The World's First Electric Fleet? Maybe Iceland.

Jim Motavalli

Jim Motavalli | Jun 21, 2012

Which country will be the first to plug in with an all-electric transportation grid? Some of smart money was on Western Europe because of its strict greenhouse gas regulations. But then EVs actually went on sale there and consumers reacted with indifference. EVs are expensive in Europe, and there are other green choices—like subsidized clean diesels. China is universally seen as the great hope for the future, given its enormous subsidies and determination on the subject, but right now there’s only a handful of cars on the road. I’m sure I wasn’t the only person fascinated by a China-connected consortium buying the remains of Saab.

The U.S. is the leading deployment country right now, but we’re so far seeing a trickle, not a mighty flow. The Tesla Model S goes on sale this week, and that should juice things up a bit. The American market needs the excitement a new Tesla can bring.

Gisli Gislason (left) with Tesla's Elon Musk. A big order for the Model S could be in the offing. (photo courtesy of Gisli Gislason)And so, I’m thinking Iceland. Iceland? You mean that tiny island nation out in the north Atlantic somewhere with a population of 319,000 and a bankrupt economy? That’s the one. I've been keeping a close watch on the place, but up to now it's all been embryonic.  Because of its huge reserves of both hydro and geothermal energy, electricity is practically free in Iceland. The country is about the size of Kentucky, so long-distance travel isn't much of an issue. "There is little range anxiety for EV buyers and no problem with electricity generation," reports Cars UK.  If the country could export this resource by the kilowatt-hour, it would be as rich as Kuwait, but running transportation on domestically produced clean energy instead of hugely expensive imported petroleum is the next best step. And it’s certainly better than using precious geothermal resources to make aluminum, which is what the country does now.

On June 19, Iceland’s Parliament, acting on the last day before summer vacation, approved a bill to lift the value-added tax (VAT) from the first $47,000 of electric car prices. Iceland has a VAT of 25.5 percent on new cars, the highest in the world, so this brings them tantalizingly in line with regular gasoline cars.

All electric cars under $47,000 are now VAT free; above that you pay the tax on the difference. Under the old regulations, a battery car costing $47,000 in the U.S. would cost $59,800 in Iceland, and a $57,000 (U.S.) car would come in at $72,400. Now the latter is $59,550. Overall, smaller EVs should have a 20 percent price premium. The economics are even more favorable for larger vehicles, which are subject to large import duties—unless they’re electric. Gislason says electric versions of bigger SUVs should now be at parity with their gas counterparts.

Geothermal energy is ubiquitous in Iceland, far more of a resource than the tiny population could use. EVs will help. (Jim Motavalli photo)Iceland has been holding an annual conference that centers on plugging in the country, so the very green citizenry is well informed on the subject. It’s a popular topic in the coffeehouses. Iceland’s biggest electric car mover and shaker is a carrot-topped guy named Gisli Gislason, the CEO of Northern Lights Energy (NLE), which has the ambitious goal of plugging in Iceland, and has already gotten a significant percentage of Iceland’s major employers to commit to both employee electric car fleets and to putting in EV charging.

Gislason is a flamboyant fellow, a former lawyer, realtor and movie producer, and a snappy dresser who lived in a baronial home once occupied by a disgraced Icelandic banker. He roars around the capital city of Reykjavik in a custom Tesla Roadster. He made headlines recently by picking up the first parking ticket for speeding (at 78 mph in a 50 mph zone) in that Roadster. “The police did not believe a car driving on pure Icelandic energy could go this fast and thought that their radar had defaulted,” Gislason told me.

The CEO is often seen in the company of the world’s movers and shakers. That’s Gislason with Richard Branson. That’s him with Tesla’s Elon Musk. And it’s no wonder Musk met with him—NLE wants to bring 1,000 Tesla Model S cars to Iceland. Gislason has signed a contract for a similar number of cars from Cincinnati-based Amp Electric Vehicles, which converts the Jeep Grand Cherokee and Mercedes ML350—the latter a great car for Iceland.

Gisli gets pulled over by the Icelandic police for speeding in his Tesla. (photo courtesy of Gisli Gislason)It will take a while before there are thousands of EVs on Icelandic roads, but the new law makes a big difference. Gislason says, “We still only have 11 EVs in Iceland. We’ve been waiting for the VAT law for three years now, so this is a big step. If everything works out and the manufacturers supply us with enough EVs, we can easily change the number to 500 before the end of 2013. And the sky is the limit after that.”

Within the next 45 days, Gislason says the first Nissan Leafs will arrive in Iceland, followed by cars from Coda, Amp Electric, Tesla, Renault (France), Reva (India) and maybe BYD (China). Two box trucks from Smith Electric will arrive in July.

Steve Burns, president of Amp Electric, told me that Iceland is the proverbial "perfect storm" for EVs--super-cheap electricity, high gas prices, and short commutes because it's a small island. "One thing people don't know is how crazy they are for SUVs," Burns added. "They're like 35 percent of new car sales. They go off-road a lot for recreation in the country's interior, and want all-wheel-drive. We're now offering that in both the Jeep Grand Cherokee and Mercedes ML350. For the Icelandic market, our electric cars make more sense than some super-light three-wheeled eco vehicle." Burns says Gislason will set prices, but he expects the Amp vehicles to be quite reasonable in Iceland. "Can you imagine if electric SUVs were the same price as gas versions in the U.S.?" he asks.

This Amp all-wheel-drive electric Mercedes ML350 conversion is headed for Icelandic roads. (Amp Electric Vehicles photo)Given the small size of the population, charging shouldn’t be a big deal. Greater Reykjavik has perhaps 200,000 people, two thirds of the population. A network of perhaps 10 to 15 multi-charger public stations, accessed by RIFD cards, would probably meet the early needs of the city (especially if major employers have their own set-ups). NLE has a vision for fast (480-volt) charging stations every 25 miles along the entire 869-mile ring road that surrounds the island. A big help would be enlisting the national power company, Landsvirkjun, in the enterprise. The network could be up and running by the end of 2013.

It helps that Iceland’s president, Ólafur Ragnar Grímsson, is a big supporter. The photo below shows him (right) at Gislason’s recent garden party. I had an audience with the President during my last visit, and he is quite enthusiastic about EVs for Iceland.

The president of Iceland (right) attends the electric car garden party. (photo courtesy of Gisli Gislason)Iceland has flirted with hydrogen, and there’s still a core group advocating for it. But now it looks like battery electric cars have both the political momentum and some eager entrepreneurs. There are still daunting odds—the country remains economically troubled, after all, and until recently nobody was buying any kind of cars—but everything is lining up to electrify Iceland. A new IDTechEx report estimates that the EV battery pack business could grow from $4.8 billion annually now to $54.2 billion by 2022. That's a big leap--"the next Gold Rush," they say--and a country like Iceland could be in the vanguard of making it happen.

Oh, and if you have any doubt about the huge power of Icelandic geothermal energy, just watch this short video that I shot there in 2010:

Get the Car Talk Newsletter

Got a question about your car?

Ask Someone Who Owns One