Imagine a place where all electricity comes from clean sources, where most cars are EVs and can be charged on almost every street, where daily hot water for homes and pools is drawn from the depths of the Earth, and where sweet tomatoes can grow even in the starkest winter. It sounds like magic, but it’s Iceland.
This past February, 50 HBS Energy & Environment students traveled to Iceland to witness firsthand how the country is harnessing the power of nature to deliver clean energy, hot water, and several other decarbonization solutions that affect not only Iceland, but all of us.
Renewable energy for everyone, big or small
When we think about renewable energy, it’s easy to picture massive dams or huge wind farms. But many cities with small populations don’t actually need that much energy. Ensuring that the small community of Flúðir has its energy needs met sustainably is the mission of Flúðaorka Power Plant, the geothermal facility that we visited—and that you can explore online here.
Flúðaorka has 600 kW of installed capacity, which is sold to the grid, but it also produces another invaluable resource: hot water for Flúðir’s heating network, supplying homes, greenhouses, and bathing facilities with hot water. And while Flúðir has only 400 residents, their work goes a long way as they produce one-third of Iceland’s vegetables.
The Flúðaorka power plant is a tangible example of Baseload Power, Iceland’s concept of “homegrown energy”: developing small-scale geothermal heat and power projects that promote energy and resource efficiency, energy security for small communities, and local green jobs, all while preserving nature’s balance. The warm welcome we received from Marta and Hermann at the power plant was a testament to what it truly means to care about communities.
When energy makes the impossible happen
On our way to Flúðaorka, we stopped at one of the largest customers of this renewable energy: Friðheimar, a unique restaurant where nearly every dish, drink, or dessert is made primarily from tomatoes. This popular destination attracts an impressive 300,000 visitors annually.
Friðheimar is located in Reykholt, a small town where winter temperatures can easily drop below -6°C. Yet, despite the harsh climate, its greenhouses produce what students described as the most amazing tomatoes they have ever tasted. To sustain the tomato plants through the cold season, the Friðheimar greenhouses require approximately 2.5 megawatts of electrical power, equivalent to the energy needs of a town with 7,000 residents. However, thanks to Iceland’s low-cost, renewable energy grid, the family-run operation remains both economically viable and environmentally sustainable – and delicious!
Energy is one of the oldest human needs and yet, it’s all about innovation
Can an energy producer lead in innovation? ON Power (Orka náttúrunnar) proves the answer is yes. As a major provider of geothermal electricity and hot water for the Icelandic market, ON Power goes beyond energy production: they've created a dream innovation hub for sustainable companies. The 103-hectare Geothermal Park hosts a community of forward-thinking businesses in energy and sustainability, offering infrastructure, knowledge, and resources to minimize waste and maximize shared value.
At the heart of the Geothermal Park, near the Hellisheidi Geothermal Power Plant, is the ON Power Geothermal Exhibition. This permanent exhibition teaches visitors about Iceland’s geology, geothermal energy production, and the park’s operations. Interested visitors can book a tour here.
Scaling up an audacious tough tech venture
Climeworks is the brainchild of two engineer-entrepreneurs who met at school and shared a commitment to tackling climate change. The technology they built literally pulls carbon out of the air. Founded in 2009, Climeworks began by capturing milligrams of CO₂ in a lab at ETH Zurich. Their first small-scale direct air capture plant came online in 2014—and they’ve been scaling at a fast pace ever since.
Last year, the Energy and Environment Club visited Orca, their first commercial-scale plant in Iceland. This year, the club returned to see Mammoth, Climeworks’ newest and largest direct air capture and storage facility in the world, with a nameplate capacity of up to 36,000 tons of CO₂ removed per year. Mammoth was inaugurated in May 2024 and is located within ON Power’s Geothermal Park.
Climeworks’ business model is built on the voluntary carbon credits market. One key advantage of engineered carbon removal solutions like theirs is that these solutions are easier to monitor and verify, resulting in high-quality credits. Climeworks’ credits are certified by Puro.earth, using the Puro Standard methodology for geologically stored carbon.
