Our volcanic island, not connected to larger continental energy grids, is particularly vulnerable to developments in the oil business. It has no carbon sources, no fossilized deposits, and no biomass in large enough quantities – though there are abundant geothermal and hydropower sources, as well as strong winds, marine currents, high waves and tides.

Iceland is now taking a new initiative, involving hydrogen made by electrolysis from water using renewable energy, which could demonstrate the performance of elements that might be applicable in energy systems even in very different situations.

During the 1970s oil crisis, Bragi Arnason, a professor of chemistry at the University of Iceland, pointed out that it should be possible to produce hydrogen from freshwater, using hydropower to generate the needed electricity. This would then be used to run transport on land and the fishing fleet. His ideas were noticed, but not implemented. Yet Professor Arnason continued to introduce his students to this idea, to calculate the best production options and demonstrate ideas for small power plants servicing different regions of the country with hydrogen.

Rare opportunity
From the 1970s to the 1990s, the country’s hot springs were exploited on a vast scale and piped and distributed for domestic heating and to some industries. The first geothermal electric power plant was erected at Krafla, a huge investment which brought more knowledge than power in the first stages. Even small communities and isolated farms were connected to the national grid and heated by local hot springs. These developments gave a rare opportunity to experiment with renewable energy, energy efficiency and new technologies adapted to local situations. Icelandic technicians learned much by executing such large ‘hands on’ experiments, an experience that is now a unique asset. In Iceland heating is provided almost exclusively from sustainably managed geothermal sources and electricity from hydropower plants. Oil is only used for transport and the fishing fleet, amounting to about 30 per cent of the total energy use. If hydrogen, a local fuel made from local renewable sources, could be used as a substitute for it, then the whole energy economy could become self-providing.

In 1999 Icelandic New Energy, a joint venture private company, was founded by the most important energy companies, local investment funds and research institutes. Its mission is to test hydrogen as an energy carrier like oil. It also draws support from other shareholders – Norsk Hydro, Shell Hydrogen, DaimlerChrysler – which want to test their technological developments and extrapolate the results to an image of a society run on hydrogen. In addition, the European Commission is supporting the first projects.

Last April the first hydrogen fuel station was inaugurated on the outskirts of Reykjavik, complete with see-through panels displaying explanations for the public. In October, three hydrogen fuel-cell buses started their daily route between the city centre and the eastern suburbs. Their inauguration was celebrated at a public festival where families could ride in the buses and take a close look at the fuel station.

Harsh test
The test is expected to be harsh. Winter winds carry salt from the sea. Temperatures easily vary between -10 and +10°C in the same day. Driving conditions include snow cover, icy roads, wet highways and even some un-asphalted gravel strips. Early morning darkness gives way to dusk at noon, and the buses’ exhaust steam may freeze rapidly.

During this test period the Icelandic Technical Institute will measure the composition of the emissions from the fuel-cell buses and compare it with those of similar diesel-driven buses on the same route. Life cycle analyses will compare all aspects of both types of fuel and bus. And passengers, conductors, the maintenance team and the general public will be asked about their attitudes towards energy issues and the testing of hydrogen technology. Some people associate hydrogen with explosions or accidents, but in Iceland the general attitude is positive.

In 2003, three hydrogen fuel-cell buses began running between Reykjavik city centre and the eastern suburbs

In September, Icelandic New Energy donated educational material on multimedia CDs – supported by private businesses and the European Commission – to all colleges in Iceland. During the summer the first international PhD course on hydrogen infrastructure was held in Reykjavik, supported by the Nordic Research Fund.

Iceland’s hydrogen initiatives have met respect from abroad. There is a surge of interest in the possibilities of using hydrogen as an energy carrier.

The hydrogen economy will need to compete with an already well-established fuel industry that has had 100 years to settle in. Hydrogen has been widely used in industry for a long time, for example in oil refineries and food processing. But because of accidents involving (although not caused by) large quantities of the gas in the past, the new hydrogen fuel technology has to follow extremely strict security procedures and safety protocols.

Pricing right
As long as the costs of such external factors are applied only to hydrogen, establishing it in the competitive fuel market will be tough. But if all nations were to accept the external costs of using fossil fuels – such as damage from air pollution and climate change – and price oil and coal accordingly, this would favour the use of electricity from renewable energy, cleaner fuels and higher efficiency within the current system.

It is here hydrogen is competitive. It does not release particles that cause asthma and lung disease or emit greenhouse gases. It does not pollute historical and cultural monuments with soot. It does not spoil groundwater or cling to clothes or car interiors.

Dr Joan Ogden and her colleagues at Princeton University have shown through comparative examples that if health care costs, the cost of climate change and the cost of securing supplies of fossil fuels are incorporated in the life cycle cost of typical vehicles, then continuing with our petrol-powered cars is the most expensive way to run our transport systems. By contrast, with the cost reductions brought by moderate mass production, the vehicles using fuel cells and hydrogen from renewable sources pose the lowest foreseen life cycle costs.