| Abstract |
Iceland´s progress in utilizing geothermal energy for space heating and electricity production has received international attention and Iceland already has become a significant player in the global geothermal energy market. During the transformation to geothermal energy know-how has accumulated and a number of companies and institutions now have proven capabilities in, for example, exploration of geothermal sites, drilling as well as in constructing, operating and maintenance of geothermal power plants. The purpose of this article is to analyse and assess the potential of an Icelandic geothermal exporting cluster engaging internationally. The focus is on cross border activities of an organized exporting cluster engaging in the provision of consultant and advisory services, construction, operators and maintenance of geothermal power plants, as well as sponsors and shareholders in geothermal projects. The objective is to answer the question if it is feasible for an Icelandic geothermal cluster to engage in cross border activities in emerging markets and if so, what type of engagement would be feasible? The paper concludes that Icelandic companies could possibly benefit from participating in and developing a geothermal exporting cluster to engage in emerging market economies. However, the global economic and financial crisis has severely affected the balance sheets of key Icelandic energy companies. Capital shortages will be difficult to overcome, especially for companies that intend to engage in cross border investments. Cooperation with international financial institutions remains a possibility, but so far Icelandic companies have not been successful in forming partnerships with them and Icelandic membership in IFIs is limited. Icelandic companies, banks and the government are novices in the field of international development cooperation and lack knowledge and experience in doing business with international financial institutions. The stakeholders in an Icelandic geothermal exporting cluster will need to develop a concerted strategy and an action plan if they intend to turn geothermal energy into a truly international opportunity. There is a lack of a formal platform for collaboration and coordination to form an effective exporting cluster that would have the capacity to engage in cross border investments in emerging market economies. An Icelandic geothermal exporting cluster would also require a concerted effort of many different players in Iceland, public as well as private, who engage in consulting, construction, finance, research, education, etc. It will probably take years of organization and coordination before any significant benefits could materialize from an exporting cluster. Currently the possibility to engage in energy investments in emerging markets seems limited. This is due to the limited capacity and experience that Icelandic companies have in forming international consortia. Such cooperation is particularly important to overcome the capital constraint that severely affects many Icelandic firms post crisis. Cooperation with IFIs is also important for proper risk management. The absence of a functioning national export credit agency (ECA) to support trade finance is also an obstacle for Icelandic cross border engagement in this area. In the short term it seems more likely that Icelandic companies can sell geothermal expertise overseas, provide advice and possibly participate as operators, in maintenance or in constructing of geothermal power plants. This is unlikely to generate large revenues in the context of national accounts but it could certainly make a difference for individuals and companies. Private sector cooperation with IFIs in cross border investments could be feasible in some cases but seems unlikely to materialize in the short term. |