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Iceland Launches First Organized Power Market to Boost Energy Investment

Iceland to launch its first organized power market with Nord Pool for enhanced rate transparency and investment planning.

By Athena Xu

5/15, 08:16 EDT

Key Takeaway

  • Iceland to launch its first organized power market in collaboration with Nord Pool ASA and Elma, enhancing rate transparency.
  • The new market aims to provide a benchmark price for better project planning amid rising electricity demand from industries.
  • This initiative will boost investment in energy supply expansion, benefiting from Iceland's high renewable energy production.

Iceland Introduces Organized Power Market

Iceland is set to launch its first organized power market, a significant development aimed at enhancing rate transparency. This initiative is a collaboration between Nord Pool ASA, the entity behind the main Nordic market, and Elma, a local firm. The partnership is expected to introduce a day-ahead contract by the end of this year or early 2025, with provisions for same-day trading to be implemented subsequently. This move towards an organized market is anticipated to provide a benchmark price, aiding investors in planning projects to expand supply.

The demand for electricity in Iceland is increasing, driven by industries such as data centers and food production. However, aluminum smelters continue to be the largest consumers of energy. The Elma Power Exchange, established in 2022 and owned by Landsnet, Iceland's transmission system operator, aims to offer a centralized platform for the secure, reliable, and transparent exchange of electricity. The joint statement, however, did not disclose any financial specifics of the agreement.

Energy Landscape in Iceland

Iceland stands out as the world's largest energy producer per capita, despite its isolated energy grid with no external connections. The country's energy sector is predominantly powered by renewable sources, with a significant portion of its production being consumed by energy-intensive industries. Up to 80% of the energy produced in Iceland is sold to these sectors, highlighting the critical role they play in the nation's energy consumption patterns.

The introduction of an organized power market is expected to streamline the process of electricity exchange, making it more efficient and transparent. This development is particularly relevant given the increasing demand from both traditional industries and emerging sectors seeking sustainable energy solutions.

Benefits of the Organized Market

The establishment of the Elma Power Exchange is poised to bring several benefits to Iceland's energy sector. By providing a benchmark price, it will facilitate better planning and investment in energy supply expansion. This is crucial for meeting the growing demand from various industries, including the burgeoning sectors of data centers and food production, without compromising the needs of the aluminum smelters, which are major energy consumers.

Moreover, the move towards an organized market is expected to enhance the transparency and reliability of electricity trading in Iceland. This could attract more investors to the energy sector, potentially leading to increased production capacity and the adoption of more sustainable energy practices.