Energy: Boiling Point

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A New Mission
Over the years, Icelandic engineers have learned which temperature enables underground liquids to power a turbine, how to manage a boiling cavern's chemistry, and how to keep power plants sustainable by "resting" boreholes to give the source time to replenish its heat. While the ongoing costs of a geothermal power plant are low — Krafla, for example, has only 15 full-time employees — the start-up technology needed to extract heat from a few miles beneath the earth's surface and convert it to electricity is not cheap. By some estimates, conducting the necessary geologic surveys and exploratory drilling for one plant can take up to eight years and $20 million before the turbines start turning. "The high cost is a barrier to everybody," says Karl Gawell, executive director of the U.S.-based Geothermal Energy Association.

That big, high-risk investment will only come down with the development of better technology. Gawell sees Icelandic investments abroad as an important way to develop the sector: "Icelanders have been a significant part of making the strategic investments you need to make this happen."

Perhaps not surprisingly, in Reykjavik talk about geothermal power can sometimes take an evangelical turn. One afternoon in May, in the slick offices of Reykjavik Energy, Gudmundur Thoroddsson points out a World Bank study that lists electricity above corruption, crime and access to capital as the biggest obstacle to budding entrepreneurs in Africa. "It saddens me when I come to a place where you have a big oil-driven generator sitting on top of a geothermal field and you're paying three or four times the cost [for energy]," says Thoroddsson, the former CEO of Reykjavik Energy's investment arm.

The company is focusing its early investments on East Africa, an area with vast amounts of underground heat and little means to tap it. The company plans to start exploratory drilling next year to build a geothermal plant in Djibouti. In July, the government of the Philippines awarded a Filipino-Icelandic consortium exploration rights to half of Biliran Island in the country's south. Twenty years ago, three boreholes were drilled on Biliran and then abandoned when the underground liquid at the other end of the drill was found to be too acidic. Since then, the industry has learned how to address that problem by adding chemicals to the mix, and geologic exploration is underway again. "I think a lot of investors trust Icelanders for what they're doing. They understand the risks involved," says Zammy Sarmiento, president of Biliran Geothermal Inc., the group that won the concession.

Geothermal has its share of critics. The power plants release low levels of carbon dioxide, nitric oxide and sulfur, and some people worry that drilling holes deep into the earth destabilizes the land around it. This summer, police arrested a group of environmental activists who had chained themselves to machinery at a drill site near the nation's largest power station outside Reykjavik to protest the plans for a new aluminum factory. Iceland's government has responded to such criticisms by trying to diversify and attract companies like Microsoft, Cisco and Yahoo!, all of which have discussed building massive server farms on the island.

To ensure that geothermal energy powers Iceland's future, the country is boosting the number of university programs dedicated to the subject. It's essential to make Icelanders as enthusiastic about steam as they have been about the finance industry over the past few years. On a blustery Sunday afternoon in May, a circle of visitors in all-weather jackets waits in front of the Strokkur geyser, a popular tourist attraction in southwest Iceland. Among the crowd is a busload of Harvard M.B.A. students fresh from their exams. Georg Ludviksson, an Icelandic grad who helped organize the tour, said he wasn't sure what he was going to do with his new degree, but returning home to work in geothermal investment was a real possibility. "There could be a big opportunity there," he says. His country would be happy to have him.