Risk Management in an Electricity Transmission Project between Iceland and the UK

Abstract

In recent years, energy is transmitted in the form of electricity in some parts of the world. Furthermore, all member states of the European Union (EU) have a legal obligation to ensure that 20% of their community energy consumption comes from renewable sources by 2020. Therefore, there is a great demand for electricity derived from renewable sources while at the same time there are non-negligible risks in electricity transmission between nations. Addressing these risks is thus of great importance. Under such circumstances, the national power company in Iceland is investigating the possibility of installing a series of 800–1,200 MW high-voltage direct current (HVDC) submarine power cables of over a span of 1,000 km in an effort to deliver more than 5 TWh of renewable electricity to the UK each year. In order to accelerate this project, the company must employ measures of risk prevention and/or mitigation. This study aims at revealing the potential risks of this project (called IceLink) using qualitative analysis. Thus far, there seems to be very few similar studies concerning the project, yet the results are significant from the viewpoint of risk management. Based on the results of interviews and a survey of the literature, we identify three major potential risks of the project: regulatory risk, political risk, and financial risk. In this regard, we classify risk in the same manner as a previous research. Subsequently, we suggest ways to manage these risks and as a result, we find that many of these measures can be introduced even under the present circumstances.