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A platform for trade in electricity between electricity suppliers

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Landsvirkjun does not sell its energy directly to homes or small businesses. Landsvirkjun sells electricity on the wholesale market to suppliers who then sell the electricity to end users. These suppliers buy some of their electricity from Landsvirkjun but also generate part of their supply at their own power stations. Landsvirkjun sells 80% of its electricity directly to clients in energy intensive industry and 20% is sold on the wholesale market.

Landsvirkjun completed six large power purchase contracts with suppliers in 2005. The contracts were signed in the wake of the new Electricity Act. The contracts were valid for one, five, seven and twelve years. The twelve year contracts will expire shortly (the contracts included the supply of over 1 TWh of energy). The suppliers include Orkusalan, ON Power, HS Orka, Fallorka, Westfjord Power Company and Rafveita Reyðarfjarðar.

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New arrangement for power agreements with suppliers

Landsvirkjun has been working on the development of new sales contracts with energy suppliers to households and businesses. This new type of contract took effect at the beginning of 2017. The new arrangement is an important juncture for Landsvirkjun as the contracts completed in 2005 will shortly expire after being valid for 12 years.

The new contractual arrangement means that suppliers are no longer bound to purchase energy for a one-year period therefore increasing the Company’s ability to sell power at shorter notice.

Electricity consumption is generally lower during the summer months and suppliers can achieve greater efficiency by purchasing less power each time. Landsvirkjun can also use this as an opportunity to improve the scheduling of maintenance, enabling the Company to sell power at shorter notice to those who need it.

The new arrangement will improve the utilisation of energy resources in Iceland, enabling energy companies to be more flexible and therefore better able to respond to any operational changes.

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Lower price average

According to projections supplied by energy suppliers to households and businesses, the average price decreased by 1.6% (fixed prices) in 2017 as a result of the introduction of these new contracts.

Energy purchase savings

Suppliers are no longer bound to purchase energy for a one-year period from Landsvirkjun. This will lead to increased energy efficiency as well as lower overall costs to the customer.

Short-term purchases support increased efficiency in energy utilisation

Increased short-term purchases and decreased energy purchase commitments will allow Landsvirkjun’s customers to fully utilise the energy available within the energy system which supports increased efficiency in energy utilisation. This also enables energy companies to be more flexible. 

Utilising the summer period

Suppliers need significantly less energy during the summer months. Landsvirkjun can use this period to carry out planned maintenance, enabling them to sell power at shorter notice.

Energy supply

Projections show that the amount of energy sold to the wholesale market is expected to decrease slightly. Landsvirkjun sells a total of 2 TWh to suppliers on an annual basis.

More information on the wholesale market can be accessed on Landsvirkjun’s website