Iceland geothermal: Engineering calm in a volcanic storm

[Music] Hello listeners and welcome to Plug-Din. The NG News podcast from Montel, where we bring the latest news, issues, and changes happening in the NG sector. Just before Christmas, I took a trip to one of Iceland's top attractions, the Blue Lagoon. You will know this world famous site from countless travel programmes and social media posts, which capture its famous turquoise water. What you might not know is that the blue in the Blue Lagoon is formed by the power plant. By its wastewater, mixes with sea water to form a silica rich lagoon, creating an unmistakable blue colour. Now on this occasion, I wasn't there to take a selfie or enjoy a dip. In this episode, I'm going to talk about the remarkable story of the upgrade of this geothermal power plant to 85 MW. Remarkable because production only paused once during the refit, despite 12 volcanic eruptions over the last couple of years, very close by. Thousands of locals were evacuated, making world headlines, but work at the plant went on, unaffected. Before I sat down with the operator CO, to explore how they coped under extremely challenging circumstances, I stood outside the power plant's entrance to take in the sites, the sounds, and the smells of this unique site. I'm at the Swatsengi power plant on the Rakeness Peninsula in southwest Iceland, overlooking the Blue Lagoon, one of Iceland's top tourist attractions. I'm actually standing on top of one of the barriers that prevented both the Blue Lagoon and the power plant from being overrun from lava flows. This area was witnessed to some of the most dramatic volcanic eruptions seen in Europe in recent years. We saw the evacuation of the nearby town and the constructions of these barriers, on top of which I'm standing, which prevented the plant and the Blue Lagoon from being completely eradicated. Now, let's hear from Thomas Malasubzon, the CEO of HS Orca, the company that owns and operates the Swatsengi power plant. I'm here in the Reykjavík, the offices of HS Orca, and joining me today is Thomas Malasubzon, the CEO of the company. So, a warm welcome to you, Thomas. Thank you very much. Tell me a little bit about HS Orca before we go into talking a little bit more about the activity your company has seen in the past few years. Yeah, sure. It's a sort of a 50-year-old company. Today it's the largest privately held and operated energy producer in Iceland. It started 50 years ago as sort of a utility, local utility, and primarily for hard work, for district heating, for the area of Reckhennes, which is sort of a 10% population of Iceland lives there, and we have an international airport in that area and an aid base. So, that was its foundation. But, you know, in the beginning, they were drilling for, you know, hot water and the geothermal steam. Pretty quickly, they started, you know, utilizing the steam as well for electrical production. And over the years, we have sort of grown, you know, our electrical production profile, build more geothermal power plants. And today we are also on two hydro power plants and manage multiple small hydros across the country. What's the total capacity of the plants that you operate? Total capacity of 80s Orca is 150 megawatt. Again, electrical generation and about the same hot water production. But we also have a resource park, which has developed over the years, which basically means companies that are directly connected to our geothermal power plants. Utilizing the waste steam or brine or any other resource that's come from the build them up power production. The most famous example is the Blula Gunt. The Blula Gunt developed out of 80s Orca, and it's an example of where the egg has it. Outgrown it's hen. Exactly, or it's nest even, yes, exactly. But we also have, you know, multiple other companies such as in agriculture. There's a big salmon farming development happening near our rickianist power plant, $400 million investment. And they're also utilizing the steam in other companies to dry fish, which is a popular source of protein, particularly in Africa. So it has multiple other sort of offspring, but our focus is the energy production and hot water production. Absolutely. And so obviously it's the first introduction that international travelers who tourists come to Iceland. They see either the Blula Gunt or the steam coming from the Blula Gunt, and then they will see it when they land probably some of your power plants. Absolutely. They will actually fly or are power plants most likely when they land in Iceland. Absolutely. Now I want to, I was at the Swatsengi power plant just before Christmas. And it's absolutely stunning. It's very striking in terms of the landscape. The lava flows that you've managed to stop them when these eruptions. Now I want to go into a little bit detail there Thomas about, you know, you're obviously very much impacted by the volcanic activity. Very close to the power plant. Can you talk me through some of that? Well, I would say sort of the risk of geothermal utilization, high temperature geothermal utilization, which is Iceland, of course, on the boundaries of two types of plants. There are two types of geothermal plates, North Atlantic plates and the Eurasian plate. They are growing in each direction every year. And magma comes up underneath. So we have our fair zero volcanic eruptions in country. We are utilizing the steam generated by this magma. That's sort of the occupational hazard. We might have an eruption not far away from power plants. That does not happen often. It hasn't happened for 50 years. It's never happened to us. But now over the last three years we've had, you know, 12 volcanic eruptions, 12 eruptions close to the plant. Three are a bit further out. Like three, seven kilometers away, but nine quite close to the plant. How close did the lava get, for example? The lava, actually, we, the government built embankments or barriers, lava barriers, which you saw to protect the