The idea of harnessing the geothermal energy of the Bjarnarflag Area was first debated in 1967 and the year after, the hydroelectric power stations on River Laxa were permitted to realize this project. At that time boreholes for the already existing Diatomite Factory had been sunk successfully. During the summer of 1968 the construction work was finished and British BTH generators with the capacity of 2½-3 MW were installed. They started delivering power on the 5th of March 1969 and their operation continued successfully during the following years. Because of the continuing tectonic and volcanic activity in the so-called “Gjastykki Area” during the period 1975-1984 and the imminent danger of eruptions in The Bjarnarflag Area, the power station was disassembled at the end of 1980. After reinstallation it has delivered 2½-3 MW.
The tectonic movements of the earth’s crust caused considerable damages to boreholes and the Diatomite Factory during the aforementioned volcanic period and in 1980 a new borehole was sunk there very successfully. This geothermal power station delivered power to the somewhat starved Lake Myvatn Area before the national grid was realized in 1980 and limited the expensive diesel engined production in Akureyri. In the beginning the Bjarnarflag Geothermal Power Station was the property of the Hydroelectric Power Stations of River Laxa and the steam energy supplier was the Geothermal Authority. In 1987 the Energy Authority bought The Geothermal Authority and the exploitation rights after the Laxa Power Stations had become a part of the Energy Authority.
The Bjarnarflag Power Station is the country’s first and oldest geothermal power station and one of the first of its kind in the world. Its success inspired The Energy Authority to undertake larger projects in this field, such as the Krafla, Svartsengi and Nesjavellir Power plants. In 2001 these power stations deliver approximately 200 MW, about one fifth of the total capacity. In the foreseeable future, the exploitation of geothermal energy is going to increase as the Authorities will realize the advantages and less and much more limited visible changes to the landscape than the exploitation of hydro energy does.
In 2001 the operation of The Bjarnarflag Power Station was terminated for a spell as the generators, turbines and other equipment were overhauled for about Ikr. 60 millions. Plans for the construction of a much larger power station have met with some resistance in the Capital Area and other geothermal plants have been run at full capacity. The inhabitants of the Northeast have always been positive supporters of a large geothermal power station in the Bjarnarflag Area and based their opinions on the successful exploitation of this energy source from the beginning.