Iceland’s Geothermal Sector Gains Greater Influence 

By: Gerelyn Terzo of Sharemoney

Iceland is already a global leader in renewable energy, with 100% of its electricity generated with clean power. Geothermal energy is a big piece of the Nordic country’s renewable energy pie, producing 90% of the population’s heating and 30% of its electricity needs. Now, geothermal is spilling over into other segments of Iceland’s economy, such as agriculture, where this renewable power source plays a more significant role than ever in the farming community.

It has an ample supply of glacial spring water and geothermal capacity, thanks to mainland Iceland’s strategic positioning just south of the Arctic Circle and above a pair of Earth’s tectonic plates. As a result, Icelanders can harness the boiling water under the ground and the heat from the sun to heat greenhouses where food is grown. The result is an energy mix that is 100% renewable, comprising 25% geothermal and 75% hydropower.

Iceland decided to wean off fossil fuels for energy during the oil crisis of the 1970s. The volcanic nation sought to become energy independent rather than relying on exports, and the economic benefits are clear.

According to the National Energy Authority, Iceland’s reliance on geothermal energy instead of oil for heat contributed 3.5% to the country’s GDP in 2018. Iceland slashed its carbon footprint by over 433 million tons thanks to its use of renewables over fossil fuels for energy.

Geothermal and the Ag Industry

These days, farmers are accessing the power from the country’s geothermal springs and directing the boiling water toward developing massive greenhouses. As a result, growers can continue to produce vegetables such as tomatoes, cucumbers, and strawberries all year — even during Iceland’s cold and dark winters when temperatures frequently dip below zero degrees.

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Image by Twitter/Alasdair Rae

During the winter, Iceland is limited to five hours of sunshine per day. As a result, farmers can barely grow any crops during this time. And while geothermal is nothing new to Iceland’s agriculture industry, having been integrated into greenhouses for the past two decades, its influence is growing.

This is thanks to new technologies, which pave the way for growers to produce larger, more effective greenhouses. These structures come equipped with climate control systems that mimic proper conditions like humidity, light, and irrigation so the plants can grow in a more conducive setting.

One restaurant in Reykholt, Iceland, dubbed Friðheimar, was spotlighted by for what they describe as “life-changing tomato soup.” The establishment offers soup and other tomato-based cuisine using simple ingredients, a vision extending throughout the menu. The secret behind the restaurant’s tomatoes is its geothermal-fueled greenhouses, the first of which dates back to 2014 before Friðheimar was even formed.

These Icelandic tomatoes, which have drawn people in from miles away for years, and herbs and flowers, are grown in greenhouses heated by the water in the ground. Now, Friðheimar operates ten thermal-heated greenhouses across 36,000 square feet on which the food is grown. The restaurant creates two tons of tomatoes daily, or 700 tons annually. As it turns out, Friðheimar produces 40% of Iceland’s tomatoes.

Iceland’s Broader Geothermal Influence

Incidentally, Iceland’s influence in the geothermal industry is on the rise. Canada is currently architecting the biggest geothermal lagoon outside of Quebec City. Canada is looking to Iceland to find inspiration for its massive geothermal lagoon, which is expected to be the largest of its kind in the world.

As it’s known, the lagoon will use a heating system through which the waters will maintain a temperature of 102 degrees Fahrenheit, including during the cold winter when temperatures typically fall below freezing. The Canadian lagoon project will begin in March 2023 and includes solar-powered chalets, a geothermal lagoon, and more chalets. Iceland’s Blue Lagoon is the model by which Canada’s project is being designed, though the North American lagoon is set to surpass the Nordic version in size.

Also, Iceland’s energy influence extends to China, where a partnership with the Asian country started nearly 20 years ago and has added more geothermal power to the global energy mix. As a result of a venture between the two countries, more than 2 million Chinese locals use geothermal energy to heat their homes. At the same time, carbon emissions are slashed by several million tons.

Diversifying the Economy

Iceland has a population of only 360,000 people and a $24 billion economy, as of 2019, 20 times smaller compared with Sweden’s economy. Despite a small economy compared with other Nordic countries, Iceland is known for its financial independence thanks to its ability to rely on its natural resources, mainly geothermal energy.

According to the Iceland Chamber of Commerce, the economic sectors tied to the country’s natural resources represent more than one-fifth (22%) of its GDP and nearly three-quarters of its exports. Iceland’s resource sector comprises a trio of markets, including tourism, seafood, and energy-intensive sectors like aluminum, silicon, and data centers.

Iceland is attempting to bolster its agriculture exports beyond aluminum smelters and fisheries to strengthen its economy. In addition to livestock, Iceland’s ag sector includes geothermal-powered greenhouses for growing crops. As it stands, segments of Iceland’s economy have a history of growing at a pace that is not sustainable, ultimately creating a boom-and-bust cycle that has made a one-step forward, two-steps back situation.

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Image by Bloomberg 

For example, back in the late 1960s, the loss of herring due to overfishing led to an economic crisis. The Great Financial Crisis of 2008-2009 sent its financial institutions, which had become too large relative to Iceland’s economy, into default on billions of dollars in foreign debt. And most recently, Iceland’s tourism industry, on which its economy is heavily reliant, came to a screeching halt during the COVID-19 pandemic.

As a result, the country has a roadmap to diversify its economy, which has been applauded by the International Monetary Fund (IMF). Iceland is looking to innovate to strengthen its export game, focusing on more technology innovation, a challenge to find the right talent notwithstanding.

Isaac Moran
the authorIsaac Moran
I am a former professional trader who turned his focus from technical analysis to personal finance. In that journey, I learned how to manage a portfolio of stocks, bonds, and mutual funds. I started this blog to share my knowledge with others looking to gain control over their money.