From bust to boom: how Iceland plans to turn economy round

The International Monetary Fund, along with several European states, is collecting money to help Iceland's collapsed banking system. The country is on the verge of bankruptcy following the world financial crisis.

Despite the financial help, Iceland is trying to help save itself and cut expenses. The country is an expert in exploiting its natural resources by tapping into the volcanic power beneath its rugged surface.

Every year ten million tonnes of hot steam and salt water rise up through specially drilled holes – and it’s that steam that's used to generate electricity.

The Svartsengi plant drills holes two kilometres down into the earth's lava-heated – or geothermal – core. The steam is then used to drive a turbine which produces enough electricity for 30,000 people.

And the remaining hot water gets piped into 90 per cent of households across the country.

Geologists say there's potential to expand geothermal energy production.

“We have developed about 20 per cent of estimated capacity of geothermal for electricity generation and we still hope that we have an unused and undiscovered capacity deeper down in the roots of volcanoes,” says Benedikt Steingrimsson from Iceland Geosurvey.

The National Energy Authority's director says this natural, renewable power source means low cost energy bills.

“Just through heating in Iceland it saves about one tenth of our national income every year. So we can say that every tenth year we live free in Iceland because of geothermal energy,” says Gudni Johannesson from the National Energy Authority.

In the past few decades the country has maximised its natural resources and weaned itself off oil, thus saving over $8bn.

Now Iceland plans to become fully energy independent by 2050.

And it's in the race to be the first carbon-neutral nation in the world.

“There is a small amount of carbon dioxide coming up with geo thermal water out of the earth. But if we compare this amount with what would be generated if we were getting the same energy from fossil fuels, it's very small,” Gudni Johannesson says.

So, geothermal energy is cost-efficient, renewable and environmentally friendly.

And the surplus hot water from the power plant fills up the Blue Lagoon, creating a geo-thermal steam bath which is 40 degrees Celsius, salty and mineral-rich.

Most Icelanders would tell you this is the greatest benefit – perhaps helping to soak away some of the country's current financial woes.