Presentation on the regulatory framework for geothermal energy development and utilisation in Iceland at the conference of JESDER, the Turkish Geothermal Operators Association in Ankara, 8 February 2017

1. ICELAND
GEOTHERMAL ENERGY
REGULATORY FRAMEWORK
JESDER
FEBRUARY 2017

2. ICELAND/ TURKEY
SIZE OF THE TWO COUNTRIES
103,000 km2
337,000 population
783,562 km2
74,900,000 population
Source: TheTruesize.com

3. ICELAND
A SHORT OVERVIEW
Size of country 103,000 km2
Population 337,500
Years of Geothermal Power production 47 years (1969)
Installed capacity (geothermal)* 665 MWe
Installed capacity of other sources* 2,106 MWe
Electricity production from geothermal* 5,003 GWh
Electricity production from other sources* 13,795 GWh
Proportional Production of Electricity by Source*
Hydro
73.30%
Geothermal
26.60%
Wind
0.10%
Petroleum
0.00%
* 2015

4. ICELAND
GEOTHERMAL POWER PLANTS
Bjarnarflag 3.2 MW Húsavík 2 MW
Reykjanes 120 MWHellisheidi 303 MW
Svartsengi 76.4 MW
Theistareykir 45 MW+
Krafla 60 MWNesjavellir 120 MW
To be
replaced
Under
construction
Not
operational

5. ICELAND
COAL SMOKE ABOVE REYKJAVIK 1940

6. ICELAND
REYKJAVIK GEOTHERMAL WELLS FOR DISTRICT HEATING TODAY

7. TOP 10 GEOTHERMAL COUNTRIES
INSTALLED CAPACITY (FEB 2017)
835
537
665
676
821
926
944
980
1,450
1,868
3,567
0 500 1000 1500 2000 2500 3000 3500
Other
Japan
Iceland
Kenya
Turkey
Mexico
Italy
New Zealand
Indonesia
Philippines
United States
Source: TGE Research (2017), GEA (2016), IGA (2015), Enerji Atlasi (2017)

8. TURKEY GEOTHERMAL DEVELOPMENT
INSTALLED POWER GENERATION CAPACITY 1984-2017
15 15 23 23 30
77 94 114 162
311 405
624
775 821
66
405
580
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Source: Enerji Atlasi (2017), TGE Research (2017)

9. ICELAND
GEOTHERMAL
RESOURCES
OWNERSHIP AND ACCESS

10. ICELAND
GEOTHERMAL RESOURCES

11. ICELAND – GEOTHERMAL RESOURCES
RULES ON OWNERSHIP
• Act on the survey and utilization of ground resources no. 57/1998 (“Natural
Resources Act”).
• Ownership of resources in the ground is attached to private land.
• Resources in public land are property of the State of Iceland.
• Resources defined as “any element, compound and energy that can be
extracted from the earth, whether in solid, liquid or gaseous form,
regardless of the temperature at which they may be found”
• As of June 7th 2008, geothermal resources and ground water resources owned
by the State or municipalities can no longer be sold to private entities.
• Private entities or individuals are however generally not restricted from
purchasing, selling or owning geothermal resources on privately owned
land.

12. ICELAND - GEOTHERMAL RESOURCES
ACCESS TO RESOURCES/ FOREIGN OWNERSHIP
• National Energy Authority (“NEA”) is permitted to take the initiative in and/or give
instructions for the exploration of resources in the ground,
• NEA may permit other private or public parties to explore, in which case an
exploration license shall be issued to such other parties.
• If, however, the landowner holds a valid exploration license, the NEA cannot
interfere and the landowner can either explore himself or allow third parties to
explore, without interference.
• A landowner is required to grant exploration license holders unrestricted access
to the private land involved.
• Only Icelandic citizens and other Icelandic persons are permitted to own
energy exploitation rights for other than domestic use of geothermal. The same
applies to enterprises which produce or distribute energy. Exemption for
individuals and legal persons domiciled in the European Economic Area.

