Rising electricity prices have thrown significant investments in Vinnslustöðin’s fishmeal plant in Vestmannaeyjar into doubt, forcing the company to switch back to oil despite years of electrification efforts, the plant’s manager says.
Electricity, once a cheaper and cleaner option, has become several times more expensive than oil under a new pricing and transmission system. As a result, the fishmeal plant will use almost no electricity for energy production in the coming year, according to plant manager Unnar Hólm Ólafsson.
Electrification plans put on hold
The plant has invested in electrification since 2002, running on a mix of electricity and oil. It built boiler facilities, purchased electric boilers, and prepared infrastructure to transition entirely to electricity. A second electric boiler is installed but has never been fully connected due to power supply and transmission limitations.
The long-term plan was full electrification, with power demand projected to rise to 12–15 megawatts from the current 5–8 megawatts. That plan is now effectively shelved, Unnar says.
Sharp price rises and higher grid costs
Electricity prices have risen by up to 100% since 2023. Additionally, new rules mean power prices and transmission fees now change monthly. The plant is also being moved from unstable to stable grid transmission, which will lead to further cost increases and uncertainty.
Unnar says transmission costs alone could be up to 500% higher at first. Given the large gap between electricity and oil prices, the plant has little choice but to burn oil.
Higher emissions and new investments
At full output, the plant can burn 20,000–30,000 litres of oil per day. Oil emits 10–15 times more CO₂ than electricity, sharply increasing the plant’s carbon footprint.
Unnar says it is troubling that imported oil is now cheaper than domestic electricity. He warns that the plant may need to invest further in oil-fired boilers, which would conflict with its climate goals and years of planning.