The history of Reykjavik Energy (OR) can be divided into several phases, and we are now approaching a turning point. Ahead is a period that will, among other things, be shaped by the fundamental decisions facing OR's new managers, its board, and owners.
In Reykjavík Energy’s first decade, after being established through the merger of Reykjavík City's utility companies and the energy and utility assets of Akranes and Borgarbyggð, was characterized by great expansion and investments. The city of Reykjavík regained its foothold in electricity production at Nesjavellir, after having a few decades earlier placed its main power plants into the hands of the national power company, Landsvirkjun, in joint ownership with the Icelandic state. Various municipal utilities in the south and west were purchased and, most importantly, the construction of one of the largest geothermal power plants in the world, the Hellisheidi power plant, commenced.
There was heavy investment, capital was obtained on good terms, the exchange rate of the Icelandic króna (ISK) was favourable for the most part, and the foundation was laid for considerable geothermal developments abroad. Everything was looking great – until it all came crashing down. Before the financial crash brought the indebted Reykjavik Energy almost to its knees, a rift had been created between the company and its owners, where the boundaries of authority were unclear, and the chain of responsibility for important decisions was either broken or extremely convoluted.
The following decade was characterized by reconstruction. Reykjavik Energy’s finances had to be rebuilt almost from scratch and the company culture had to be reformed. At first, the main emphasis was on the former since solid finances are a prerequisite for everything else. However, the responsible austerity measures following the crash also helped to build morale on new grounds, under the banner of OR's new values: Foresight, Efficiency, and Integrity.
Gender equality was firmly established as a matter of importance. Instead of waiting for 'society to change', the leadership decided to make that change; the need was pressing, in the male-dominated energy and utilities sector. The gender ratio in management positions became equal over a period of several seasons, but approximately three out of four managers had been men until then. The unexplained gender pay gap, so firmly entrenched within the energy and utility companies, was eliminated by, among other things, the adoption of new progressive methods. This was made possible through a sincere will to stop such human rights violations, and to do so quickly. Reykjavik Energy’s initiative in matters of gender equality has since become a model for the energy and utility sector in Iceland, and it has also showcased to a broader audience that the will to make changes is of paramount importance.
Simultaneously, the company was taking on the climate crisis. Despite financial struggles, the development of a technology to store carbon through mineralisation was continued, with at least threefold benefits: The carbon footprint of energy production has been drastically reduced; the sulphur emissions from the geothermal energy production at Hellisheidi are almost a thing of the past; and now Reykjavik Energy owns an internationally valued and acknowledged method in the fight against climate change, which is in great demand.
The three municipalities that own Reykjavik Energy did more than provide the company with a subordinated loan at a very difficult time right after the financial collapse. They established an ownership policy for the company which, even today, more than a decade later, is the only ownership policy of an Icelandic energy company. It was an important guide during the reconstruction, not least when the requirement of the Electricity Act to establish independent subsidiaries for electricity generation and sales on the one hand, and the utilities' licensed activities on the other, had to be met. New governance had to be built for a group of OR companies instead of a single company before.
In the middle of the reconstruction period, Veitur and ON Power were established, and the brand Reykjavik Fibre Network was created. Each company got its own board with legal responsibility for the success of the respective operation. Central control, which was extremely important when Reykjavik Energy’s finances had to be rebuilt from the ruins under the banner of the Plan, was reduced. Another consequence was that important decisions, such as the tariffs for licensed services, had transferred from the local municipalities to the board of Reykjavik Energy, and later to the boards of its subsidiaries. This development was natural, as there were numerous examples in the history of the utility operations where political decisions regarding individual operational issues did not stand the test of time. It does not diminish the fact that this development was neither simple nor without controversy. Therefore, there must be regular discussion about where the balance should lie between decisions made by the owners of Reykjavik Energy, the board of the parent company, the boards of the subsidiaries, and the managers of the companies.
Discussions are now underway regarding changes to Reykjavik Energy’s ownership policy and governance. This conversation is important for many reasons. The first is that times change; the operating environment changes with new official requirements or market conditions, new technologies emerge or attitudes towards the desired arm's length between politics and the management of the companies change. Signs of this can be seen in Reykjavík City's new ownership policy, which outlines how the municipality looks after the interests of the city's residents in relation to operations in which the city has a stake. The owners of Reykjavik Energy have already agreed that Carbfix will be jointly owned by Reykjavik Energy and other shareholders, who will contribute capital to ambitious and expensive investments in carbon storage. It is imperative to discuss how a solid role chain will be constructed in such ownership, not least since the Reykjavik Fibre Network has been on a similar journey. This is not only a question for the owners of OR, but no less for its managers, as evidenced by the fact that both Carbfix and Reykjavik Fibre Network have appointed their own financial directors, the first from outside the parent company since its establishment.
There are signs that the third phase of Reykjavik Energy’s history has already begun. The company is financially stronger than ever, but its leaders are also faced with challenging tasks. It so happens that at this juncture, there are going to be changes in three important roles; a new CEO will take over from me in early April, a new chair of the board has assumed that role after many years of Brynhildur Davíðsdóttir’s successful leadership, and, at the end of the year it is expected that a new mayor of Reykjavik will take over, after more than a decade of Dagur B. Eggertsson's participation in the reconstruction of Reykjavik Energy, representing the main owner of the company.
The most obvious task of those who will now be leading the way is of course the fight against, and adaptation to, climate change, completing the final steps towards carbon neutrality, and an increased emphasis on measures to support the circular economy. The leadership of the companies within the OR group regarding energy shift is undisputed and will have a significant impact on how the nation succeeds.
Equality is a concept that takes on an increasingly broad and important meaning. Our workplace must embrace equality, enjoy its benefits, and participate in leading the debate in that area.
It would be exciting to lead the work ahead for Reykjavik Energy, but after 12 years at the helm it is time for me to leave. I would like to thank all the excellent people that this position has allowed me to work with over the past 12 years, not the least all the group’s employees. I wish the new people and all the companies in the Reykjavik Energy group the best of fortunes.
