The Economic Rent in hydro and geothermal resources in Iceland with reference to international energy Markets and resource cost structure

In this paper the concept of Economic Rent (ER) is reviewed and applied to the virtually emission-free renewable energy resources of Iceland. In particular, a case study is presented with experimental test data from the Icelandic hydro and geothermal system. A calculation is presented based on prices in the domestic and an international market as well as cost assumptions. The importance of the ER concept is of particular interest in a case where the electric power system utilizes renewable energy resources to the greatest extent of almost any country in the world. For this reason the Iceland energy situation should be of special interest, where no fossil fuel resources are available and where fuel-based electricity generation is virtually non-existent. The results of the paper include a case study suggesting the economic significance of renewable natural energy resources in the form of ER. A pilot numerical example is presented to lead the way for further appraisal of the economic value of these resources with a more developed data set and cost assumptions.