Iceland

Icea
GH2 Country Portal – Iceland

Green Hydrogen Vision

Iceland’s vision for green hydrogen reflects its deep commitment to sustainability and combating climate change. With a foundation of nearly 100% renewable electricity and a long history of pioneering energy transitions, the country sees green hydrogen as a transformative solution for decarbonizing hard-to-abate sectors like heavy transport, maritime, and aviation. Iceland aims to leverage its abundant renewable energy resources to produce hydrogen and e-fuels sustainably, integrating them into domestic industries and exploring export opportunities to contribute to global emissions reductions. This vision aligns with the nation’s broader goals of achieving carbon neutrality and complete fossil fuel independence by 2040. Iceland envisions a future where green hydrogen is not just an alternative fuel but a key enabler of economic diversification, technological innovation, and energy security. By fostering international collaborations and advancing research, Iceland is positioning itself as a global leader in green hydrogen, while supporting local communities and industries in adopting cleaner, more sustainable practices. 

National Strategy

Iceland is committed to achieving carbon neutrality by 2040, leveraging its renewable energy potential to transition from fossil fuels. The government’s 2024 roadmap focuses on decarbonizing sectors like heavy-duty road transport, maritime, and aviation by introducing green hydrogen and e-fuels. Hydrogen will play a vital role in reducing emissions in industries and transportation modes that are challenging to electrify. This aligns with Iceland’s goal of becoming fossil-fuel-independent and becoming a leader in renewable energy and hydrogen technology. 

The roadmap emphasizes the need for substantial infrastructure and investment to meet targets, including increased hydrogen production and electrolyser capacity. Early projects like hydrogen fuel stations and green methanol production have laid the foundation. New initiatives aim to integrate hydrogen into maritime and aviation sectors while considering export opportunities for green hydrogen and e-fuels. This strategic development positions Iceland to cater to domestic demand and global hydrogen markets. 

Policy support and investment incentives are critical for the roadmap's success. The government plans to strengthen legislative frameworks, encourage international collaboration, and implement incentives to support green energy. Pilot projects are crucial to testing technologies and building public and industry confidence. Iceland seeks to capitalize on its renewable energy surplus by focusing on both domestic needs and export capabilities. 

Looking ahead, Iceland envisions a comprehensive energy transformation powered by green hydrogen and e-fuels, fulfilling its commitments to decarbonization and climate leadership. The roadmap highlights the importance of technological innovation, strategic planning, and international cooperation in achieving its ambitious energy and environmental goals. 

Capacity Targets

Electrolyser Capacity: 

  • By 2030: 71 MW for domestic non-ETS (Effort Sharing Regulation) sectors; 237 MW in total, including international aviation and maritime applications. 
  • By 2040: Up to 430 MW for domestic applications. 

Hydrogen Demand: 

  • By 2030: 10 ktpa for non-ETS sectors; 35 ktpa total including ETS (EU Emissions Trading System) sectors. 
  • By 2040: Annual demand could reach 60 ktpa for domestic non-ETS sectors, potentially expanding for full fossil fuel replacement. 

Energy Requirements: 

  • By 2030, total renewable energy needed for hydrogen and e-fuels: 3.2 TWh (17% of Iceland’s current annual power generation). 
  • By 2040, total energy needed to phase out all fossil fuels: ~23 TWh (more than Iceland's current generation). 

Impact Targets

Decarbonisation Goals: 

  • Road Transport: Achieve 40% renewable energy share by 2030. 
  • Maritime Applications: Reach 10% renewables by 2030. 
  • Domestic Aviation: Proposed 20% renewable energy share by 2030. 
  • Long-term: Full fossil fuel independence and carbon neutrality by 2040. 

Emissions Reduction: 

  • Reduction of more than 1 million tonnes of CO2 emissions by 2030 (from 2005 levels). 
  • Aviation: Compliance with EU SAF mandates for increasing synthetic fuel use to 70% by 2050. 
  • Contribution of hydrogen and e-fuels to decarbonising heavy-duty transport, fishing, maritime, and aviation sectors. 

Policy and Project Spotlight

  1. Icelandic green hydrogen project developer IðunnH2 has teamed up with Haffner Energy to establish a 300MW sustainable aviation fuel (SAF) plant at Keflavík International Airport. The facility aims to produce 65,000 tonnes of SAF annually, potentially fulfilling 15% of Iceland's expected jet fuel demand for 2028. Green hydrogen from Iceland’s wind, hydropower, and geothermal energy will be used with biogenic carbon dioxide (CO2) sourced from Haffner’s gasification technology. This technology will supply the plant with solid biochar, a by-product of biomass thermolysis, gasified on-site to generate sustainable aviation fuel (SAF). The French firm claims this method will lead to a “fundamental change” in SAF production economics. 
  2. On April 29, 2024, five Icelandic companies signed letters of intent to purchase MAN hTGC hydrogen trucks comprising 44- and 49-ton HD models. ON Power produces green hydrogen at the Hellisheidi geothermal plant, with Blær as the distributor. This marked the launch of a crucial Icelandic energy transition project, bringing together truck producers, local dealerships, and hydrogen production and distribution entities. For 18 months, Icelandic New Energy has worked to secure offtake and finalize this deal following its establishment in 1999 to support renewable fuel use in transport. The letters were signed at  Hellisheiði, ON Power’s hydrogen site. MAN’s agent, Kraftur, secured 20 trucks for delivery in 2025-2026, with the first expected in spring 2025. The group hopes this event will encourage others to adopt zero-emission trucks. The 6:2 (8-wheel) trucks will be available in 2025, and the 6:4 (10-wheel) will follow in 2026. 

Financing

Investment Requirements (2030): 

  • ISK 160-275 billion for domestic goals in non-ETS sectors. 
  • Additional ISK is 90-160 billion to meet ETS-related demands. 
  • Total investments: ISK 160-440 billion (6-12% of Iceland's 2022 GDP). 

Private Sector and International Partnerships: 

  • Collaboration with entities like Landsvirkjun, Carbon Recycling International, and international stakeholders for e-fuel and hydrogen projects. 
  • Projects include developing production facilities for e-methanol, e-ammonia, and hydrogen-based SAF. 

Export Potential: 

  • Feasibility studies suggest hydrogen and e-fuels could be exported to markets like Rotterdam, leveraging Iceland's renewable energy surplus. 

This roadmap positions Iceland as a leader in renewable hydrogen production, aiming for ambitious decarbonisation and economic growth through green energy initiatives. 

Government Green Hydrogen Lead

Ministry of the Environment, Energy and Climate