 3 (220 kV) overhead line between Krafla and Fljótsdalur, and a 220 kV overhead line and underground cable between Akureyri and Hólasandur.

Addressing Long-Standing Challenges and Boosting Reliability

For decades, Northeast Iceland has grappled with underinvestment in its electricity network, leading to frequent power outages and limited capacity that hindered business growth and daily life. Communities such as Kópasker, Raufarhöfn, Þórshöfn, and Vopnafjörður have been particularly affected, with local industries often relying on backup generators due to unstable electricity supplies. The new investments are designed to overcome these issues, improving the security of supply and reducing transmission losses.

Jóhann Páll Jóhannsson, Minister for Environment, Energy and Climate, emphasized the government's commitment, stating, 'There has been far too much uncertainty, vagueness, and disagreement over who is responsible for developing power infrastructure in Northeast Iceland. With this agreement, we are finally cutting through the knot.'

Facilitating Future Energy Production and Economic Growth

The upgrades are crucial for integrating new renewable energy sources into the grid. The new transmission line across Melrakkaslétta, for instance, will make future wind farm projects in the region more viable by eliminating the 'system contribution fee' for developers. Several potential wind power sites, including Hnotasteinn, Austurvirkjun Power Plant, Sauðanesháls, and Brekknaheiði, have already been identified. This infrastructure development is expected to support a vibrant business community and ensure equal opportunities for establishing businesses regardless of location, aligning with the region's development strategy.