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Does Apple Not Want Truly Green Data Centers?

Denmark-Electricity-Sector-Mostly-Coal_March-2015Is there such a color as coal-green? This question comes in mind when reading about Apple’s new data center in Denmark. Apple recently announced it will construct two new large data centers in Europe, both to be “run on 100 percent renewable energy”. According to a press release from Apple, “the new facilities will run entirely on clean, renewable energy sources from day one”. These are interesting statements, having in mind that both data centers will be connected to a grid which mostly delivers electricity from fossil fueled power production. Here we will consider if a data centre located in Denmark can truly be said to run all the time on 100 percent renewable energy.

Denmark’s Own Power Mix is Dominated by Coal

Denmark-Coal-Plant-StudstrupværketDanmark generates substantial amount of green energy. According to the most recent information from the European Union (EU), the renewable’s share of Denmark’s gross electricity consumption in 2012 was close to 40 percent. More recent information from the Danish transmission system operator (TSO), Energinet, tells us that the share of renewable energy in 2013 was somewhat higher than in 2012, but still less than half of the total electricity consumption (47.5 percent).

Denmark’s electricity is mainly generated by coal. The Danish government has plans to decrease the importance of coal, but coal still constitutes for more than half of the fuel consumption of Danish power stations. Most of Denmark’s renewable energy comes from wind, which is of course somewhat a fluctuating and unreliable energy source. In 2013 the share of wind in the electricity consumption was almost one third (32.7 percent).

Connections to Other Countries are Based on Economics Rather than Green Energy

Denmark’s electricty grid is not an island, but connected with its neighbouring countries by several large cables. Therefore, Denmark sometimes exports electricity and sometimes imports electricity. Weather it is exporting or importing electricity depends on the price difference within the larger market area. Normally, Denmark exports electricity during night (because of its large wind power capacity) and imports during the day (when demand goes up and Norwegian and Swedish hydropower stations are utilizing the water in the reservoirs). However, imports and exports of electricity of course always depends very much on how the wind blows in Denmark.

Denmark Imports Power from Coal, Hydro, and Nuclear Power Stations

When Denmark imports electricity, it comes via cables from Germany, Norway, and/or Sweden. The imported electricity can, for example, be generated by fossil fuels (major coal power in Germany), by nuclear power (nuclear stations in Sweden and Germany), or by hydropower (especially from Norway, but hydropower is also a major source in Swedish power generation).

Denmark-Electricity-Imports-and-Exports-2013

Lately, most of the imported energy has been from Germany (as shown on the diagram at left, which is from the Danish TSO). Coal is the most important source of electricity generation in Germany, accounting for close to half of the generation. In Germany, only ¼ of the generation comes from renewable sources on average. Natural gas and nuclear energy account to close to ¼ of the generation. Thus, electricity imported to Denmark from Germany normally increases the share of fossil fuels and nuclear power in the Danish electricity consumption.

Data Centers in Denmark are Dependent on Fossil Fuels and Nuclear Power

It is highly unlikely that a data centre located in Denmark, connected to the grid.  will be run entirely on clean, renewable energy sources only. For the end-user in Denmark it is impossible to know how the electricity he consumes was generated. Even more important is that Denmark’s electricity mix is dominated by coal power stations.

Denmark-Electricity-Consumption-Mix_1990-2013-and-forecastIn fact every date centre in Denmark can be expected to mostly be run on coal power. Of course companies, including those running data centers, can try to find a generating company that only produces electricity from renewable sources and buy its electricity from that company. But the electricity put into the transmission grid can not be isolated – so to speak – from other electricity on the grid. Therefore, it is of course impossible for the buyer to promise that he is only using or consuming green energy.

It is possible to buy what is called Green Certificates, which are a tradable commodity proving that certain amount of electricity is generated using renewable energy sources only. However, this does not mean that the electricity being consumed by the buyer of the certificate is from renewable sources – it might as well be from a coal power station or from a nuclear plant. The result is that every data center in Denmark, connected to the grid, will in fact be using electricity from all kinds of power plants, including for example coal power stations.

