Geothermal Energy in Iceland

Chavdar Lalov
November 5, 2022

Submitted as coursework for PH240, Stanford University, Fall 2022


Fig. 1: Iceland geothermal facilities. (Source: Wikimedia Commons ).

In this report we analyze some of the environmental and economic benefits of geothermal energy in Iceland. We describe the period up to 2018 as more data has been made available for this period by the Icelandic government. During the 20th century, Iceland developed from one of the poorest economies in Europe, largely depending on imported peat and coal, to a country with a high standard of living where nearly all stationery energy is derived from renewable sources. [1] Geothermal energy played a major role in this transformation (Fig. 1). In 2018 it was responsible for 64% of primary energy and for 30% of electricity production in Iceland. [2,3]

Economic Benefits of Geothermal Energy for Heating

Iceland is a cold country and its heating needs are greater than those in most other countries. Nevertheless, Iceland no longer has to rely on imported fossil fuels for its heating. [1] About 90% percent of the buildings in Iceland are heated with geothermal energy. [4] In 2018 approximately 9000 GWh or 3.24 × 1016 J of geothermal energy were used for space heating. [5] One might wonder how much money Iceland has saved by using geothermal energy instead of oil for heating. An estimate has been made by Orkustofnun, a government agency that is responsible for all energy-related matters in Iceland. Their study compares the cost of hot water to that of oil to yield the same energy for heating. [6] They conclude that in 2018 Iceland has saved about 91 billion Icelandic krona or (assuming 2018 exchange rates) 846 million US dollars by using geothermal energy instead of oil for heating. This is about 3.5% percent of the 2018 Iceland GDP. An additional economic benefit of using geothermal energy is its price stability in contrast to that of oil. [1]

Environmental Benefits

Geothermal energy is more environmentally friendly than fossil fuels as it produces less CO2. [1] The main uses of geothermal energy in Iceland are in space heating and electricity generation. [1] In 2018 about 9000 GWh or 3.24 × × 1016 J of geothermal energy were used for space heating and about 6000 GWh or 2.16 × 1016 J of geothermal energy were used for electricity. [5] Orkustofnun estimated that this resulted in about 8.5 × 106 tonnes of CO2 savings when compared to using oil for these same needs. [5] This results in about 24 tonnes of CO2 savings per capita, a significant amount when you take in mind that the average person in the European Union contributed about 8.5 tonnes in 2018. [7]


Iceland is a world leader in the use of geothermal energy. It has managed to remove its dependence on fossil fuels, an issue most countries in the world are yet to face. Iceland shows that if a country has suitable geothermal energy recourses, exploiting them can give significant economic and environmental benefits.

© Chavdar Lalov. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.


[1] S. Björnsson et al., "Geothermal Development and Research in Iceland," Orkustofnun, February 2010

[2] "Primary Energy Use in Iceland 1940-2020," Orkustofnun, May 2021.

[3] "Development of Electricity Production in Iceland (2021)," Orkustofnun, July 2022.

[4] "Space Heating in Iceland by Energy Source 1952-2020," Orkustofnun, September 2021.

[5] "CO2 Savings Using Renewable Energy Instead of Oil," Orkustofnun, October 2019.

[6] "Economic Benefits of Using Geothermal Energy Instead of Oil For Space Heating in Iceland," Orkustofnun, October 2019.

[7] "Emissions Gap Report 2019," UN Environment Programme, November 2019.