New Energy Forecast
20 March 2024
Orkustofnun is pleased to announce the release of a new Energy Forecast, integrating the Electricity Forecast and the Energy Conversion Forecast. This publication offers insights into the future of the electricity market and energy exchange, based on two scenarios: a base forecast and a high forecast.
Forecasts Overview:
- Base Forecast: Assumes moderate growth in activity and a continuation of current trends in energy exchange, reflecting a business-as-usual approach. Projections include moderate increases in population and tourist arrivals. Growth in large-scale consumption is expected to follow trends seen in previous years, with the assumption that electric fuel will be imported during this period.
- High Forecast: Anticipates an increase in activity for large-scale use, taking into account forecasts for population growth and tourist arrivals. This scenario predicts a faster pace of energy exchange, with electric fuel being produced domestically to meet both local and international demand.
Main Results and Challenges:
The primary outcome indicates that the new electricity supply will not meet the rising demand until possibly 2027. If not allocated to other projects, the new supply could suffice for large-scale energy exchange projects by 2030.
In the past two years, there has been a significant demand for electricity from various large-scale consumption sectors, pushing wholesale electricity prices towards those in other Nordic countries. This has sparked a growing interest in developing new electricity generation capacities. However, the preparation of power plant options and their integration into the transmission system often progresses slowly from approval to the framework plan.
For electric fuel production to be efficient, increased support for such projects is needed, or electricity prices must fall below the expected trend. Energy exchange projects face competition for electricity from other large users and subsidized imports. The cost of renewable fuels remains significantly higher than that of fossil fuels.
Accelerating energy transitions in road transport and ships is crucial for Iceland to meet its climate obligations.
In a high forecast scenario, direct electricity use due to energy exchange is projected to reach close to 2.5 terawatt-hours (TWh) and up to 10 TWh by 2050 for the production of electric fuel, matching domestic and international consumption.
Significant enhancements have been made to the energy forecast, including electricity supply and price forecasts, electric fuel feasibility analysis, and improved data and methodology in road transport analyses. Detailed supporting data and more comprehensive analyses will be available on Orkustofnun's website. Additionally, the agency has initiated the regular publication of short-term electricity market outlooks, named electricity indicators, and increased the frequency of data publications for electricity and energy conversion. This data and analysis are crucial for the agency's oversight and decision-making processes.
Access the Energy Forecast's results and assumptions here: Orkustofnun Energy Forecast
Explore an interactive presentation of the Orkuspár's main results here: Orkustofnun Energy Transition 2024
