“Major news for economic growth in North Iceland”
From left: Magnús Þór Ásmundsson, CEO of RARIK; Jóhann Páll Jóhannsson, Minister for Environment, Energy and Climate; Svandís Hlín Karlsdóttir, Executive Director of Business and System Development; and Sigurður Þór Guðmundsson, Mayor of Langanesbyggð. mbl.is/Líney Sigurðardóttir
A major investment in power infrastructure is planned for Northeast Iceland in the coming years, aimed at boosting regional development following the shutdown of PCC’s silicon plant at Bakki, as well as facilitating new energy production, including wind power. Electricity supply capacity will also be greatly increased at Þórshöfn, improving both capacity and reliability.
This is outlined in a new agreement signed yesterday in Þórshöfn by Jóhann Páll Jóhannsson, Minister for Environment, Energy and Climate, alongside representatives from Landsnet and RARIK.
The state will allocate 2.2 billion ISK next year in additional share capital for Landsnet and RARIK to increase their investment capacity. The funding will come from cuts to the Climate and Energy Fund.
“There has been far too much uncertainty, vagueness, and disagreement over who is responsible for developing power infrastructure in Northeast Iceland. With this agreement, we are finally cutting through the knot,” says Jóhann Páll Jóhannsson, Minister for Environment, Energy and Climate.
1. New transmission line across Melrakkaslétta
Landsnet commits to building a 132 kV transmission line to Langanes across Melrakkaslétta, to be added immediately to the national grid plan. “The goal is to accelerate this project as much as possible, and the government will seek to create the conditions for that—among other things by facilitating local energy production,” said Jóhannsson.
He noted that the line would make future wind farm projects in the region more viable, as several potential wind power sites have already been identified, including Hnotasteinn, Austurvirkjun Power Plant, Sauðanesháls, and Brekknaheiði.
Bringing the line into the official grid plan also means developers will no longer have to pay a “system contribution fee,” which significantly changes incentives for new projects.
“Once this bottleneck in transmission and distribution is resolved, the entire foundation for regional growth changes. It opens up possibilities for Finnafjörður, new power projects, and expansion of existing industries,” Jóhannsson said.
There was a large turnout at the meeting held in Þórshöfn. mbl.is/Líney Sigurðardóttir
2. Underground cable from Vopnafjörður
RARIK will begin construction next year on a 33 kV underground cable between Vopnafjörður and Þórshöfn, creating a full ring connection around the Langanes peninsula. This will significantly increase both capacity and reliability, enabling an additional 10–11 MW of electricity demand in the area.
3. New substation at Bakki
A new substation will be built at Bakki to replace the older facility that was designed for PCC’s silicon plant. The new substation will better support smaller industrial users and diversify energy use at Húsavík.
“This will not only serve new large-scale users but also benefit homes and smaller businesses on Húsavík,” said Jóhannsson.
The project follows the government’s initiative to identify opportunities for regional growth after PCC’s closure. “This could be the first step toward a data center at Bakki, but more broadly it’s about enabling new industries to develop,” he added.
Looking ahead
Prime Minister Kristrún Frostadóttir has initiated a task force to assess challenges and opportunities in North Iceland. “The idea is for the state to take a decisive role in supporting regional and economic development here, to create optimism and hope,” Jóhannsson said.
He concluded by describing the agreement as a historic step forward:
“These are major news for economic growth in North Iceland.”