Iceland is the Best Option for Green Data Centers

The only way for a major data center being truly able to run on 100 percent renewable energy is to take power from a grid that only delivers electricity from renewable sources. In Europe probably no grid comes as close to this as in Iceland. Iceland produces close to 99.9 percent of its electricity by utilizing hydro- and geothermal power (and some wind power).

Norway is in a similar situation, producing almost all the power from hydro resources. But Norway also imports power from other countries, thus distributing coal power and nuclear power to end-users. So Norway is not quite as green option as Iceland is.

Regarding Denmark, it is obviously not a very green option at all. The environmental accounting may tell us that a company there has a very low net carbon footprint, but in reality the electricity is not only from renewable sources at all. If Apple or any other firm in Denmark wants to run 100 percent on renewable energy it would in fact either have to disconnect from the grid – or set up its operation in Iceland.

World Class Wind Efficiency

In 2014 Landsvirkjun’s wind turbines efficiency was 44 percent! This is much higher than the world’s  average of 28 percent, meaning that each megawatt (MW) of a wind turbine in Iceland is generating substantially more electricity than wind turbines do elsewhere in the world. Here you can see real-time data from the wind turbines now operated by Landsvirkjun.

Iceland-Wind-Power-Landsvirkjun-Burfellslundur-Wind-ParkIt shall be stressed that Landsvirkjun still only operates two wind turbines. Utilizing wind power for generating electricity into the grid is still in its infancy in Iceland, as Iceland has so far mostly been focusing on low-cost hydro- and geothermal power sources. Last year (2014) was the  first full calendar year in which large wind turbines were operated in Iceland. These are two 900 kW turbines from Enercon and they are located near Landsvirkjun’s hydro power stations above Búrfell in Southern Iceland.

These two windmills were developed as a research project. In addition to the earlier mentioned high efficiency, it is also important that the operational availability of the two turbines in 2014 was almost 99 percent and 97.5 percent, respectively. The positive outcome of the research project is an important step in confirming optimistic views about possibilities of wind power in Iceland, as described in a report by Ketill Sigurjónsson to the Ministry of Industries and Innovation in 2009.

Due to these positive results, Landsvirkjun now has started planning for a large wind park in the area. The wind park is expected to have a total power capacity up to 200 MW and will be the first major utilization of wind power in Iceland. In the future, wind may become an important source for Iceland’s renewable energy production. Iceland’s extensive hydro- and geothermal sources have already made Iceland the world’s largest power generator per capita and the wind will be an interesting addition.

Build, Own or Operate Data Centers in Iceland

The Icelandic national power company Landsvirkjun has published a new video, explaining how data center operators in Iceland are using clean, renewable energy to power some of the world’s lowest total-cost-of-ownership (TCO) data centers. Landsvirkjun is Iceland’s  largest electricity generator, processing around 75 percent of all electricity used in Iceland. Iceland-data-centers-well-connected-by-optical-fiber-cablesAccording to a report by BroadGroup Consulting, Iceland is a highly attractive place to locate data centers. BroadGroup‘s, analysis show that on the key issue of power (encompassing everything from costs to quality to regulation) Iceland scores higher than leading global data centre locations such as the US, UK, Sweden, Singapore and Hong Kong. The report states that  power costs for data centers in Iceland can be half of those in Scandinavia, and significantly more competitive than other European countries. And what is even more important, Iceland’s power costs remain very likely to stay much lower than other countries. It is particularly important that data centers constructed in Iceland have the opportunity to cap the prices for ten years or even longer for greenfield projects. Opera-Software-logo-Data-Centre-IcelandIn addition to the low prices, it is an important fact that the power in Iceland is 100 percent from renewable sources. Iceland produces electricity using exclusively hydropower, geothermal energy and onshore wind. These are sustainable, environmentally green resources with zero carbon trade-offs. This makes Iceland an ideal location for addressing corporate responsibility considerations. On telecoms, existing connectivity (Greenland Connect, FARICE and DANICE) are being substantially upgraded. Significant new capacity is planned to be added over the next several years. The telecoms pricing attractiveness and strong telecom connections are well illustrated by existing users in Iceland, such as Opera Software. You are welcome to contact us at the Icelandic Energy Portal for more information on building, owning and/or operating data centers in Iceland.

