Over 90% of Iceland´s households are heated with geothermal water. Until recently filament and oil-fired heating have been used exclusively for household heating in Iceland´s cold areas, where geothermics are not sufficient for geothermal water heating. The wood chip boiler in Hallormsstadur is the first one of its kind and scale in Iceland. In the beginning the 500 kW boiler will provide hot water for a domestic science school, an elementary school, a gymnasium, a swimming pool and a guest house. Later on it is planned to connect all residential houses to the heating network.
The idea to set up a woodchip boiler in Hallormsstadur came up during Iceland´s participation in the Northern WoodHeat project from 2004-2007. The project was funded by the Northern Periphery Programme of the European Union. Partner countries besides Iceland were Finland and Scotland. The Icelandic Forest Service in Hallormsstadur, the Agricultural University of Iceland and the Heradsskogar afforestation project took part for Iceland and project coordination lay in the hands of forestry consulting firm Skograd ehf.
In the village of Hallormsstadur (pop. 75) test holes have been drilled in search of geothermal heat. The drillings yielded no results making geothermal heating ineligible. On the other hand grows another energy source in and around Hallormsstadur: forests. Close distance to the raw material is of crucial importance because transport costs play a big role for a product like timber that has not been processed very much. Until now it was difficult for the forest owners in the community to sell their products. The start-up of the wood chip boiler generates a new market for the products of the municipality´s forest owners and creates employment in the countryside.
Since the year 1990 the state has provided considerable subsidies for tree plantings on private lands, mainly through regional afforestation projects like Heradsskogar (the afforestation project in east Iceland). The oldest forests are due for their first thinning. Timber from first thinnings is generally of poor quality. But, since the use of wood as fuel sets very little conditions regarding timber quality, timber from first thinnings suits wood fuel purposes well. These prerequisites encouraged Iceland´s participation in the Northern WoodHeat project – whose main aim was to develop markets for forest products.