Watching Climeworks clean our atmosphere and help build an entirely new market, we were reminded that when passion for the energy transition is matched with resources and allies, changing the world becomes a real possibility.
Drawing down carbon to where it belongs
Sharing the same home in the Geothermal Park is Carbfix—Climeworks’ perfect match for a definitive carbon removal solution. Carbfix permanently traps carbon in naturally reactive basaltic rock formations. Their technology delivers a full carbon capture and injection process: CO₂ is dissolved in water and injected underground, where it reacts with the rock to form solid carbonate minerals. This natural mineralization process takes about two years and, once complete, the carbon is locked away for thousands of years. In nature, certain rock formations already act as carbon sinks. Carbfix mimics this natural process, but at a much faster pace and using previously captured CO₂.
Founded in 2006, Carbfix has long worked with various sources of captured CO₂, including emissions from ON Power’s Hellisheiði geothermal power plant. Their partnership with Climeworks began in 2017. So, those carbon dioxide removal (CDR) credits certified under the Puro Standard mentioned earlier are the result of this power duo: CO₂ captured by Climeworks and permanently stored by Carbfix.
Shaping the future, again
Building innovative solutions like the ones above demands allies. In Iceland, Transition Labs is exactly that—a partner for climate founders around the world who need legal, technical, commercial, and strategic support to deploy and scale their ideas.
Their portfolio of partner companies is nothing short of astonishing. It spans from the ocean, with the research NGO Röst Marine Research Center, all the way to outer space, supporting projects like Space Solar, which is developing a space-based solar power plant. Transition Labs works with both long-established organizations, such as the Clean Air Task Force (with over 25 years of impact), and newer startups like Rock Pore, founded in 2020.
We were particularly excited by Space Solar’s ambitious vision to make solar energy viable as baseload power. The technology involves satellites that convert sunlight into radio waves and beam them back to Earth, where ground antennas collect and convert the signal into grid-ready electricity. The goal is to launch this solution at commercial scale by 2030, with each satellite expected to deliver up to 600 MW of clean power.
Considering that many of the companies seeking Transition Labs’ business development services are not originally based in Iceland, the Lab stands as living proof of Iceland’s growing leadership in bold, boundary-pushing climate innovation. Now that much of the energy transition work is already underway at home, leaders like Kjartan and Margret are helping the rest of the world contribute their slice of the decarbonization pie.
How Iceland got it right
How did Iceland achieve this idealistic society where everything seems to work in perfect harmony with nature?
While visiting Gullfoss we may have stumbled upon a clue. At the entrance to the park stands a photo of a defiant woman on horseback: Sigríður Tómasdóttir, remembered for her fight to protect Gullfoss and Icelandic nature, a concept that was likely radical when she lived over 100 years ago.
People who care — that's my personal take on Iceland’s greatest natural resource. It’s what has made the country a global example of sustainability. And care is exactly what we saw in the faces and attitudes of the people we met during this season of our Icelandic adventure.
Visiting Iceland was an absolutely magical opportunity, made possible only through the generosity of the incredible hosts who welcomed us into their companies. Some were HBS alumni, like Kjartan Ólafsson from Transition Labs and Jesper Jolma from Baseload Power. Others, like Margrét Ormslev Ásgeirsdóttir, Marta Rós Karlsdóttir, Hermann Baldursson, Sara Lind, Ingunn Gunnarsdóttir, and Ólafur Elínarson, graciously gave their time (even on a Sunday!) simply out of a passion to share their work. To all of them, our deepest and most heartfelt thank you!
Author: Sabrina Montovanelli, HBS Student, Co-Head of the 2025 Iceland Trek and Co-President of the Energy & Environment Club for the 25-26 term.
Note: Learn about the past 2024 Iceland Trek here: Energy & Environment Club’s Icelandic Adventure! - Blog - Business & Environment - Harvard Business School