Iceland inks US$250 million deal to develop geothermal energy for China

Iceland signed a US$250 million deal with China to provide technology for clean, geothermal energy in Xiong'an, near Beijing.
Iceland signed a US$250 million deal with China to provide technology for clean, geothermal energy in Xiong'an, near Beijing.PHOTO: ALPHONSUS CHERN

REYKJAVIK (BLOOMBERG) - A tiny north European island known best for icebergs, geysers and volcanoes is helping China fight pollution.

Iceland just signed the biggest deal in its history to provide the world's second-largest economy with the technology it needs to deliver clean, geothermal heat.

The agreement affects up to 15 million people in Xiong'an, a new economic area south-west of Beijing established by President Xi Jinping.

With more than 100 volcanoes, Iceland has become a world leader in geothermal technology.

The heat produced from the Earth's core not only does not pollute, but is also cheap. So cheap, in fact, that Iceland can afford to heat sidewalks in its biggest cities.

The China deal - a joint venture between Arctic Green Energy (AGE) and Sinopec Green Energy that comes with US$250 million (S$328.8 million) in loans from the Asian Development Bank - shows that technology produced in "small communities can be scaled up in the largest countries in the world," said Olafur Ragnar Grimsson, a former Icelandic president who back in 2002 showed Xi's predecessor the first geothermal power plant ever seen by a Chinese head of state.

Iceland's deal with China comes as European authorities fret over the decision by the National People's Congress to make Xi a president for life.

The European Commission in Brussels is now considering how best to protect its strategic interests from foreign takeovers by state-owned companies.

ARCTIC GREEN

Energy Chairman Haukur Hardarson says his company's share of the Chinese geothermal market (heatpumps excluded) is about 35 per cent.

Based on the demand coming from Asia, he says AGE could service about five times as many people in three-four years as it does now.

Scientists from Iceland and China are also helping each other study climate change. Grimsson says there's "a direct relationship" between extreme weather patterns in China and the melting of the Arctic.

"When I started my presidency, China was a peripheral issue," Grimsson said. "By the time I left office, in 2016, China had moved to centre stage in our cooperation and in our global reach."