13. ICELAND
DRILLING & RISK MITIGATION

14. ICELAND - GEOTHERMAL RESOURCES
DRILLING SUPPORT AND RISK MITIGATION
• Early 1960s – Geothermal Fund was established, now National Energy Fund
• Goal of fund:
1. To provide low-interest loans to municipalities, firms or individuals for geothermal
drilling both for public supply, use in horticulture and similar economic activities and
heating of individual homes, especially in rural areas
2. Sharing by the state of risk of geothermal development undertaken by developers.
• Provision that if an attempt to develop field is unsuccessful loan may be converted into
a grant and does not have to be repaid
• Loans for drilling provided by the energy fund normally cover 60% of total drilling
costs, grants up to 50%
• Arrangement has been instrumental over years in furthering geothermal development in
Iceland
• Research on resources by National Energy Authority
• 1940s State Drilling Company was established to drill, privatised in 1986.
• Now Iceland Drilling is a private company is focusing on high heat drilling in Iceland and
internationally, while there are several small drillers focused on lower heat and shallower
drilling for heating project across Iceland.
• Geoscience department of Authority was spin out in 2003 - Iceland GeoSurvey (ÍSOR)

15. ICELAND
GEOTHERMAL LICENSING

16. ICELAND - GEOTHERMAL LICENSING
REQUIRED LICENSES
• Act on Natural Resources requires
- Exploration License
- Exploitation License
- Power Plant License.
• Landowners may however without any license
utilize geothermal energy extracted from the
ground on their private land for household
and agricultural use, including for
greenhouse cultivation, industry and
cottage industry up to 3.5 MW
• A landowner must notify the NEA of proposed
drilling or other major undertakings for such
purposes. The NEA may impose conditions
on landowners as necessary for safety or
technical reasons.

17. ICELAND – GEOTHERMAL LICENSING
ROLE & VOICE OF LANDOWNER IN LICENSING PROCEDURE
• Landowner can provide written observations when
reviewing applications for a license, but NEA is not
bound by observations from landowner – but take into
consideration
• Before extraction on landowners’s land – agreement
needs to be reached on compensation
• If no agreement is reached a process for
expropriation can be sought – guaranteeing public
interest, legal basis and full compensation for
expropriation

18. ICELAND – GEOTHERMAL LICENSING
CRITERIA FOR LICENSE – REQUIRED APPLICATION ELEMENTS
Exploration Exploitation
Purpose of license Purpose of license
Detailed geographical boundaries Detailed geographical boundaries
Time schedule for execution of exploration Time schedule for execution of exploration
Report on plausible effect on and around are of license Report on plausible effect on and around are of license
Exploration schedule, incl. date of commencement Exploration schedule, incl. date of commencement
Different stages and conclusion Different stages and conclusion
Plan for drilling & other activities incl. clean-up of work area
and altered land
Plan for drilling & other activities incl. clean-up of work area
and altered land
Information on quantity and rate of utilization of resource
Liability Insurance
information on environmental aspects incl. final decision on
behalf of the administrative body of environmental matters.
Duration no maximum defined but usually 1-15 years Duration up to 65 years

19. ICELAND – GEOTHERMAL LICENSING
CRITERIA FOR LICENSE – REQUIRED APPLICATION ELEMENTS
Power Plant
Independent, legal and taxable entities, unless <100 kW capacity
Conclusion of research made for plant
Description of plant, incl. maps, plans, stats and demarcation of area
Draft timeline for construction, planned completion and start of operation
Budget for construction of plant
Agreement with transmission and/ or distribution system operator
Information on agreement with landowner on compensation for resource
Information on environmental factor of plant and influence on relevant energy resource
Environmental Impact Assessment, if required by law
Information on other relevant elements and whether plant is fully consistence with existing
town and country planning/ zoning. – and sufficient funding for plant
Duration: no maximum, but license expires 10 years if the license holder has not begun
development at that time and 15 years if a power plant has been constructed but not
commenced operating.

20. ICELAND – GEOTHERMAL LICENSING
GENERAL TERMS OF LICENSE
Exploration & Exploitation Power Plant
Duration of license, commencement of operation and by what
time it should be completed
Size of plant and definition of relevant geographical area
Definition of relevant geographical area Information on when operation shall commence
Resources covered by license, incl. quantity and rate of
utilization
Reporting obligations (NEA and transmission system
operator) for performance of respective roles
Approval by NEA of preliminary drawings of any proposed facility Safety and environmental protection measures
Reporting obligations of license holder
Conditions relating to technical and financial capacity of
license holder
Safety and environmental protection measures
Disposal of facilities and equipment when use is
discontinued
Purchase of insurance for damage
Other matters pertaining to conditions of license and
obligations of license holder
Surveillance and cost of surveillance
Payment of license feet to meet cost of preparation and issue of
license
How extraction of facilities and equipment should be carried out
after expiration of license
Clean up of work areas and land altered during exploration/
exploitation

