Drought leads to a deterioration in reservoir level

10.01.2022Orka

The level of Landsvirkjun's reservoirs is at a seven-year low. The water inflow in the catchment areas of the Company's major hydropower stations has been very poor due to drought, for the second year in a row, leading to a poor reservoir level.

The situation in the Þjórsá area is especially unfavourable and the status of Lake Þórisvatn, the largest reservoir in the area, is at its worst since the winter of 2013-2014, when delivery of interruptible power to energy intensive customers with flexible power contracts was last reduced. These two water-years are in a league of their own, as is evident from the picture to the left. This is the result of very low precipitation in the area over the past two years, which has led to an exceptionally low ground water level.

As before, limits to the transmission capacity impede on the energy system's ability to transfer power between areas. This coincides with an ever-increasing demand for Landsvirkjun's renewable energy.

The overall level of Landsvirkjun's reservoirs is currently around 600 GWh lower than at the beginning of 2021. Reservoir levels started to decrease at the beginning of last October and the decrease has been stable since then. Water-saving measures must therefore be taken to protect the system's water supply until next spring.

Reductions could amount to up to 3% of annual production

Landsvirkjun has already taken measures in relation to the group of customers with the most flexible power contracts. Last December, the supply of energy to fish meal factories was reduced and it is now evident that no energy will be available for that market until next spring. In total, this amounts to around 200 GWh, according to the factories' power purchasing schedule for the period of January-April.

Landsvirkjun has also informed its other customers with flexible energy contracts, i.e. power intensive customers and district heating plants, that if the situation does not improve, reductions will have to be implemented in the next three to four weeks. A ballpark figure for the total reduction is up to 250 GWh, in addition to the aforementioned 200 GWh reduction to fish meal factories. All in all, these possible reductions could amount to around 3% of Landsvirkjun's annual power production.

Contracts anticipate the situation

These reductions are fully in line with the terms of the contracts between Landsvirkjun and relevant customers, i.e., they anticipate the possibility of reductions due to the variability of annual inflow. Furthermore, the contracts also allow Landsvirkjun's customers to reduce their purchase of power, should the status of their operations call for such a change. Landsvirkjun's role is to produce the energy in a responsible manner and during contract negotiations, our customers made it clear that they fully understood that a situation like this could arise.

The amount of reduction by individual customers varies, and we are not at liberty to divulge information about the position of our individual customers. We will further discuss the situation with our customers in the coming days, addressing the impact of these reductions for them individually.

We assume that the reductions will last until next spring. Exact dates cannot be estimated however, given the temperamental character of an energy system which depends on mother nature.

To be expected during poor water-years

Hörður Arnarson, Landsvirkjun's CEO:

"Even though we're always prepared for the possibility that a difficult water-year might play a trick on us and even though our customers show full understanding that such a situation may arise, this is far from an ideal situation. Our ambition is to be able to provide our customers with all the energy they require. Certainly, some power contracts implicitly assume that a reduction can take place, a fact that is reflected in the electricity price in these contracts. That does not change the fact that we want to work towards the goal of being able to secure enough green energy for any party interested."

Day-to-day real-time status of Landsvirkjun's reservoirs can be monitored here:

www.landsvirkjun.is/rauntimavoktun