Iceland Has the World's Cleanest Electricity

DANIEL ROSENTHAL / LAIF / REDUX
Piping hot HS Orka's 100-megawatt geothermal plant in Reykjanes

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There are other arguments against expanding the aluminum industry. Smelters pollute even on clean electricity. And they're energy-voracious. Iceland has lots of clean power, but not an endless supply.

Also, on a jobs-per-megawatt basis, aluminum smelting employs fewer people than other industries, notes Thordur Hilmarsson, managing director of the quasi-governmental agency Invest in Iceland. So some Icelanders want to attract less-polluting industries like polysilicon and carbon fiber that put more people to work per megawatt. And data centers and carbon fiber manufacturers can create downstream jobs within the country: in support and research operations in the case of data centers and in spare parts in the case of carbon fiber. Aluminum companies, for the most part, simply export. Invest in Iceland hopes the energy hook will help create 3,500 jobs, which would wipe out at least a quarter of unemployment.

Beyond attracting new industries, Iceland envisions "green parks" of metallurgical and chemical companies in which the by-product of one plant feeds another. HS Orka and the Blue Lagoon spa exemplify this industrial conservation ethos. HS Orka's power plant in Svartsengi taps hot water from 2,000 m below for steam to drive turbines. There's enough extra water to heat local buildings and fill the Blue Lagoon. This is no industrial wastewater. Rather, it's earthy brine with a purportedly curative mix of silica, algae and bacteria. The spa attracted 413,000 visitors last year, mostly from abroad.

But Iceland has a dirty little secret. Geothermal steam emits CO2, albeit tiny amounts compared with fossil-fuel plants about 5% of what coal-powered plants emit and 11% of what natural-gas plants do. In this conservation-minded place, though, they're always thinking about how to capture it. HS Orka plans to pipe CO2 to a nearby greenhouse where Icelandic firm ORF Genetics grows genetically modified barley for cosmetics and medical products. Another Icelandic company, Carbon Recycling, is buying CO2 from geothermal companies to mix into a form of methanol that increases gasoline efficiency.

Exactly how much more electricity the country can and should produce is hotly debated by, among others, environmentalists who oppose spoiling the wilderness with power plants and industry. Iceland's National Energy Authority says there's enough potential to triple its current 16 terawatt-hours of production. Asgeir Margeirsson, CEO of Magma Iceland, which owns HS Orka, says that's a conservative estimate. Hordur Arnarson, CEO of the country's largest power producer, Landsvirkjun, says it's high.

About 75% of Iceland's electricity today comes from hydro, the rest from geothermal. Most of the growth will be in geothermal in this geologically vibrant land, where Jules Verne started his travelers on a journey to the center of the earth. Iceland straddles two huge tectonic plates that are pulling apart, seismically loosening subsurface rock and easing the rise of heat from the planet's core all to a power producer's delight. "I love earthquakes," quips Albert Albertsson, HS Orka's deputy CEO.

Landsvirkjun has another reason to expand electricity production: it's looking into laying an undersea high-voltage cable in order to sell green electricity to Europe. Arnarson thinks a link could be established by 2020 and would cost about $2.6 billion. Iceland could also use the cable to import inexpensive electricity at nighttime rates to power, for example, round-the-clock smelters.

"The market in Europe is very interesting to Landsvirkjun," says Arnarson. "We could sell in the daytime at high prices and buy back at nighttime at very low rates." Magma's Margeirsson adds that imported electricity could temporarily feed a new factory until a local power plant opens.

Iceland is flashing eyebrows to lure foreign companies: a shipping location within striking distance of both Europe and North America; pesticide-free conditions for agriculture; weather that's not really all that bad; an educated workforce that rarely strikes.

The country will have to settle some internal differences to realize its green dreams. Besides the environmental battles, strong-minded municipalities can stymie the national effort to attract industry, as each insists on locating power plants and businesses within their borders.

"The erupting volcanoes affect our character," says Juliusdottir. "We're quite fiery." If Icelanders can all agree on attracting industry, they might also help make a dent in the world's carbon footprint. Then, once again, Iceland will have made a difference.

This article originally appeared in the Jan. 24, 2011 issue of TIME Magazine Europe.