plant. So we would be under lava today. At that not been done. So the, the fissure, which erupted from us may be three kilometers away from us. But the lava flow reached the plant and bypassed the plant. But the barriers sort of secured it that it went past the plant and to different areas. So that, that happened for those nine eruptions that happened close to us. Three of those lava flows came quite close to the plant. So maybe just within a few hundred meters. But all our boreholes, we drilled two to three kilometers into the ground to collect steam and, and, and, and flew it under pressure to generate the electricity. All the boreholes were safe and all our, all our, you know, infrastructure equipment, power plants were safe. So no people got injured. So, so we were safe from that. But obviously during eruptions, we had scared from lava flow coming close to the plants, cutting off roads, pollution, coming over the power plant. Poisonous gases, you mean, gases and stuff like that. So that, that, you know, there were a bunch of interruptions. So during this period, we were actually constructing a new power plant inside Schwarzenegger, which you saw probably. No, I did a new, new 50 megababab turbine. It was not just you, sorry to interrupt that one, but you, not just were you keeping the plant operation, you were actually building a new power plant there itself, which came online, what, November? Yeah, end of November. And we were being a 50 year old site. So I think it's the foundation of our company. There were a lot of older power plant, older equipment, which were obsolete. So we were decommissioning those and inserting a new bigger power plant instead of bigger turbine. And that was ongoing when this happened. And all in all, you know, due to eruptions, I think we had over four months of interruptions, if you combine everything due to lava flows and pollution and things like that. But still, you know, with some interesting and good, you know, insightful strategies, assembling equipment and things off site and things like that, we managed to catch up and deliver it on time. So that was quite, quite astonishing. And I heard also on the budget. Yes, it was. It was. That's a sunny issue. I think, you know, elsewhere in Europe, that doesn't happen very often with these big, big projects, but maybe it's different size. But this is about 55 megawatt. So, yeah, turbine is 55. It's going to generate to begin with somewhere around 25. We need to drill more holes to get it up to the extra, you know, 30. That's the capacity it has. But we have decommissioning, you know, we decommissioned probably 15 megawatts worth of generation capacity and we get an extra 15 to 20 with this new one, just using the same equipment, using the same steam. So, all in all, it brings the plant up to 85 megawatts. It was, you know, in 60 before. Yes, that's quite a big upgrade. Yeah, absolutely. Big upgrade just with, you know, new equipment. And while this volcanic activity was ongoing, did you cut the power supply or the district heating supply tool? For one, the power supply, you know, one of the lava flows actually took down power lines. So power supplies was off, power power generation was off for a week. That was because of the distributor, Landsnet, you know, their power line went off and they had already built barriers around the, the masks, but, you know, the lines themselves melted. So that was, that was, but they managed to reconnect us in a week and then we had for three days interruption of delivering hot water to the community, which was quite a scary situation. because it was in the middle of January winter. It was -15 degrees Celsius outside. We heat our houses with hot water from that power plant. So during the course of two and a half to three days we were just re-welting, new pipes building. It was a massive undertaking. And got connected again and nothing really. No big damages to homes, which we were trying to protect. Homes and companies, of course, in the whole area. We, of course, had our fairs fair of the pipe first. And stuff like that. But all in all, I would say, surprisingly little damages both to our plant and to any other facilities in the area. And it's quite eerie when you drive through Grintervik now because it's mostly - it's the people who are forced to evacuate. It's almost like a ghost town, isn't it? And you can see some damage that has been done by the lava. I mean, it's very, very striking, especially the lava over the roads. And one of them, when we talk about eruptions, what triggered all these activities was a massive earthquake. And basically Grintervik, the town of Grintervik, basically a fissure ruptured open right underneath and through the town. So the sports facility just had a big deep fissure going through it. So some of the houses are just risky because of that, because there's big void underneath. Having said that, I think the authorities have done a great job trying to secure the area. There is more and more activities happening there. The companies are back because there's a big - this is a very active fissure area. Shortest, basically, distance to the most fertile cut, grounds outside of Iceland. Fissure is starting to grow again. I think now, like 20% of people are moving back. And just recently spoke to the mayor and they're hoping that they can bring the schools up. Hopefully being able to receive people again in the community and grow it again, because it's one of the fissure, you know, old Iceland communities. Absolutely, you know, it's a very important town. And what about the blue lagoon? Was that? Yeah, they had to shut down a few days as well. I think they had a - they showed exceptional resilience in my view as well, because they had - they were in a hotel. They have a thousand people there in the blue lagoon and they had evacuation plans and things like that and had to evacuate. And we were shut down many, many times. Especially early on, the first eruptions, you know, understandably