UK Affirms Interest in IceLink Interconnector

HVDC-Letter-UK-to-Iceland_2015-01-29_17-55-03_GBG_January-2015Iceland’s Minister of Industry, Ms. Ragnheiður Elín Árnadóttir, recently received a letter from Mr. Matthew Hancock, UK’s Minister of Energy and Climate Change. In his letter, Mr. Hancock expresses his interest in an electric connector between Iceland and the United Kingdom (UK).  The letter is dated January 24th 2015 and reads as following:

Dear Ragnheiður Elín,

You met Michael Fallon in spring last year [2014] to discuss the possibility of an electricity interconnector between Iceland and the UK. I have taken over as Energy Minister and wanted to write following a meeting I had recently with one of the potential developers. I was very pleased to hear that a new Steering Committee is being set up to help you consider the impacts of such a major project. If it would be helpful, my officials stand ready to assist the work of this Committee, for example by providing information on the UK regulatory regime.

Studies we have commissioned indicate that an electricity interconnector between our two countries could provide economic benefits to us both and I am therefore interested in examining such a project further. The UK Government is considering options for sourcing low carbon, secure and affordable electricity post-2020 and an interconnector between our two countries might be one of the options we could examine in this process.

Matthew-Hancock_UK-Minister-Energy-Climate-Business-InnovationI would welcome your own views on the benefits of such a project and would of course, be very happy to discuss this with you if you have the opportunity to come to London at any time. I look forward to hearing your thoughts on the next steps.

Then the letter ends with Mr. Hancock’s signature [“Matt”]. It will be interesting to see how this possible project will develop in the next months.

Thorsil Secures Sales Contract with Dow Corning

Thorsil-Silcon-Helguvik-IcelandPlans for the new Thorsil silicon plant in Helguvík in Southwestern Iceland are moving well ahead.

Thorsil has already entered into contracts for the sale of 85 percent of the production from the plant which is being constructed in Helguvík. According to the Icelandic business media Viðskiptablaðið, the two sale contracts amounts to a total of 1.3 billion USD over the contract period. The newspaper Mogunblaðið reports that one of the two contracting parties is Dow Corning, which is the largest silicone product producer in the world. The two contracts are said to be for a period of 8 years and 10 years, respectively.

Dow-Corning-Slicon-Production-Thorsil-IcelandWhen in full production in 2017, the Thorsil plant is expected to produce up to 54 thousand tons of silicon metal, as well as 26 thousand tons of silica powder. The plant will utilize close to 85 MW of power capacity, all from Icelandic renewable energy sources. The decision to locate this new silicon plant in Iceland is based on many factors, including very competitive electricity prices and positive tax environment in Iceland.

NordLink: 1,400 MW Interconnector Between Norway and Germany

Earlier this month (February 2015) final investment decision for the NordLink high voltage direct current (HVDC) interconnector was made by partners Statnett, TenneT and KfW.

HVDC-Nordlink-MapThis will be the first direct connection between the German and Norwegian electricity markets and is yet another indicator how positive interconnectors are for the Norwegian electricity market. This development is also likely to strengthen interest in a cable project connecting Iceland and Europe (sometimes referred to as IceLink). Thus, we at Askja Energy will closely be following the construction of the NordLink.

NordLink is a turning point in the development of subsea electric cables. The longest cable of this kind today is the 580 km long NorNed between Norway and the Netherlands, which has been in operation since 2008. The length of NordLink will be close to 600 km, of which 516 km will be a subsea cable. Furthermore, the capacity of NordLink will be 1,400 MW and the voltage will be 500 kV, while NorNed is only 700 MW (and 450 kV).

