High grid charges have made electricity more expensive than oil at Vinnslustöðvarinnar’s fishmeal plant in Vestmannaeyjar, forcing the company to reconsider its long-standing energy transition.
VSV says recent tariff changes by electricity provider Landsnet mean producing steam with electricity now costs more than three times as much as using oil. The shift undermines investments made since 2002 to run the plant on electric power only.
The company warns that the current pricing makes further energy transition financially impossible.
Power costs triple after tariff change
The fishmeal plant uses steam to supply heat to production. With oil, energy costs are around ISK 10–12 per kWh. With electricity, after the latest grid tariff increases, costs exceed ISK 30 per kWh.
As a result, electricity transmission costs for the plant’s electric boiler have risen by about 500%. VSV estimates that this adds ISK 400–500 million in extra costs per year, equivalent to roughly EUR 2.6–3.3 million.
Cheaper to burn oil than use green power
VSV says it is now ISK 400–500 million cheaper per year to produce steam with imported oil than with Icelandic renewable electricity. The company calls this outcome the opposite of national goals on energy transition and climate policy.
It adds that such costs would weaken competitiveness and make the plant unprofitable if run solely on electricity.
Cable upgrade welcome, pricing criticised
VSV supports the new power cables to Vestmannaeyjar, saying the upgrade is needed to replace old, faulty lines and improve supply security.
However, it estimates the cables may have cost ISK 3–4 billion in total, or about EUR 20–27 million. Based on current charges, Landsnet could recover that investment in four to five years, despite an expected cable lifespan of 15–25 years.
VSV argues the tariff model does not reflect seasonal, flexible industrial use and risks pushing companies away from green energy.