people, they're more nervous. Now, it's pretty - we're all - we pretty much know where the lava will come up. We know how it will - you know, what's safe and what's not. So, but in the beginning they had to shut down the operation for knots. But now, the latest eruption came and I think they shut down for like 36 hours and then opened again. I mean, that's - that's incredible. And the bridge on just the right way, you mentioned it earlier on to us, but it's actually - it's formed by the by - by the waste water from the - from the swatzecky power plants. It's a brine when we - when we drill into the ground, you know, we collect the - you know, brine under a lot of pressure, you know, geothermal brine and steam and the brine. So, it's sea water? Is it sea water? Yeah, it's weather rich in salt and minerals and silica. And that's what they utilize and have turned into, you know, it has proven health benefits and, you know, so - and that's what we bay in when we go there. I regularly go there, I like it. I'm going there in a few days, but, you know, I was there in the early 80s when it looked very different from what it does now. Well, it did. You know, there was some really smart people that sort of spotted the - we have benefits and started developing this area as a - as a tourist site. And in - in today, I think it's - yes, we were critical for building the barriers because we were supplying the entire community with hot water and electricity. But every other tourist visits Pula Coon. So, you know, for a country that has, you know, over two million tourists a year, this is an important, you know, very small country. This is an important infrastructure for tourism. So, there was also a good justification for protecting the area. Absolutely. And it started with how close it is. It's hard to imagine how - you know, it's not just a few hundred meters away from the - when the - when the barriers and the lava flows, I mean, it's quite remarkable. Is there still what kind of activity going on? Are you expecting maybe more eruptions and could they have a kind of impact on - the infrastructure, the power plants and - and so - so one - one of the things that we know more and more, you know, there's - there are a lot of measurements happening in the area about the lava intrusion below us. And that's slowing down. It was almost to a point that could estimate early on when the eruption would happen because the - the ground was rising right underneath. My office, for example, was like 30 centimeters higher, at a few - in few instances, and then it erupted. And, you know, the elevation of the area, the plant and everything went down by 30 centimeters up and down. Now, it's much slower. And there's more space for the lava to - to go into fissures and things like that. But the intrusion from way, way deep into the - the magma chamber is much slower now. We might see an eruption summer end of February beginning of March according to the scientists. But this might also be the end. I said that also last summer. And then there was an eruption in July. But since then, we haven't had any. And I'm pretty confident that, you know, if this happens again, it's going to be, you know, smaller and further away. And our - our - our - our emparkments are going to be able to withhold all lava flows. I mean, it's not no nonchalance or something. You know what to expect, and you're fully aware of all the dangers as well here. And also, when you built a geothermal power plant in a high temperature zone like ours, you can expect this. You know, there are a lot of geothermal opportunities across the Europe for example, and they will not have this risk. You might have it in Italy in Turkey. Maybe in the Canary Islands, where you have volcanic activities, active volcanoes, but not sort of normally. Well, 100 meters also away from the plant. I mean, that's quite stunning. I think let's talk a little bit about the Icelandic power market. You said your company is 100% privately owned, one of the only ones in Iceland. What's happening in the Icelandic power market, Thomas. I mean, it's obviously a small country. Is Iceland is not interconnected with any of its neighbors, but still there are things happening here. There are things happening. And we know we're a small nation, and we would never have afforded to build up our over the decades or great than our power stations if we weren't for big users. So Icelandic power infrastructure group by servicing aluminum smelters. We have three in Iceland. We meaning Iceland has three power. Large aluminum smelters. There's a ferro silicon plant. There were silicon plants there are. And now so all of these industries use would be 80% of our power. Over the past, nearly eight years, the data center industry has been growing quite a bit. And it's obviously with all the discussion about hyper-scalers and all that in data centers. The demand is really strong from the data centers. And so there's the demand is there, but at the same time, there haven't been many new projects over the last nearly 20 years, 18 years. The last big one was built for an Alkoa aluminum smelter in East Iceland, where I was to see all 18 years ago. So I know it intimately, but that was like a 600 megawatt power plant. I visited it. Yeah, yeah. Cover a new car. But after that, we had our economic collapse economy. It wasn't ready for more big projects. And then following that, the government was very much subsequent government, we're very much green, left leaning. And the focus was not on developing further the energy industry. I think we have a change. We've had a change over the last few years. We have built, now this is the second geothermal power station we commissioned in four years. So we built two, they're not big, 30 and 30 to 50 megawatt scale, but there's still those are the newest projects in the country. I think there are four data centers in country that all want to grow. And they all have opportunities to grow with one of the