The NordLink will be realized by the Norwegian Statnett and Nordseekabel, each with 50 percent ownership in the project. The Dutch TSO TenneT (which also operates transmission system in Germany) and the German promotional bank KfW each have shares of 50 percent in Nordseekabel.  The tender process has been finalized, where Nexans and ABB have been awarded contracts for the HVDC cable itself and ABB has been awarded the contract for the converter stations (on each end of the cable in Germany and Norway). Lead insurer for the project will be Codan.

NordLink signingThe NordLink comprises a total investment volume of approximately EUR 1.5 – 2 billion EUR (equivalent to 1,7-2,3 billion USD). The interconnector is scheduled for commissioning and trial operation in the last quarter of 2019, and after the trial period the interconnector will go into commercial operations in 2020.

The most important aspect of NordLink’s business model is to utilizing the flexibility of Norway’s hydropower system as storage for German wind power. This will increase the utilization of the German wind power capacity and also make it possible to maximize profits of the Norwegian hydropower industry, creating a win-sin situation. The result will also be increased proportion of renewable electricity and increased security of supply. Without doubt, an interconnector between Iceland and Europe would offer similar advantages.

The Number One Source for Icelandic Energy Information

In 2014 the Independent Icelandic Energy Portal became the world’s most read digital information source on Icelandic energy issues. After starting from ground zero in 2012, the Portal now has more annual visits than any other website presenting information about energy in Iceland and possibilities for investing in energy related projects in Iceland.

Askja-Icelandic-Energy-Portal-Visits-2014-MapThrough 2014, the Portal had readers from a total of 148 countries.  Most visitors came from the United States.  United Kingdom and  Germany were not far behind, followed by visitors from Canada and the Scandinavian countries.

The readers of the Icelandic Energy Portal seem to be very interested in subjects related to investment. The most read categories in 2014 were the investing category and the electricity market category. This is no surprise, as Iceland is probably one of the world’s best locations for investing in for example data centers and silicon production. We are looking forward to continue bringing our readers more information about Icelandic energy issues in 2015 – always emphasizing  independence, real data and reliability. Stay tuned.

Ireland and United Kingdom are Best Options for Electricity Exports from Iceland

It would be a positive step for Europe to become connected with Iceland by a subsea electric cable. Compared to other countries in Europe, Iceland has low electricity generation costs. In addition to the attractive electricity price, the Icelandic hydro- and geothermal resources offer very reliable and stable generation.

With this in mind, it is interesting that Iceland’s next door neighbours are electricity markets where the electricity prices are among the highest in Europe. Here we are referring to Ireland and the United Kingdom (UK). What is also important, is the fact that UK and Ireland are much closer to Iceland than for example Denmark, Holland (the Netherlands) or Germany. It is obvious that a subsea electric cable between Iceland and the European mainland would be substantially more expensive than to UK or to Ireland. There fore there are strong arguments for Iceland to consider Ireland or the UK as the best financially feasible options for such a connection.

UK is an Excellent Option and Ireland Even Better

UK-Ireland-Electricity-Prices-Industrial-2013_5-3-1

The two graphs (at left and below) show the electricity prices in 2013 in selected European countries, in USA and in Japan. The blue portion of the bars is the cost of electricity including transmission cost. The white bars show the price of the electricity when all the relevant taxes have been added (such as VAT and environmental taxes).

The first graph (chart 5.3.1) shows the electricity price to industries while the second graph (chart 5.5.1 below) is the price to households  (domestic prices), The average price of electricity (excluding tax) to industries in the UK in 2013 was close to 8 pence pr. kWh in 80 GBP/MWh. And the price to households in the UK in 2013 was close to 15 pence pr. kWh (150 GBP/MWh). In Ireland the prices were substantyally higher.

UK-Ireland-Electricity-Prices-domestic-households-2013_5-5-1

In 2013, wholesale electricity prices in the UK were close to 45% of the total price. Thus, the average wholesale electricity cost for industries in the UK in 2013 was close to 35 GBP/MWh, and for households the cost was close to 65 GBP/MWh. This means that the wholesale price of electricity to industries in the UK in 2013 was being close to equivalent of 55 USD/MWh. And the wholesale price to households was close to 100 USD/MWh.

