Landsvirkjun leadership change renews debate over energy growth

A dispute over governance at Landsvirkjun has led to chief executive Hörður Arnarson’s departure after 17 years, prompting questions about the state-owned power company’s next chapter, mbl.is columnist Björn Bjarnason writes. He describes the company as the crown jewel of state-owned enterprises, with energy security, economic development and living standards all dependent on decisions about domestic energy resources.

When Landsvirkjun was established in 1965, Sogsvirkjun provided the foundation for its operations. Its first major power station, Búrfell, began producing electricity in 1969, as Iceland’s society was being electrified and the aluminium plant at Straumsvík was being built. The company later opened Sigalda in 1978, Hrauneyjafoss in 1981, Blanda in 1991, Sultartangi in 1999 and Vatnsfell in 2001.

Jóhannes Nordal chaired the board from 1965 to 1995. Bjarnason says Nordal’s contribution shows why political responsibility and professional expertise should not be treated as opposites. The task was to link expertise, financing and construction with the policies of elected representatives, who defended decisions publicly and took responsibility for their results.

The largest step came with the Kárahnjúkar power project. Main construction began in 2003, and Fljótsdalur power station, with a capacity of 690 megawatts, was commissioned in 2007. Development continued with smaller stations: Búðarháls, Þeistareykir and Búrfell II entered service between 2014 and 2018, with a combined capacity of 285 megawatts. Two experimental wind turbines were built in 2013, and the first phase of the Vaðalda wind farm came into operation in September 2026.

During Arnarson’s tenure, Landsvirkjun renegotiated agreements with major customers, reduced its debt and increased dividend payments. A new phase of construction began in autumn 2024, before the current government and the company’s current board took office.

Overall, however, Iceland’s electricity generation has remained at about 19 terawatt-hours a year since 2017, according to the Icelandic Chamber of Commerce’s analysis “Power in the pipeline,” published on October 29. As the population has grown, electricity production per person has fallen. Increasing the capacity of individual power stations does not necessarily bring a corresponding rise in annual generation, the analysis says.

The chamber says about 150 undeveloped power project options have been mapped under the national energy development framework, with a combined potential output of more than 80 terawatt-hours a year. They cannot all be developed at the same time, and some are in a protected category. The energy resources exist, Bjarnason writes; the challenge is how decisions about their use are made.

The third phase of the framework was approved by Iceland’s parliament in 2022, nine years after the project committee began its work and six years after it completed its final report. The chamber says appeals and failures to observe legally mandated deadlines delay projects.

The transmission system is another obstacle. In 2024, 18 of 26 connection points could accept no more than 10 megawatts of additional demand, according to the analysis. Increasing electricity generation has limited value if the power cannot reach users.

The chamber proposes scrapping the framework and processing power projects through the standard permitting system under laws covering environmental assessment, planning and nature conservation. It also calls for a single appeals process, transmission infrastructure to be built ahead of demand, and priority for wind power near reservoirs. The chamber wants a public target of 43 terawatt-hours of electricity production by 2040, more than double the current level.