hyper-scalers. So I'm confident that there will be more increased demand. I'm promoting on our end, we should move away more and more from fossil fuel driven economy to an electrical driven economy as a country. We do have the resource. We just need to deploy projects and take strategic decisions. There's no reason why we shouldn't go be driving electric cars. We shouldn't have a strong electrical infrastructure around the country. Why, small boats shouldn't be electric driven. It's technically possible. That would save the country on importing fossil fuels. And we could be a prime example of how you drive an economy based on electrical power infrastructure. Though Iceland isn't connected with its neighbors through cables, there is a strong competition in attracting the big industrial companies and also data centers. So that's where Iceland can compete with say Norway, Sweden and Finland in terms of the price of electricity. Is the remains competitive, would you say? I think there's been a lot of discussion over the last two decades about an interconnection, basically electrical cable to the UK, which is massively expensive, something in the order of Martin Luther Fie or 6 billion euros. My view is that we don't need it any more because we have the data cables. We have a bunch of opportunities growing in the data centers and the prices are competitive but they're still really good. You know the data centers are ability to pay is higher than the old industry even if we like that industry as well. So good healthy mix is good but I think with you know with the AI boom and everything that's going on in the data center industry we have had opportunity to basically get more badly for our power and develop projects and we can now develop projects which probably would not have it been economical economical for the aluminum industry or silicon industry because they need low prices and we have probably developed most of the cheap projects but the new projects you know for servicing the data industry you know they are probably they are more expensive but the data the customer can pay for that. So I think our prices are still competitive globally but there's also good you know for us because we want our power companies and especially because they're so they're state-owned you know the government relies on the dividends from them so I think this is all all an old positive for the economy and positive for the way the government wants to move. So that's the mantra what about the supply side if you can can you get more supply on stream and you said that you've struggled over the last 20 years to build new supply I mean I since notoriously windy Thomas but is that something I can tell you you know we have a few wind sites and we've been doing wind measurements where exactly we would set world record on land here if we developed wind and I would I'm all for it I don't believe we should be doing it all over the country but I think strategic locations where and we do have and then I say when I say we I mean Iceland I'm not meaning it's a Zorka our primary it's a Zorka primary power production is baselot because we have geothermal but the country has a bunch of good reservoir you know installed capacity and opportunities and I think we should develop those and I think we could have a massive opportunities on wind onshore and be and co-locate with batteries or something so that I mean but you know there's there's very few occasions when it's not windy in Iceland so maybe you know fortunately that's yeah that's that's the unfur you know for us living here it's always windy you know so I think we have great opportunities yeah and how about in terms of how's the market organized in Iceland is that there's a wholesale market there's there's a competing power exchanges could you run me through that to us yeah well there's a there's a wholesale market you know they're big like I said there are big few big consumers industrial consumers and then there's for the SME companies size companies and you know what we call SME and here because that's an active market for those retail markets for those and an active market and many many players selling into to you know households and small companies and medium midsize companies our fishing industry is largely capable you know online the fishing factories and things like that are largest capable and freezing plants of utilizing electricity and they are becoming very big you know as an as a as an industry and it's an active market but I would always criticize it because it's so much so some big so such a big power with its own by the government or municipalities so it's biased towards that and and you know it doesn't it's not in my political beliefs but I know the country doesn't want to change from that because the politicians like the fact that these you know utilities are owned by the state or the municipalities and they want to be you know read the benefits because this is a good industry yeah that's the policy I think that's shared by other Nordic countries as well you know in Macon as a matter of national resources they want to maintain that kind of control you know I think in our case we do have an example from the fishing industry where the fishing rights are mostly all of them are more or less privately held I think that has been very successful in you know in terms of generating a sustainable fishing industry but I believe that the power industry because of the fishing industry will be public yeah owned by public companies whereas we have been allowed to play you know in 10% or so 7 to 10% of generation privately and that's fine we're owned by the pension funds mostly so so every every Icelander owns owners indirectly but but I think when we spoke about few projects in the past we have implemented rules and regulations that have been are simply been too cumbersome to get the project from you know the drawing board to execution has just taken years and years and years and recent governments want to