When the eruption ceased in July 1973 people considered whether the heat residing in the lava could be used for heating houses. Hlöðver Johnsen from the Natural Disaster Relief Fund together with Sveinbjörn Jónsson a CEO of the thermal radiator manufacturer Ofnasmiðjan attempted the first utilization of the steam from the lava by piping it from a drilled hole into the central heating system of the house at Helgafellsbraut 6.
Based on promising experience from this experiment it was decided to further utilize the heat. In 1976 the buildings closest to the lava were connected to a distribution system from Gufugil ("steam valley"), in all twenty residential houses, the hospital and the bank. This was also successful and consequently a distribution system was installed in the new neighbourhood which was being built in the western part of town. Older parts of town were connected later.
The backbone of the system was built in 1977. A central pumping station was erected on the corner of Kirkjuvegur and Heiðarvegur. It was equipped with an oil heater to maintain the temperature when the lava heating was insufficient. Simultaneously the town's remaining distribution network was constructed and a new power station on the eastern part on the lava, utilizing the steam produced by the infiltrating seawater below.
The most prominent researchers and constructors of the geothermal heating system were Þorbjörn Sigurgeirsson, Örn Björnsson and Sveinbjörn Björnsson from the National Energy Authority and the locals Már Karlsson, Hlöðver Johnsen and Sigmund Jóhannsson. The town's employees and many others worked enthusiastically on the project.
The new system was brought into use in 1978 and supplied 90% of all housing in Vestmannaeyjar with geothermal energy. It was a circulation system, where 70°C water was pumped to the consumers, but returned back at 30°C. This was the only geothermal system in the world built on newly cooling lava and many problems had to be solved. Most prominent were cracking problems due to pipes overheating and the pressure being sometimes too high for domestic radiators.
This local effort received international attention being the first attempt to utilize lava for energy. The schedule of officially visiting foreign dignitaries and other interested parties to Iceland included a visit to the island to see for themselves this unique scheme.
As the lava cooled, new sites were located for utilization until, eventually, it was not deemed cost efficient anymore and in 1988 the system was closed down. This unusual use of geothermal energy had served the inhabitants for more than a decade and saved them considerable money. Although the temperatures had declined, the distribution system was in place and since 1988 the water has been centrally heated by surplus electricity.
Source: Local signage