Financing secured for Faeroe Islands’ first pumped-storage plant

The Nordic Investment Bank (NIB) has agreed to loan DKK 250 million (US$ 34.3 million) to Elfelagio SEV, the grid operator and main power producer of the Faeroe Islands, to help finance the construction of a pumped-storage system to support greater integration of variable renewables.

The investment is designed to help meet the Faeroe Islands’ target of achieving 100 per cent fossil-free generation and onshore consumption by 2030. The 15-year loan, which was signed on 30 June by André Küüsvek, NIB President and CEO, Hákun Djurhuus, SEV CEO, and Kári Johansen, SEV Chairman of the Board, will co-finance the project in the Vestmanna area on the main island of Streymoy. The plant will have a capacity of 40 MW in the turbine mode and 70 MW in the pumping mode. The project, which will connect the existing Myr­arnar upper reservoir and the Hey­gadalur lower reservoir, will involve the construction of an underground powerhouse in a cavern approximately 500 m inside the mountain, and will include a 240 m-long steel-lined pressure shaft. Financial closure is expected shortly, with the project to be constructed between 2023 and 2027, at an estimated total cost of DKK 1.3 billion (US$ 178.6 million), and to be fully operational by 2028.

SEV, which is owned by all 29 municipalities on the Faeroe Islands, is also continuing studies to build a pumped-storage plant on the southernmost island of Suðuroy, with associated subsea links.

The self-governing archipelago, part of the Kingdom of Denmark, comprising 18 islands between Iceland and Norway in the North Atlantic Ocean, has ambitious renewable energy plans. New wind, solar and tidal energy projects are to be commissioned in the coming years to meet the islands’ renewable energy targets and reduce the use of fossil fuel thermal plants, which fire on imported HFO and gas oil. Thermal power accounted for 63 per cent of the islands’ total installed capacity of 182 MW as of the end of 2021, and typically account for around 60 per cent of all electricity produced. Hydropower capacity of 39.7 MW and wind power of 25 MW generate most of the remainder of 6 consumption, which has risen by an annual average of close to 6 per cent over the last five years.

An average of between 20 and 30 MW of both wind and solar energy are expected to be added every two years in the period 2023-2030. Two 18 MW wind parks are scheduled to be commissioned by the end of 2022 and SEV has submitted an application to the Government to study the development of an offshore wind turbine park with a capacity of 96-120 MW and estimated annual production of 420-520 GWh, at an estimated cost of around DKK 2 billion (US$ 275 million). Solar energy could possibly yield 5-7 per cent of the total annual power production of 600 GWh by 2030.

Meanwhile, Minesto of Sweden plans to install 120 MW of tidal energy arrays at four sites, which could generate about 350 GWh/year, equi­valent to 40 per cent of consumption.