change that and I know with the new government they have much focus put a lot of emphasis on on simplifying the regulations the national framework plan the environmental impact assessment operating permit planning permissions building commissions permissions this has taken up to 20 years sometimes it's long and it's maln made I don't I'm not promoting to give a discount on on environmental you know regulation just make them quick you know either expedite them may accelerate give me a rat light immediately if it's a rat light not let me be stuck on a yellow light for 20 years yeah but but I don't know what to do absolutely it's a question and if we can stay with regulation Thomas what's you know the relationship with with Europe or with the European Economic Area I mean there was a trouble there was a little bit of trouble a few years ago with the third entry package that took took a while to get through what's what's what's the status now in the relationship with Brussels and with the in principle we implement everything that you know EU implements and we have done energy the first and second and third energy package has been implemented total separation of generation and and sales and and you know distribution and you know is is always separated from from generation and sales so I think we have implemented all of it we talk about gold plating a lot in Iceland because we tend to implement it to the highest possible standard and be proud of it even to a point where we have started talking about let's plating because it's so heavy so so if you want to implement or develop a list of water cleaning facility for a municipality of two or three thousand people they have to go through same regulation as Frankfurt you know we have to simplify those things because we have just different environment and the ability to file a complaint and stall projects and put those projects to courts we have allowed broad definition of that that's why projects have been stuck for 20 years best example is the powerland you know I told you about the powerland we had only one single powerland to Schwarzenegger which melted there has been a power line in development for 20 years to secure you know delivery from that power plant second power plant power line and it's still being held up at the courts because of landowner disputes and things like that so yeah I think we have basically the same implement we implemented everything that the EU has implemented up to the third energy package and we have tended to go to sort of letter of when we implement these rules and regulations and I think present government is actually trying to change that I think there are governments across Europe as well that trying to expedite the process and overrule some of the local opposition to especially these infrastructure products because as you say these can become just a bureaucratic nightmare and with one in Bevers another in me or and certain local councils in opposition but a final question really Thomas I mean I'm sure you're involved in the guarantees of origin markets it's just off and and what do you make of the kind of plans on the table by the greenhouse gas protocol have you had a look at that at all and because this would that would that would stop the sale of guarantees of origin outside of ice and effectively because you'd have to prove you either sell it within the same price zone or or if there's an interconnection with another one yeah I don't pretend to be an expert on this but personally I think by doing that it defies the purpose of a single market and I think we have sold deals and we have used that party to fund our growth of green sustainable projects and that's the whole purpose and we're in the same single market so that's why I think this these latest moves are wrong totally wrong because we are exactly and we are probably a poster child of what we should be doing with the benefits of a green origin you should be reinvesting into new green projects and we built three new green power plants in the last six years yes we have some revenue from the Geos it's not massive but it's part of the funding of a new green project and now we have great you know 200 megawatt GeoTem a power plant which we have already started exploratory drilling on that's totally green we have an expansion opportunity in Schwarzenki totally green more GeoTemper because we have space basically for more generation and we have a hydro project in the north 55 megawatts totally green and I think Geos you know benefits from the Geos should go into developing more green energy in a single market we're competing about for data centers we're competing for industrial you know facilities Salman land-based salmon farming uses a lot of energy that's just a green source of protein so I think if I understand the move correctly I think it's wrong I think it defines the purpose of a single market you know and you apologize if my English isn't perfect but to describe it but I think you know we have been doing using in the market in the right way we're basically being you know getting the benefits of developing or having a green pipeline developing new projects and That's what we're doing. - I think your opinions will be shared by many power companies across the Nordic region, at least. - Absolutely. - Yeah, I hope so. Thomas, thank you very much indeed for being a guest on the Plug-Din. - Well, my pleasure. - My pleasure. Thank you very much. - A new listener's thanks for listening to this episode of Plug-Din. If you enjoyed this discussion, please like, rate, and follow to make sure you get the latest podcast episodes as soon as we release them every Friday. We'd also love to read your reviews of the podcast. It helps us to keep up to date with what you, our listeners, think of our podcast and what content you want to receive more of. Finally, you can head to Montonnews.com for more news and analysis from our team of journalists across Europe and beyond. See you next time. [BLANK_AUDIO]