Proposed Iceland/United Kingdom power link-an indepth analysis of issues and returns

This paper examines issues and makes an indepth engineering analysis of the profit which would be expected from electricity from Iceland using possible scenarios considering variables which could impact on the viability of the link. Considered is fluctuation of pool purchase price over half-hour periods of a complete year, discount rates, nonfossil fuel premiums, possible price movements in future years, and carbon taxes which it is expected could be imposed by the time the link is operational, as well as capital which is tied up during construction periods, availability of plant, and transmission losses etc. It is concluded that the link is viable for all but the very worst scenarios, but if development costs could be reduced by 10% or more the link would be more attractive to developers and investors on account of uncertainty and risk involved, unless EC and governmental guarantees are forthcoming. These conclusions are in agreement with an independent assessment which has recently been made by an International Energy Consulting Group