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TheStreet Open House

Iceland's Full Steam Ahead on Energy Saving

REYKJAVIC -- Iceland is proof positive that being green and curbing global warming doesn't necessarily require higher costs and lost personal comfort.

This frosty island nation that's just a five-hour flight from New York has been weaning itself from its fossil-fuel diet for more than 30 years.

The results: cheap electricity that's so abundant that the country doesn't know what to do with it all, streamlined heating that's almost entirely renewable, an expanding industrial sector and a high quality of life that centers on spas and outdoor pools.

When the oil crisis hit in the 1970s, several world leaders, including Richard Nixon , vowed to make their countries energy self-sufficient and reduce their vulnerability to the whims of OPEC. But when oil prices softened again, unlike us, Icelanders didn't leave their resolve in the dust of their SUVs (though they like their SUVs as much as we do).

Today, 72% of the country's energy -- pretty much all its electricity and heat -- comes from drilled geothermal wells or hydroelectric plants. Cars, buses, trucks and ships are the only things consuming fossil fuel, and the nation's business and academic leaders are doing their best to find a solution to that as well.

The Icelanders themselves use only a quarter of the electricity they produce and, according to Ingibjörg Sólrún Gísladóttir, minister of foreign affairs and external trade , prices fell after the conversion from fossil fuel. Conserving energy isn't something people here trouble themselves with.

Since geothermal pressure and glacial waterpower are not easily exported, Icelanders have had to be creative to monetize the 75% of electricity that they don't need. One of the earliest solutions was to invite electricity-intensive industries to move their manufacturing facilities north.

Aluminum companies in particular have eagerly accepted the invitation. Alcan (AL) and Alcoa (AA), among others, use more than half of the nation's green electricity for their smelters, sometimes from power plants built just for them.

Gísladóttir wasn't able to quantify how many new jobs these plants have created, but she said in an interview that in small towns like Reydarfjordur, in eastern Iceland, where Alcoa recently opened its Fjardaál plant, populations that had been shrinking are growing again and new housing and businesses are going up.

No matter how renewable the electricity might be, of course, smelting and power plants are still hulking industrial facilities and don't enhance otherwise pristine and wide open landscape. Regular Icelanders -- especially those in Reykjavic who head out into the wide-open spaces to commune with nature rather than to earn a living -- aren't sure how many more of these businesses they want.

So the nation is now building data centers, hoping to attract technology companies that need inexpensive and temperate places to back up their work. Most of the power in such centers goes toward keeping servers from overheating. Cooling systems don't need to work as hard in a place where the temperature rarely reaches into the 60s. And if the power the centers do need comes from a source that's cheap and green then all the better, the Icelanders argue.

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