Reykjavík Secures Major EIB Financing to Expand Geothermal Heat and Electricity Networks for Carbon Neutrality

(IN BRIEF) The European Investment Bank has signed a €100 million loan agreement with Orkuveitan to fund the expansion and renewal of electricity and geothermal heating networks in the Reykjavík metropolitan area. The project will help meet rising energy demand due to population growth, improve supply security, and support Iceland’s target of becoming carbon neutral by 2040. Backed by the EFTA Facility and fully aligned with EIB climate goals, the financing will strengthen electricity distribution and increase geothermal capacity, providing long-term benefits to households, businesses, and the city’s energy transition.

(PRESS RELEASE) LUXEMBOURG, 18-Nov-2025 — /EuropaWire/ — The European Investment Bank (EIB) has signed a €100 million loan agreement with Orkuveitan, Reykjavík’s leading energy and utility provider, to support a major infrastructure modernisation programme in Iceland’s capital region. The financing will be used by Orkuveitan’s subsidiary, Veitur Utilities, to update and extend the city’s electricity distribution systems and geothermal district heating networks, meeting the rising demand for efficient and sustainable energy services in a rapidly expanding urban area.

With Iceland’s population growing at a record pace, the need for resilient utility services, energy-efficient housing, and modern infrastructure has intensified. The upcoming investment will not only expand capacity but also replace ageing components of the electricity and heating networks, reinforcing long-term supply security and performance for residents and businesses alike.

The project also includes steps to boost the country’s geothermal heat production and reinforce the region’s electricity grid, aligning directly with Iceland’s ambition to achieve net-zero carbon emissions by 2040. These efforts fall in line with EIB’s climate action goals and support its environmental sustainability roadmap.

EIB Vice-President Karl Nehammer underscored the strategic value of this investment:
“Long-term investment in sustainable energy systems is essential for resilient and affordable infrastructure. By financing Orkuveitan’s green infrastructure programme, the EIB is supporting Iceland’s energy transition and helping the capital region prepare for continued growth with clean, reliable and secure energy.”

Orkuveitan’s CEO, Sævar Freyr Þráinsson, also highlighted the importance of the funding:
“This financing marks an important step towards ensuring secure, sustainable and affordable energy for the capital area in the years ahead. By strengthening the electricity distribution network, we are enhancing supply security, and by expanding geothermal heat production, we are preparing our community for continued growth, energy transition and Iceland’s carbon neutrality target by 2040. This is a vital investment in infrastructure that will benefit households, businesses and future generations.”

This long-term financing comes via the European Free Trade Association (EFTA) Facility—an EIB instrument dedicated to supporting sustainable investments in EFTA member states. The entire project has been classified as climate action and is aligned with the bank’s broader strategic commitments to environmental and energy transition efforts.

Background

EIB

The European Investment Bank (ElB) is the long-term lending institution of the European Union, owned by its Member States. Built around eight core priorities, the EIB finances investments that contribute to EU policy objectives by bolstering climate action and the environment, digitalisation and technological innovation, security and defence, cohesion, agriculture and the bioeconomy, social infrastructure, the capital markets union and a stronger Europe in a more peaceful and prosperous world.

The EIB Group, which also includes the European Investment Fund (EIF), signed nearly €89 billion in new financing for over 900 high-impact projects in 2024, boosting Europe’s competitiveness and security.

All projects financed by the EIB Group are in line with the Paris Climate Agreement, as pledged in the organisation’s Climate Bank Roadmap. Almost 60% of the EIB Group’s annual financing supports projects directly contributing to climate change mitigation, adaptation, and a healthier environment.

Fostering market integration and mobilising investment, the Group supported a record of over €100 billion in new investment for Europe’s energy security in 2024 and mobilised €110 billion in growth capital for startups, scale-ups and European pioneers. Approximately half of the EIB’s financing within the EU is directed towards cohesion regions, where per capita income is lower than the EU average.

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Media contact:
Thomas Eriksson
t.eriksson@ext.eib.org

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SOURCE: European Investment Bank