Saving Iceland

Dozens of Icelandic companies and institutions, all directly connected to the heavy industrialization of Iceland, have established a co-operating forum concerning the development of the so-called “Icelandic geothermal cluster”. The forum, which was formally established yesterday, June 28th, is originally a conception by Dr. Michael Porter, professor at Harvard Business School and known as “a leading authority on company strategy and the competitiveness of nations and regions.” Interviewed by a news-report TV show Kastljós, Porter, who was in Iceland to take part in the forum’s formal establishment, said that Icelanders are “too cautious” when it comes to “using the opportunities that consist in geothermal energy and the nation’s expertise on the issue.” Contrary to Porter, environmentalists and Iceland’s National Energy Authority fear the overexploitation of geothermal resources.

The companies behind the co-operating forum include energy companies Landsvirkjun, Reykjavík Energy, HS Orka and its owning company Alterra Power Corporation (former Magma Energy), as well as aluminium companies ALCOA and Norðurál, owned by Century Aluminum. Banks Íslandsbanki, Landsbanki and Arion banki are also all involved, the last-mentioned being the forum’s main sponsor. Amongst other parties involved are the Universities of Reykjavík and the University of Iceland, the Federation of Icelandic Industries (SI) and the Confederation of Icelandic Employees (SA), the ministries of environment, of industry, of trade and of foreign affairs, and Mannvit, Iceland’s biggest engineering firm, responsible for both the design and the making of Environmental Impact Assessments for most of the country’s biggest heavy-industry and large-scale energy projects.

To recap, the newly formed co-operating forum manifests that all major parties with direct links and financial interests in the further heavy-industrialization of Iceland and its parallel destruction of the country’s wilderness, have joined forces. And the aim: To increase the competitiveness of Iceland’s geothermal energy industry and its making of capital goods, facilitate the capitalization of geothermal projects, contribute to technological advances and reinforce Iceland’s image.

A Follow-Up of the Plan to Heavy-Industrialize Iceland

During the forum’s establishing meeting, which took place in the headquarters of Arion bank, a new report, titled “The Icelandic Geothermal Cluster – Mapping and Mobilization”, was published, covering “the analysis and the collaboration-formation of the the Icelandic geothermal cluster.” The term business cluster was originally introduced and popularised by the aforementioned Michael Porter, and is, to quote Porter’s own words, a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. According to the idea, the formation of a cluster creates a certain entity, which is supposed to be much stronger than many individual parties each operating separately.

The report – starting with the words of Henry Ford: “Coming together is a beginning, staying together is progress, working together is success” – lays out what it calls “three big growth opportunities”, as the results of the analysis of Iceland’s geothermal cluster. To nobody’s surprise these so-called opportunities consist of bringing energy-intensive industries to Iceland, exporting geothermal energy to Europe through a marine cable, and exporting Iceland’s geothermal expertise. These suggestions are of course no novelty in Iceland but rather a predictable follow-up of the plan to heavy-industrialize Iceland and fully exploit the country’s natural resources – a plan that was well documented in an infamous booklet, titled “Lowest Energy Prices!!”, which was made in 1995 by Landsvirkjun and the ministry of industry, and sent to international energy-intensive heavy industries, offering them cheap energy and “minimum environmental red tape”.

Carefully Chosen Rhetoric and a Private Speech on State Television

Michael Porter has carefully adapted his rhetoric to the current political atmosphere, obviously aware of many Icelanders’ increased doubt and decreased trust towards corporations due to the 2008 economic collapse and many of its following exposures of corruption, as well as the enhanced discussion about the importance of keeping the ownership of natural resources away from private parties. In his forewords to the aforementioned report, he and his co-author, Dr. Christian Ketels, also from Harvard Business School, state that though the “economy has [since the collapse] stabilized at a lower level, and the government has gotten its budget balance so much under control that it is expected to return to the global financial markets later this year […] stabilization is necessary and not sufficient.” And they continue:

Iceland needs to lay the foundations for a new, more sustainable economic growth path. In February 2009, we published an article in the Icelandic press that set out an action agenda for the country. One of its key elements was cluster mobilization as a critical step to build on Iceland’s unique assets and capabilities. We stressed that Iceland had to move beyond a backward looking debate about who was to blame for the crisis to a forward-looking collaboration to improve competitiveness. Clusters are a powerful vehicle to mobilize the private sector and guide the policy choices of government.

The Icelandic geothermal cluster program puts this vision into practice. It builds on Iceland’s unique assets and capabilities in geothermal energy with a clear focus on creating greater value for the Icelandic economy, rather than simply selling power. The geothermal program is grounded in the realization that progress towards this goal will only materialize through collaboration.

Interviewed in Kastljós, a daily news-report show on state-owned TV station RÚV, last night, Porter spoke in a similar way, reminiscent of a memorable Kastljós interview with Ross Beaty, the CEO of Magma Energy (now Alterra Power Corporation), in August 2009. When asked if he understood the public opposition towards privatization after the economic collapse, Beaty said, as reported by Saving Iceland, that he was aware of this but added that Icelanders would have to understand what kind of company he was leading. “We are not a scary company, we want to work with H.S. Orka in building up a stronger company, for the good of Icelanders, ourselves, and actually the whole world,” said Beaty to newspaper Fréttablaðið that same day.

During the TV interview last night, Michael Porter said that he finds Icelanders are “too cautious” when it comes to “using the opportunities that consist in geothermal energy,” and added that there is need for more innovating spirit, aggressiveness and risk-taking. Asked the same the question as Ross Beaty was, a little less than two years ago, Porter answered that the country’s natural resources could still be “owned by the nation” while the utilization rights could be lent to private companies. He also said that though he preferred a mixture of privately and state run businesses, the state-owned energy companies would still have to be run like private companies. This idealisation of privatizing energy companies perfectly resonates a recent encouragement from the Organisation for Economic Co-operation and Development (OECD), set fourth in the institution’s 2011 Economic Survey of Iceland. The interview would better be described as a speech-like monologue as the questioner mostly nodded and occasionally said things like “yes”, “absolutely” and “indeed”. After Porter had described his utopian corporate vision for large-scale geothermal energy production in Iceland, he ended the interview by saying: “Let’s do it!” – followed with an end-note from the presenter: “Let’s hope!”

Fearing Overexploitation of Geothermal Resources

Contrary to the statements about the need for large-scale exploitation of geothermal energy, as mentioned by Porter and the parties of the co-operating forum, environmentalists and Iceland’s National Energy Authority (INEA) fear overexploitation of the geothermal areas that are planned to be exploited to produce energy for aluminium smelter, which in fact constitute all major geothermal areas in Iceland. Recently INEA decided that HS Orka/Alterra Power would have to widen its planned drilling area for the planned enlargement of Reykjanes geothermal power plant and that they would have to supply proof that enough energy can be found on a larger area than already arranged for. The enlargement is meant to provide energy for a planned aluminium smelter in Helguvík, owned by Norðurál/Century Aluminum.

“It is possible to get all this energy on the current construction area, there is no doubt about that,” said energy director Guðni Jóhannesson to newspaper Morgunblaðið in March 2011. But he continued: “But we know it from geothermal areas abroad that if too much construction has taken place in too short time, the capacity of the area can decrease, resulting in the need for reducing the production again.”

Hence, we have it from the horse’s mouth that geothermal energy on a large-scale industrial level is not sustainable.