Skúli Thóroddsen Legal Adviser National Energy Authority of Iceland

1. Legal & Policy Framework for Geothermal Development Skúli Thóroddsen Legal Adviser National Energy Authority of Iceland

2. 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.

3. Geothermal Fields in Iceland Tavg = 0°C (january) to 10°C (july) in Reykjavík

4. 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.

5. 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.

6. 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.

7. 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

8. Avoided cost by harnessing a domestic source of energy Savings in 2008 equivalent to 91% of the total imports of refined oil products.

9. Primary Energy Use 1940-2010

10. 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

11. Geothermal Energy Utilisation Sectoral Share

12. Geothermal Electricity Generation

13. 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.

14. Act on Survey and Utilisation of Ground Resources The 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 Act According 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.

15. 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

16. 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 ElectricityAct Is the official monitoring body

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

18. 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

19. Geothermal Power Plants to be developed To be developed Existing 50 MW 50 MW 100 MW 100 MW 200 MW 200 MW National Energy Authority, Kristinn Einarsson, September 2011

20. Conclusion Geothermal 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.

21. 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

22. 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 age Fellowships: • Fellowships are awarded to candidates from developing countries and some Central and Eastern European countries • Financed by the Government of Iceland and UNU

23. LINES OF TRAINING AND TIME SCHEDULE

24. UNU-gtp Fellows in Iceland1979-2011 Lithuania 2 Lithuania 2 Russia 9 Latvia 1 Bulgaria 5 Latvia 1 Poland 14 Poland 14 Ukraine 2 Mongolia 11 Ukraine 2 Russia 9 Romania 5 Slovakia 2 Slovakia 2 Mongolia 9 Romania 5 Turkey 10 Serbia 3 Serbia 3 Bulgaria 5 China 72 China 78 Azerbaijan 1 Georgia 1 Macedonia 1 Albania 2 Georgia 1 Azerbaijan 1 Macedonia 1 Albania 2 Nepal 2 Iran 20 Iran 21 Turkey 10 Tunisia 6 Greece 3 Algeria 4 Greece 3 Honduras 3 Mexico 6 Honduras 2 Morocco 1 Bangladesh 2 Mexico 7 Algeria 4 Pakistan 4 Thailand 5 Nicaragua 11 Jordan 6 Egypt 4 Egypt 4 Jordan 6 Vietnam 5 Guatemala 3 Tunisia 6 Vietnam 5 Guatemala 3 Nicaragua 8 Nevis 1 Yemen 3 Nepal 2 Philippines 31 Philippines 31 Pakistan 4 Dominica 1 El Salvador 28 El Salvador 32 Djibouti 5 Eritrea 7 Eritrea 6 Yemen 4 Thailand 5 Ethiopia 27 Sri Lanka 1 Costa Rica 18 Costa Rica 16 Ethiopia 26 Djibouti 6 Uganda 13 Uganda 14 Kenya 62 Kenya 45 Rwanda 5 Rwanda3 Indonesia 24 Indonesia 29 Comoros 1 Burundi 1 Burundi 1 Tanzania 5 Tanzania 7 Zambia 1 Zambia 1

25. Participationin UNU-GTP 1979 - 2011 • 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 Central & Eastern Europe 13% Central America 16% Asia 41% Africa 30%

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