A plan for an undersea power cable to connect the British and Icelandic grids is attracting “strong” investor interest, Charles Hendry, a U.K. lawmaker and former energy minister who promoted the project, said today in London.
“There’s no doubt in my mind that in Britain the political will is there, so if there is a political will in Iceland, we want to work together,” he told an Iceland energy conference.
The project offers low-risk, predictable returns attractive to institutional investors including pension funds and the U.K. is preparing to change policies needed for the cable, he said.
Hendry helped spur an agreement between Iceland and the U.K. in May 2012 to explore the proposals. The link may cost as much as 4 billion pounds ($6.4 billion) and be completed by 2022 if approved. It would extend as far as 1,000 kilometers (620 miles), longer than any subsea cable now in operation.
Cables already connect the grids of Norway and Britain to the Netherlands. TenneT Holding BV, the Dutch grid operator, plans links between Germany and Norway and the Netherlands and Denmark. There’s also a connection between Britain and France.
“These assets are attractive to financiers, which suggests that the capital costs to build the new cable should be financed by the private sector,” Andrew Perkins, a partner in energy and environmental finance at Ernst & Young LLP, said by e-mail.
Almost all of Iceland’s power comes from renewable sources, with three-quarters from hydropower and the rest from geothermal, according to the country’s National Energy Authority
“There are many examples in Iceland that highlight the very important message that a clean energy economy isn’t just about energy,” Iceland President Olafur Ragnar Grimsson told the conference. Cheap power and heating helped industry to grow and allowed Iceland to weather the financial crisis, he said.
Britain would be able to smooth out the highs and lows of its wind and solar generation with Iceland’s steady geothermal and hydro power as backup. The cable would give access to low-carbon electricity at “relatively low costs,” Perkins said.
“The best comparison is against nuclear energy, which has shown that it needs subsidies over long periods in order to justify the risks and costs involved,” he said.