The municipal utility Orkuveita Húsavíkur (Húsavík Energy) has initiated a new exploration phase with the drilling of seven geothermal wells in northern Iceland. The operation aims to improve knowledge of the local subsurface to anticipate new industrial uses, in a context of reduced energy demand caused by the production halt of silicon metal at PCC BakkiSilicon hf.
New strategy following main client shutdown
The closure of the PCC BakkiSilicon site in 2025 has altered the economic dynamics of the Bakki industrial zone, initially structured around large-scale renewable electricity supply. The withdrawal of this key client, which consumed up to 58 MW, led to a reduced local grid load and revenue loss for infrastructure operators. Húsavík Energy is now working to reconfigure its energy offer by leveraging geothermal heat to attract new players less exposed to raw materials market cycles.
Technical partners and regulatory framework
The project is being carried out in partnership with Iceland GeoSurvey (ÍSOR), responsible for geological interpretation, and drilling company Vatnsborun ehf. These operations fall under the legal framework of Resource Act no. 57/1998 and are overseen by the National Energy Authority (Orkustofnun), which regulates permits and monitors performance of geothermal facilities. The drillings are classified as exploratory and do not require full environmental impact assessments at this stage.
Synergies with the ICEWATER European programme
Since 2024, Húsavík Energy has been participating in the LIFE ICEWATER project, with a budget of ISK5.8bn ($40.2mn), including ISK3.5bn ($24.3mn) funded by the European Union. The programme aims to improve management of industrial effluents, especially from the agri-food sector, through circular infrastructure combining heat, water, and treatment. The new drillings will supply these uses from controlled thermal sources, enhancing the company’s ability to offer stable long-term contracts.
Asset optimisation and restart prospects
Analysis of the new well data could also determine the feasibility of recommissioning the 2 MW Kalina geothermal power plant, dormant since 2008. Acquired by Wasabi Energy in the early 2010s, the facility may be modernised or replaced with a Rankine Cycle (ORC) unit better suited to current temperatures and technological efficiency. Local power production would provide Húsavík Energy with an additional revenue stream and reinforce the resilience of its energy system.
Local market and reconfiguration of the energy offer
Previous studies indicated underutilised geothermal potential in the area, with an estimated hot water capacity of about 300 l/s versus 90 l/s used. The goal of the campaign is to locate high-permeability and high-gradient thermal zones to prioritise investment in the most profitable wells. Improved project ranking would enable the company to structure commercial offers targeting agri-food, aquaculture, or data centre sectors.
Industrial positioning and contract leverage
The municipality of Norðurþing, indirect owner of Húsavík Energy, intends to enhance the appeal of the Bakki site by offering modular combinations of electricity, heat, and process water. The aim is to attract projects less reliant on international markets while optimising existing infrastructure. The drilling campaign provides precise subsurface data, allowing better calibration of future contracts, at a time when the company plans a 4.2% tariff increase in 2026.
External risks and financing dynamics
None of the involved partners are currently listed under active sanctions. However, the project remains indirectly exposed to European policy decisions, particularly regarding anti-dumping duties on silicon metal. At the same time, coupling geothermal projects with circular infrastructure could improve access to additional funding through EU climate, water, or industrial innovation instruments.
