Energy and tourism : A comparative study for the Skagafjörður region in Iceland

Abstract: In a region in the northern part of Iceland, Skagafjörður, a local organization is preparing to harness the flow of the river Jökulsá to produce electricity. But the hydroelectric power project, Villinganesvirkjun, will put an end to the rafting tours offered, as part of the tourist attraction, down the river canyons. In the recent years, Skagafjörður has had some economic problems that resulted in migration out from the area. This is a great general concern of the local government and projects have been established in order to resist this development. One of them was to analyze the possibilities of establishing power intensive industries in Skagafjörður. It was from there that the idea of a hydro electric power plant emerged. If the power plant will be built it means that the rafting tourism in the rivers will come to an end. The rafting tourism has grown rapidly or up to 29% a year. The purpose of this project is to highlight the economic consequences of the two mutually exclusive alternatives: Villinganesvirkjun, hydroelectric power plant and rafting tourism in the Skagafjörður region. Our research and calculations have implied that river rafting tourism is a more preferable alternative for the Skagafjörður region and is that conclusion based on the man power needed for the operation, the marginal effect and the financial value of the rafting tourism which all were more beneficiary for the region than the Villinganesvirkjun project. However, it is important for readers to understand that the financial calculations are based on criteria that might change and the results can’t give a final conclusion of the different economic consequences of the two alternatives. It is though possible to view the results as indicators. The fact that there are enough unused power resources in the region and Iceland as whole, but at the same time there are no rivers that provide the same rafting quality as Jökulsá, is a factor that we thought should be kept in mind.