The Iceland Example

I vacationed in Iceland recently and it gave me the opportunity to explore how this small country can be largely energy independent.  In the 1970s, Iceland made a pivotal shift in its energy policy in response to the oil crisis.  That set the foundation for its energy independence today.  What did they do? Invest!!!

1. Pivot Away from Imported Fossil Fuels

Prior to the 1970s, Iceland was heavily dependent on imported oil for heating and electricity. The 1973 oil crisis sharply exposed this vulnerability, triggering a national push to reduce dependence on fossil fuel imports.

2. Massive Investment in Geothermal Energy

Iceland began aggressively developing its geothermal resources, which were abundant due to its volcanic geology. This resulted in public/private cooperation.

• Subsidized geothermal exploration and drilling.

• Encouraged municipal district heating systems to switch from oil to geothermal.

• Created the National Energy Authority (Orkustofnun) to guide and oversee energy development.

By the 1980s, over 90% of homes were heated with geothermal energy, compared to just 43% in 1970.

3. Expansion of Hydropower

Iceland also ramped up its hydropower capacity. The country already had some hydro infrastructure, but in the 70s and beyond, major dams and generating stations were built to power industries like aluminum smelting. Today, hydropower supplies roughly 70% of the country's electricity.

4. Long-Term Strategic Planning

Iceland took a long-term national planning approach, linking energy policy with environmental protection and economic development. This included:

• Coordinating with municipalities and utilities.

• Building public trust in renewable projects.

• Offering education and training for geothermal and hydro engineering.

Result: Energy Independence

Today, 100% of Iceland’s electricity and about 90% of its total energy use (including heating and power) come from domestic renewable sources — primarily geothermal and hydropower. The only major exceptions are transportation and aviation, which still rely on imported fossil fuels (though electric vehicles are growing).  Iceland is unique with the geothermal and hydropower resources, so it played to its strength. 

What lessons can the rest of the world take from Iceland?  Develop a long-term plan and invest in the future.  The return may be decades away, but the investment certainly paid off for Iceland.  Take advantage of the god given geographic advantages.  Countries must evaluate what is available and use these to the fullest.  Governments must work with the private sector to craft policies that are efficient and effective.  It takes everyone working together to make real change. 

#ANDnotOR®