The Beginning
Talks regarding the possibility of utilizing geothermal energy for the residents of Suðurnes hit full swing during the fifties – and there was discussion on the necessity of all municipalities joining hands in realizing such a project. In the year of 1953, Keflavík's budget took into account a 20.000 krónur proposal, which was used to research the possibility of such a heating plant. From 1954 until 1956 the research fund money granted by Keflavík was 30.000 krónur, which was lowered to 15.000 krónur in 1957. During a town council meeting in Keflavík, on the 26th of May 1959, there was a committee chosen to keep researching the possibility of a district heating plant in Keflavík. Their first meeting was held shortly after, or on the 8th of June. A heating plant committee for Njarðvík was also chosen later that year. These committees met with Gunnar Böðvarsson, director of Jarðborar Ríkissins ( The Drilling Company of Iceland, a former government enterprise), and with Þorbjörn Karlsson, engineer, who had been hired before by the heating plant committee of Keflavík. A few years later, in 1963, additional research was carried out by the American military forces, which were then based on the Miðnesheiði. This area was then compared to the Reykjanes and Stapafell area; in these areas it seemed drilling would provide sufficient hot water.

The town council of Grindavík, in 1969, decided to carry out its own geothermal research in the Svartengissvæði, especially focusing on heating homes in Grindavík. Two holes were drilled 5 kilometers north of Grindavík, near Svartengi, in 1971 and 1972. At first the holes which had been drilled, one being 240 meters and the other being 403 meters, seemed to very promising, however two major problems were discovered. The first problem was that the water was too hot, it was high temperature area: and at a depth of around 1 km the heat was around 200 Celsius. Secondly, the water that came out of the drilled holes was salty, around 2/3 parts salt. Because of the high salt content and high temperature of the water, it was not possible to utilize the hot water as was then done in Reykjavík and in other parts of the country. Heat exchange methods had to be developed to utilize the geothermal energy.

In January of 1973 Orkustofnun(National Energy Authority) finished a rough draft of plans for a geothermal energy plant in the Svartengi area. The conclusions drawn from that plan were deemed very positive and further research was pursued, which Orkustofnun carried out for the entire area. Two holes were then drilled into the earth, one hole was 1.713 meters deep and the other was 1.519 meters deep. Further research was also carried out to deduce how large this “hot water pocket” was. The data from that research estimated the total area to be around 400 ha at a depth of 600 meters – however there was a marginal deviation in determining the size of the total area due to the high content of saltwater near the “hot water pocket”, because the salt in the subterranean water decreases the reliability of the research methods, as well as decreasing the temperature of the water.

The founding of Hitaveita Suðurnesja
In a meeting of all the municipalities in Suðurnes on the 10th of September the representatives there elected three individuals, called the Hitaveitunefnd Suðurnesja (Heating Plant of Suðurnesja Committee), from the board of municipalities in Suðurnes to a committee to handle the preparation and construction of a district heating plant plant in Svartsengi. The elected individuals in the committee were Alfreð G. Alfreðsson, head of the local goverment in Sandgerði, Eiríkur Alexandersson, head of the local government in Grindavík and Jóhann Einvarðsson, mayor of Keflavík. This committee began preparations for founding the company and they selected the social center Festi in Grindavík, on the 15th of December in 1973, as a venue for the process. A temporary committee of seven individuals was also elected then, and on the 17th of January this committee selected a board of executives, consisting of the same individuals selected for the Hitaveitunefnd Suðurnesja ((Heating Plant of Suðurnesja Committee).

After these preparations the founding of Hitaveita Suðurnesja was put into law by Alþingi on the 18th of December in 1974, then confirmed by the president of Iceland on the 31st of December that same year. (Law nr. 100 from 31st December of 1974.) The first article of this law is as follows:

,,The purpose of the company(Hitaveita Suðurnesja) is to utilize the geothermal heat in Svartsengi near Grindavík or in any other area of Reykjavík if it is considered beneficial; to build heat exchange plants and to connect the towns of Suðurnes to the system; install a distribution system and handle the sale of hot water to users. Hitaveita Suðurnesja shall also build boiling plants if deemed necessary for production safety”.

When the company was founded the shares in the company were split up, with 40% of its shares owned by the government because the American military on Keflavík Naval Air Station was also in the energy distribution area. The rest, or 60% was to be owned by the seven existing municipalities in the area and to be split up according the number of residents, as recorded on the 1st of December 1974, in each municipality.

The first board meeting of Hitaveita Suðurnesja was held on the 13th of February in 1975 in Þórshamar. As mentioned above the board of directors included: Alfreð G. Alfreðsson, local head of government in Sandgerði, Eiríkur Alexandersson, local head of government in Grindavík and Jóhann Einvarðsson, mayor of Keflavík, who was elected chairman of the board. On the behalf of the government there was Ólafur G. Einarsson, member of Parliament (Alþingi) nominated by the then Minister of Finace and Þóroddur Th. Sigurðsson, hydro-energy distribuition director, nominated by then Minister of Industry.

One of Hitaveita Suðurnesja's first projects was to procure the land that was to be utilized and built on as well as obtaining the rights to distribute geothermal and fresh water. Talks with landowners were iniated in January of 1974, which concluded with an agreement made on the 22nd of July that a court of arbitration would decide the price the rights of the land and the geothermal energy rights. The court finished its proceedings in January of 1976 and its decision was that the price for these rights in total should be 87.7 million krónur, which in 1999 was around 95 million krónur.

The final meeting held by the board of directors of the Hitaveita Suðurnesja with the landowners and the lawyers of both parties was held on the 25th of June in the Trade School of Keflavík. According to one of the board members, Alfreð Alfreðsson, the local head of government in Grindavík, the deliberating parties were in two separate rooms and in two separate sides of the school as well. However, the lawyers were in rooms in between and they delivered proposals and counter proposals between the two parties. As the night slowly preceded this process kept going on back and forth, until the periods between pauses grew longer – as did the waiting period accordingly.

Both parties had agreed on finishing the negotiations at that meeting session, thus the meeting would not be adjourned until an agreement was reached – even if it would take all week. The board members of Hitaveita Suðurnesja did not sit by idly while waiting, or as Alfreð says: “Of course, the teenagers that passed the school were curious, especially when seeing the school was lit up around two in the morning. Their curiosity did not cease both when they glanced into the windows and saw us, board members, on the floor. We were casually dressed on all fours playing a coin game. One of the municipality’s parliament members, along with the mayor of Keflavík and Grindavík and I included. In another corner of the schoolroom they saw the distribution director, Þóroddur, relaxing with his hands in his pockets in a yoga position. They (the teenagers) could scarcely believe their eyes.

What kind of meeting was this supposed to be – and what was the meaning of this? Distinguished gentlemen of the society, crawling on all fours and standing on their heads during the middle of the night. And they try to say we shock them! Nonsense! Nonetheless, we made no attempt to try and explain what these teenagers had seen, as it would have proven difficult. The teenagers just went their way in disbelief – we on the other hand managed to finish the negotiations during the night, thus we did not have to use sleeping bags in “roughshod conditions”. Around three thirty in the night, both parties agreed to let court decision decide the value of the land and all rights accordingly.