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Sustainability in East Iceland and green certificates

April 8, 2005

Respectively, the speakers were the Head of Environmental Affairs at Landsvirkjun, Ragnheiður Ólafsdóttir, and the Head of Wholesale, Eiríkur S. Svavarsson.

In her lecture, Ragnheiður Ólafsdóttir told how sustainable development fulfils the needs of the present without reducing the possibilities of coming generations to meet their needs. She added that the weight of this definition lies in the Earth no longer containing any place which people have had no impact on.

The purpose of the Landsvirkjun/Alcoa Sustainability Project in the eastern part of Iceland was to support the ideology of sustainable development, showing consideration for environmental, economic and social factors.

A Stakeholder Advisory Group had been organised, which was preparing indicators to help in monitoring, so that the two companies could pursue their goals of sustainability during the periods of construction and operation. Monitoring will note the success of Landsvirkjun and Alcoa in achieving their sustainability goals regarding their undertakings in East Iceland. Besides Landsvirkjun and Alcoa, group participants include public officials and people from the municipalities, business community and social organisations.

Some examples of the topics which the Stakeholder Advisory Group want to address are erosion and silt deposits, residential trends, social infrastructure and impact on wildlife. The Group has defined 45 indicators and 77 criteria, with a few examples of these indicators and criteria being the following:

  • Environmental indicator: Impact on birds -- Pink-footed geese
    Criterion: Number of pink-footed geese in selected areas
  • Social indicators: Demographic changes in East Iceland
    Criterion: Gender and age distribution of East Iceland residents
  • Economic indicators: Financial welfare
    Criterion: Income of East Iceland residents, compared with Icelandic incomes in general

Ragnheiður Ólafsdóttir said that while the outcome of the Project would not be clear until several years from now, she hoped the work by the Advisory Group would mark the beginning of changes in approach.

In his presentation, Eiríkur Svavarsson told how a new Electricity Directive, 2003/54/EC, was being adopted in the European Union, which was also revoking the old Directive. Since the new Electricity Directive had not been incorporated in the European Economic Area, however, the Directive of 1996 was still in effect in Iceland.

According to Eiríkur Svavarsson, the new Icelandic Electricity Act often goes much further than what is stipulated by the Electricity Directive. For example, the Act provides for administrative separation of the transmission system from other facets of the market. Considering Icelandic conditions, it could be argued that this was a reasonable solution.

Moreover, continued Eiríkur Svavarsson, it was interesting that the Electricity Act actually conformed to the new European Directive of 2003, so that the Act would leave no need for substantial amendments when the new Directive is introduced in the European Economic Area. Therefore, even though the Icelandic nation will be relatively late in adopting the new set of rules, it can be said to have already provided for the newest requirements despite their not yet legally applying to this country.

Eiríkur Svavarsson also discussed "green certificates", saying that trading in them would, for instance, enable an electricity producer in the internal market who generates a high proportion of electricity through renewable energy sources to sell green certificates on this production to producers elsewhere in the internal market, who would thereby increase their proportion of green energy generation.

"This is creating some opportunities for Icelandic electricity producers to sell a certain by-product, merely because of Iceland's electricity generation occurring almost entirely through renewable energy sources. These opportunities are opening up because of Iceland now being part of the internal market for electricity," stated Eiríkur Svavarsson.

Saying that the future of green certificate sales was difficult to predict, he did however point out the following: "It is at least clear that the framework of rules on these matters will develop rapidly over the next two years. On the other hand, the sale of these certificates can be expected to remain a mere spin-off product of Icelandic energy firm operations, since certificate prices are not very high. Even if they rise substantially, such certificates will have no significant effect on revenue creation among Icelandic electricity producers," concluded Eiríkur Svavarsson.

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