According to Platts, the average wholesale electricity price in the UK in 2013 was close to 45 GBP/MWh, which is more than 70 USD/MWh. In Ireland the average wholesale electricity price in 2013 was higher or close to being equivalent to 80 USD/MWh.

UK-and-Ireland_-Electicity-Prices-Wholesale-2013

For comparison, in Iceland about 80% of all electricity produced is sold to aluminum smelters and other energy intensive industries, at a price close to 25 USD/MWh. If Iceland could sell electricity to UK, the revenues pr. every sold unit of electricity could be close to triple the current price in Iceland. Of course there would be a high transmission cost via subsea cable; probably close 35-40 USD/MWh. Still, the added profits would be substantial – if the electricity would be sold to UK or Ireland at 70-80 USD/MWh . At the same time, the UK or Ireland would get access to reliable renewable energy.

Will the UK be Interested in Icelandic CfD’s?

UK-Decc-Energy-Policy-CfD-Strike-Prices-Cover_dec-2013At first glance, one might consider Ireland more interesting market for Icelandic electricity than the UK. It is indeed so that the price of electricity in Ireland would probably justify a submarine cable between Iceland and Ireland. However, the energy policy of the UK makes the UK more attractive for Icelandic electricity suppliers.

The energy policy of the British government involves ensuring new energy projects, by securing a minimum price for the electricity from new generating projects, in special contracts called Contracts for Difference; CfD’s. The minimum electricity price in such contracts (called strike price) is quite high. For electricity from geothermal and hydro power sources the strike prices are equivalent to 155-220 USD/MWh.

UK-Decc-Energy-Policy-CfD-Strike-Prices-Table_dec-2013It is also interesting that the strike price for electricity from new offshore wind farms is equivalent to 220-240 USD/MWh. It is likely that the UK could negotiate with Iceland for a strike price that would be substantially lower, thus saving Uk’s taxpayers money. What the exact price would be would be decided in negotiations between Iceland and the UK, but it could be somewhere between 155-240 USD/MWh. This option should be interesting to both Iceland and the United Kingdom.

UK-Iceland Cable on the Global Infrastructure 100 List

A global panel of independent industry experts has identified a subsea electric cable between Iceland and the United Kingdom (UK) as one of the hundred most inspirational and innovative infrastructure projects in the world – many of which are expected to transform the way the world’s populations interact with their cities, governments and environment. This is the first time that an infrastructure project in Iceland is on this list, which is published by KPMG (download the report as pdf here).

KPMG-Global-Infrastructure-100-2014-coverKPMG International’s ‘Infrastructure 100: World Markets Report highlights key trends driving infrastructure investment around the world. In the report, a global panel of industry experts identifies 100 of the world’s most innovative, impactful infrastructure projects. Furthermore, the panel demonstrates how governments are coming together with the private sector to overcome funding constraints in order to finance and build projects that can improve quality of life – both solving immediate needs and planning for future societal demands.

The 2014 report focuses on key trends driving infrastructure investment in four key markets, one of the categories being smaller established markets, which are strong domestic markets open to private finance in infrastructure.

The subsea electric cable between Iceland and the UK is one of 25 projects falling under this market-category. The report describes the project, called IceLink, as an ambitious attempt to connect the power grids of Iceland and the UK. Iceland produces all of its electrical power by the means of renewable energy, such as hydro, geothermal and wind, and has potential well beyond local consumption.

According to KPMG, the total investment in the cable and related production and grid infrastructure in Iceland has been assessed in the range of USD 5 billion. When completed, this clean-tech venture would be the world’s longest subsea power cable, delivering as much as 5 TWh a year of renewable electricity to the UK – at a cost lower than offshore wind in UK territories. KPMG says that UK-based ventures have shown interest in funding the interconnector, while Icelandic power companies will build the power-generating facilities and onshore infrastructure in Iceland

KPMG-Global-Infrastructure-100-2014-enregy-and-resources-list-smallOf all the 100 projects listed in the 2014 KPMG-report, 27 projects are in the sector of energy and natural resources. Besides the IceLink, these projects are for example the Alaska LNG Project, the UK Hinkley Point C Nuclear Power Station, and Russia-China Gas Pipeline.

