EuropeReykjavik Letter

Iceland steams ahead in renewable energy stakes

Iceland Letter: Nordic country harnessed the potential of what lies underground

As hardy sea swimmers donned their woolly hats for their daily dips at home, I quite smugly lowered myself into a steaming blue lagoon overlooking Reykjavik.

The Icelandic swimming culture is as much a fixture of local life as it is for Irish sea swimmers, but it is just one reminder of how the country has managed to harness the potential of what lies underground.

Across the Nordic island that is about the same size as Ireland, but with a total population about the same as Fingal in north Dublin, geothermal energy heats everything from homes and swimming lagoons to greenhouses growing tropical fruit and vegetables in freezing conditions.*

Driving through the valleys between Iceland’s snowcapped mountains, the dotting of homes and farm buildings bear an uncanny resemblance to rural Ireland, apart from the steam tumbling upwards out of boreholes drilled deep into the earth.


Figures from Eurostat show that 97.3 per cent of heating and cooling energy came from renewable resources in Iceland in 2021, the share of renewable heating and cooling in Ireland was just 5.2 per cent, the worst performing country in Europe.

The disparity in renewable heating development occurs despite both countries having similarly grown their economies from relatively poor conditions under foreign rule of monarchies, declaring themselves independent republics within five years of each other (1944 in Iceland, 1949 in Ireland), and going on to have parallel economic booms and subsequent 2008 banking crashes.

Now both islands rank in the top 10 on the United Nations Human Development Index, with Iceland ranking third and Ireland ranking eighth out of 191 countries.

Up until the 1970s Iceland derived the large majority of its heating power from fossil fuels.

Sparked not by climate concerns but the spiraling cost of imported oil in the midst of an international energy crisis, Icelandic policymakers began to incentivise individuals and local municipalities to explore geothermal resources and drill for hot water, and to move away from heating homes with fossil fuels.

The state provided loans and grants for the drilling and construction costs of geothermal heating systems to local communities and farmers, as well as cost recovery for failed projects. A national energy fund offered loans for the initial cost of drilling and exploration, which only had to be paid back if the drilling successfully found a viable geothermal resource.

A legal framework also made it attractive for households to connect to a new geothermal district-heating network rather than to continue using fossil fuels.

The policy encouraged exploration, shared risk and led to the widespread use of geothermal heating across Iceland.

While Ireland does not have the same volcanic energy available to Iceland (and perhaps gladly so given the recent eruptions in the southwestern part of the country), it has untapped geothermal energy resources that could provide a significant proportion of the country’s heating needs.

Ireland’s first policy statement on geothermal energy, published by the Government in July, notes that with new developments in science and technology, “there is potential for geothermal energy to make a significant contribution to the decarbonisation of the energy sector in Ireland, particularly for heating and cooling buildings”.

The policy statement notes that geothermal energy projects are “subject to more initial uncertainty than other forms of renewable energy”, requiring expensive exploratory drilling, and that “addressing geological uncertainty is critical to the success of geothermal projects at almost every step of the planning and development process”.

It adds that work has commenced to develop a strategy for the geothermal energy sector.

Sixty years ago, an international energy crisis drove Iceland to transformational change. Today, not only have recent international events highlighted the need for Ireland to have a secure domestic source of energy, but ambitious climate commitments have set binding targets for Ireland’s delivery on renewables.

As Ireland solidifies its approach to growing its nascent geothermal energy sector, it could do well to look to its Nordic neighbours for inspiration.

*Article amended at 11.45am on February 8th, 2024