Currently Icelandic officials are looking at the possibility of funding a 1,170km power cable to Scotland. Iceland’s has natural endowments which lend itself to huge geothermal and hydropwer potential. Its export value has been put at approximately $1.33bn if priced at today’s spot price which is approximately 10% of Iceland’s $12bn economy.
As the EU tries to increase its use of clean energy (20% by 2020) the cable from Iceland would help considerably in achieving this goal and by about 2030 Iceland’s revenue per capital could rival that of Norway, where oil income has made its $507bn sovereign wealth fund second to that of the UAE on $600bn. This potential earning for the Icelandic government has led to a reduction in the cost of credit default swaps which is insurance on Iceland defaulting. But in order to realise its potential Iceland will have to attract a lot more investment as 75% of its power potential is underdeveloped. Therefore an infrastructure that has the capacity to generate such volumes of electricity is esseential to any further advancement of the Icelandic economy. Alcoa Inc., Rio Tinto Group and Century Aluminium Company have already set up plants in Iceland to take advantage of its cheap energy. Demand is definitely outsripping supply. Click here to see the Bloomberg article on Iceland.