A total of 25 projects are classified as being in smaller established markets. The IceLink is one of these projects – other projects in this category are for example the Facebook Rapid Deployment Data Center in Luleå in Sweden, the Scandinavian 8 Million City High Speed Rail Link between the capitals of Norway, Sweden and Denmark, and the Rail Baltica, linking Finland, Estonia, Latvia and Lithuania with 960 km of railway track. Although many of the projects in this category face challenges regarding scale and investment, KPMG believes there are good possibilities to realize all the projects with increased access of private investment. With IceLink in mind, a perfect and realistic business model might be a private ownership of the cable, while the Icelandic TSO and the main Icelandic power firms would probably be in majority governmental ownership, possibly with private investors as co-owners.

Landsnet Strengthening the Grid

Demand for electricity in Iceland has grown immensely since the development of the current national transmission grid system, which was mostly constructed during the period 1972-1984. Since 1984 the amount of electricity being fed into the Icelandic grid has quadrupled.

Landsnet-Iceland-TSO-Grid-Upcoming-Map-1

The Icelandic Transmission System Operator (TSO) Landsnet is currently working on an environmental impact assessment (EIA) for a new high voltage transmission line between Southern and Northern Iceland; the South-North-Connection (SNC) over the Sprengisandur highland plateau. This new 220 kV transmission line will improve the current power transmission and increase security of supply and stability in the electric system.

Furthermore, the new line will substantially increase the transmission capacity. Thus, the project will not only be positive for better fulfilling current demand, but also prepare Landsnet to meet increased electricity demand in the coming years and decades. The increased demand will for example come from increased electrification of fish meal plants, and from new industrial production plants and services (such as data centers). Because of its stable energy supply, green energy portfolio, and yet-unharnessed renewable energy sources, Iceland is a very appealing location for companies that need substantial amount of electricity or heat for their production process. Iceland’s main power producer (Landsvirkjun) is currently offering long-term electricity contracts at a fixed price of 43 USD/MWh. Those long-term contracts are probably the most favorable in Europe and even in the whole OECD.

The Basic Transmission System to Become 220 kV

In its Transmission Systems Plan 2014-2023 (TSP), Landsnet has proposed three different options (platforms) for the development of the Icelandic electricity grid.  All three platforms aim to construct stronger connections between the major energy areas in the country, to increase stability in the transmission system and to ensure better delivery of electricity. The TSP is a.o. based on the National Master Plan for Hydro and Geothermal Energy Resources, which is a parliamentary resolution on future development of Icelandic energy resources, and an independent governmental forecast of how the electricity market will develop.

Landsnet-TSO-Transmission-System-Iceland-2010

According to Landsnet, the transport capacity of the Icelandic national transmission system will be developed to be at least 220 kV. Presently, 220 kV transmission lines have only been constructed in the southwestern part of the country (between the capital region and hydropower stations in the Þjórsá and Tungnaá region) and between Fljótsdalur power plant and the aluminum smelter in Reyðarfjörðir in Eastern Iceland. The new line between Southern and Northern Iceland (SNC), over the Sprengisandur highland plateau, could become the next major 220 kV connection. This will increase operational security, flexibility and efficiency of the Icelandic transmission.

Four Options of North-South-Connection Over Sprengisandur Will be Considered

Landsnet-Iceland-TSO-Grid-Upcoming-Map-2

Landsnet has started the process of examining the option of South-North-Connection more closely, preparing an environmental impact assessment (EIA) of the new transmission line. According to a draft already presented in the preparation for the EIA, Landsnet will compare four options of a South-North-Connection over the Sprengisandur highland plateau.

Special emphasis is placed to minimize the visual impact of the line, as the area is largely untouched (except from gravel summer road). Parallel to this work by Landsnet, the Icelandic Road Administration will perform an EIA of a new road in the area. Of the four options on the transmission line that will be examined, one option is specified as the main advantage (with a total length of 192 km). Interestingly, one of the other options is an underground cable as part of the route.