21. ICELAND – GEOTHERMAL LICENSING
GENERAL TERMS OF LICENSE
Exploration Exploitation Power Plant
Exploration licenses granted on basis of
Natural Resources Act
Exploitation license granted on basis of
Natural Resources Act
Power Plant licenses granted on
basis of Electricity Act
Does not grant pre-emptive right for
Exploitation license
Landowner shall previously have been
granted exploration license
Does not automatically convert into
exploitation license
Holder of exploration license for district
heating utility holds pre-emptive right with
regards to exploitation license for up to 2
years after exploration license terminates

22. ICELAND
SURVEILLANCE

23. ICELAND – GEOTHERMAL LICENSES
SURVEILLANCE
Exploration & Exploitation License
• Monitoring based on Natural Resources Act
• Purpose is to secure sustainable utilissation of natural resources, ensure resources are
not contaimnated or limited in any way for future use.
• Responsibility of monitoring with National Energy Authority
• Protection & monitoriing subject to Nature Conservation Act
• Monitoring largely conducted by collecting data to be delivered by licensee
• No regular onsite inspections or visits
Power Plant Licenses
• Monitoring based on Electricity Act
• Purpose is to secure sustainable utilissation of natural resources, ensure resources are
not contaimnated or limited in any way for future use.
• Compliance with Competition Authorities for vertically integrated companies
• Monitoring under Act on Measures, Weights and Accreditations

24. ICELAND – GEOTHERMAL LICENSES
REQUIREMENT FOR INFORMATION SUBMISSION
Exploration
• Report with all the results of exploration as well as information on the nature and size of
the resource, no later than 1 May every year and at end of license term
• Information extent: exploration schedule sets the frame for information due.
• Any drilling activity requires keeping diary describing the location of the hole, sedimentary
stratas, type and depth, when water enters the hole, temperature and other related
information.
• License holders shall hand over a copy of the diary within a month from the drilling of the
hole.
• The NEA can demand that specimens of rock and soil from the drilling be preserved.

25. ICELAND – GEOTHERMAL LICENSES
REQUIREMENT FOR INFORMATION SUBMISSION
Exploitation
• Report on total quantity and estimated value of extracted resource and other information indicating
situation of resource every 1 May
• License holders shall make sure that the know-how of the resource and experience gathered during
exploitation is accessible and transparent both to the public and for academic purposes.
• Any drilling activity requires keeping diary describing the location of the hole, sedimentary stratas, type
and depth, when water enters the hole, temperature and other related information.
• License holders shall hand over a copy of the diary within a month from the drilling of the hole.
• The NEA can demand that specimens of rock and soil from the drilling be preserved.
• Information on extraction of energy and mass, release of liquid and gases, pressure draw down,
chemical changes and earthquake measurements shall be public within a year. Information and data to
be handed in regarding the nature and size of the natural resource and the response of the geothermal
system to production shall be made public within 5 years from the making of the data.

26. ICELAND – GEOTHERMAL LICENSES
REQUIREMENT FOR INFORMATION SUBMISSION
Exploitation data to be handed in (total monthly):
• quantity of geothermal liquid extracted from the system (in kg) and the extraction per year (in Tg);
• quantity of geothermal liquid extracted from each borehole on area (in kg);
• quantity of liquid drawn down into the system (in kg) and the draw down per year (in Tg);
• reading of the temperature of water drawn down into the system (in ̊C);
• measurements of the water level of the boreholes on the area and can be measured (in m);
• measurements of pressure or pressure draw down into the system (in MPa/ bar);
• measurements made on the warmth of the borehole liquid from each borehole exploited on the area in
question (in kJ/kg) and the relevant data supporting it;
• primary utilization from the well (in PJ/a). Primary geothermal energy is the energy that is re- leased
from the geothermal liquid on its way from the original state to the referred state at 15 ̊C at 1 bara;
• primary utilization of geothermal minus the primary energy of liquid drawn down into the same geo-
thermal well within the same period;
• heat and pressure measurements in bore- holes on the geothermal area;
• chemical analysis on geothermal water (and steam where applicable);• results of simulator
calculations made for the geothermal system;
• measurements made to monitor the changes in the geothermal system;
• information on new boreholes on the exploitation area; and
• results from new boreholes regarding the nature of the geothermal system.

27. ICELAND – GEOTHERMAL LICENSES
REQUIREMENT FOR INFORMATION SUBMISSION
Power Plant
• quantity of geothermal liquid extracted from the system (in kg) and the extraction per year (in Tg);
• quantity of geothermal liquid extracted from each borehole on area (in kg);
• quantity of liquid drawn down into the system (in kg) and the draw down per year (in Tg);
• reading of the temperature of water drawn down into the system (in ̊C);
• measurements of the water level of the boreholes on the area and can be measured (in m);
• measurements of pressure or pressure draw down into the system (in MPa/ bar);
• measurements made on the warmth of the borehole liquid from each borehole exploited on the area in
question (in kJ/kg) and the relevant data supporting it;
• primary utilization from the well (in PJ/a). Primary geothermal energy is the energy that is re- leased
from the geothermal liquid on its way from the original state to the referred state at 15 ̊C at 1 bara;
• primary utilization of geothermal minus the primary energy of liquid drawn down into the same geo-
thermal well within the same period;
• heat and pressure measurements in bore- holes on the geothermal area;
• chemical analysis on geothermal water (and steam where applicable);
• results of simulator calculations made for the geothermal system;
• measurements made to monitor the changes in the geothermal system;
• information on new boreholes on the exploitation area; and
• results from new boreholes regarding the nature of the geothermal system

28. ICELAND
POWER PURCHASE &
INCENTIVES

29. ICELAND – POWER PLANTS
POWER PURCHASE AGREEMENTS
PPA General terms
• No regulation under Icelandic law
• If power producer is owned by the Icelandic state and/ or municipalities the agreement is
subject to notification and approval by the EFTA Surveillance Authority (“ESA”) in order to
ensure that the agreement does not entail state aid
• Under ESA regulation it has been to assess whether the PPA made by a publicly owned
company is made on terms acceptable to a private market investor and whether the sale
of electricity would be expected to be sufficiently pro table for a private operator.
• For a new facility the basis for ESA ́s examination is whether the power producer obtains
acceptable return on the new investment (the power plant).
Duration
• Duration not regulated – duration of existing PPA’s approved under ESA rules range from 15-40 years
• Duration of wholesale agreements to retail companies usually from 5-10 years

30. ICELAND – POWER PLANTS
INCENTIVES
Incentives for geothermal development
• There are no specific incentives for geothermal development/ investment
• General incentives for business investments are though available, e.g. in the form of derogations from
taxes and charges, a fixed income tax rate for a period of 10 years as well as exemptions from
customs and excise duties on importation.
• The incentives are thus provided for the investment and not through the PPA.

31. ICELAND
ENVIRONMENTAL IMPACT
ASSESSMENT

32. ICELAND – GEOTHERMAL DEVELOPMENT
ENVIRONMENTAL IMPACT ASSESSMENT
Subject to Environmental Impact Assessment (EIA)
• “when utilization could have significant environmental effects due to its scope, nature or
location.
• Governed by the Environmental Impact Act, nr. 106/2000.
• Developer shall notify the National Planning Agency (“NPA”) prior to utilizing geo- thermal energy
EIA scoping document proposal - information
• the project site and alternatives which could be considered and provide information on
• the planning of the project site;
• how the project will comply with development plans;
• what aspects of the project and of the environment should be emphasised;
• description of data already available; and
• a plan for making information available and for public consultation.

33. ICELAND – GEOTHERMAL DEVELOPMENT
ENVIRONMENTAL IMPACT ASSESSMENT
Environmental Impact Assessment (EIA) - Report
• Substance of report consistent to scoping document
• Specifying
• Effects, cumulative and synergic, direct and indirect which the proposed project and activities
may have on the environment and the interaction of individual environmental factors.
• Description of aspects of the proposed project regarded as most likely to have an impact upon the
environment, including its scale, design and location, compliance with development plans, proposed
mitigating measures and proposals for environmental monitoring where appropriate.
Other licenses required
• All major projects with potential effect on the environment and may change its appearance are subject
to a development license from the relevant municipality subject to the Act on Planning no. 123/2010.
• All power plants must apply for a building permit from the NPA in accordance with the Act on
Constructions no. 160/2002.

34. IGC TURKEY 2017
THE CONGRESS IN THE HEART OF THE GEOTHERMAL INDUSTRY IN
TURKEY.
2nd International Geothermal Conference IGC Turkey to be held 22-24 May 2017 in Izmir.
Izmir/ Turkey – 22-24 May 2017
Contact us for details on how to get involved via eren@jeotermalhaberler.com
Co-Host

35. THINKGEOENERGY
LEADING IN NEWS AND RESEARCH ON
GEOTHERMAL ENERGY
Focus on power generation and direct use … also internationally in Spanish, in
Turkish and Indonesia.
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JeotermalHaberler.com

36. CONTACT
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ALEXANDER RICHTER
+354 618 5304
ALEX@THINKGEOENERGY.CO
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