REYKJAVIK, ICELAND—Snorri Sturlusson is the first name in geothermal development here. That's because this original Icelander tapped Earth's heat for a pool in his backyard, according to the medieval Icelandic Sagas. That pool, recently restored, still sits atop a grassy hill in the town of Reykholt. It's about 15 feet (4.5 meters) across, perfectly round, paved with gray and brown basalt tiles, and as warm to the touch as it was when Snorri built it almost a thousand years ago.

Sturlusson's modern-day descendants are striving to follow his example, especially the president, Ólafur Grímsson, who travels the world extolling the virtues of geothermal power. From the warm water that heats this capital city to the "Blue Lagoon," Iceland is dotted with efforts to harness the volcanic power beneath its rugged and often stark surface.

Slide Show: View Iceland's Majestic Geothermic Scenery

Video: Iceland Geothermal Power

The island itself is basically a blister of porous basalt at the crack in Earth's crust where the North American and Eurasian plates are pulling apart. It possesses two of the traits dearest to geologists in search of exploitable geothermal power, according to power company Reykjavik Energy: enormous underground reservoirs of water that are continually renewed by levels of annual precipitation that range as high as 177 inches (450 centimeters) over Iceland's glaciers, and shallow plumes of magma that heat the deepest reaches of these reservoirs to temperatures in excess of 750 degrees Fahrenheit (400 degrees Celsius).

Plus, nowhere else other than the Great Rift Valley in Africa is seafloor spreading visible on land, says Richard Hey of the University of Hawaii. This constant generation of new crust makes the country one of the most geologically active on Earth. And it is that activity the Icelanders are trying to tap.

Home heat
Historically, Icelanders used Earth's heat directly for washing and baking the "hot spring bread" known as hverabrauth. In 1930 water from boreholes drilled into geothermal springs in Laugardalur, just east of the capital city of Reykjavik, was piped to Austurbaer primary school about two miles (three kilometers) away.

Whereas district heating in Iceland is straightforward—naturally pressurized "low temperature" geothermal fields containing potable water at temperatures less than 300 degrees F (150 degrees C) are common throughout the country, according to Reykjavik Energy, the regional power authority that includes Iceland's capital city—it wasn't until the first oil shock of the early 1970s that Icelanders got serious about exploiting their native energy resources. Ásgeir Margeirsson, CEO of Geysir Green Energy, says that at the time homes in Iceland were almost entirely dependent on oil heat.

By financing thermal and electric power plants throughout the country, as well as the infrastructure required to deliver hot water to homes, the Icelandic government not only eliminated the country's dependence on fossil fuels for heating and electricity, but also jump-started an entire industry, according to Alexander Richter, Director of Sustainable Energy, Global Research and Communication at Glitnir Bank.

Iceland is now the leading exporter of geothermal expertise to the rest of the world, according to the Trade Council of Iceland. The nation's engineers, geologists and financiers work on projects anywhere there are incentives (as in Germany, which has a feed-in tariff on geothermal of 20 cents per kilowatt-hour) or easily-tapped reservoirs of underground heat (as in the Philippines). Iceland's third-largest bank, Glitnir, helped finance the world's biggest geothermal district heating project in the city of Xianyang, China, and it retains a staff of geologists to evaluate the potential of early stage drilling projects, such as one it financed in Nevada, Richter says.

Today, Reykjavik is home to the largest district heating system in the world, and it has been estimated that were Icelanders still dependent on oil, their heating costs would be five times as high, according to Margeirsson. Across all of Iceland, 90 percent of households are connected to a district heating system, with just a few remote households getting their heat from fossil fuels such as propane.

Clean energy boom
Today, 99 percent of Iceland's electricity is produced from renewable sources, 30 percent of which is geothermal (the rest is from dams—and there are a lot of them), according to Iceland's National Energy Authority. When transportation, heating and production of electricity are considered as a whole, geothermal provides half of all the primary energy used in Iceland. (Although there are efforts underway to use the island's supplies of renewable energy to power its fishing fleet and motor vehicles through conversion to hydrogen fuel, these efforts are still at the earliest stages of development.)

For example, guests at the famous "Blue Lagoon" spa cannot help but notice the Nesjavellir geothermal power plant in the distance, whose plumes of steam tower over the turquoise outdoor pools from which the lagoon derives its name. Indeed, the lagoon would not exist without the plant, whose stream of used groundwater gradually clogged the porous rocks into which it had been flowing, forming the hot baths that are now Iceland's leading tourist attraction.

Yet only a small fraction of Iceland's geothermal capacity has been tapped. "It's been estimated that by conventional use of geothermal, the available power in Iceland could be on the order of 20 to 30 terawatt-hours per year," says Ólafur Flóvez, general director of ÍSOR, or Iceland Geosurvey, the governmental institution that employs roughly 100 geologists to conduct research on geothermal resources. "Currently we're producing maybe four terawatt-hours per year." (A terawatt equals one trillion watts.)

Industry is already driving further development of Iceland's remaining geothermal resources. Aluminum smelting alone currently uses more electricity than all other activities in Iceland combined, and by 2015, 400 additional megawatts (million watts) of geothermal electricity are scheduled to go online just to serve a single new aluminum smelter in Bakki, in the north of the country, according to U.S.-based aluminum giant, Alcoa, which is investing heavily in the plant. Other industries are also looking to take advantage of this resource.

"It's no secret that both Microsoft and Google have looked at Iceland," Richter says. The enormous power needs of the clusters of powerful computers used to run the World Wide Web, known as data centers, have inspired companies to look for sites anywhere in the world there is cheap energy and sufficient connection to global networks.

The future is now
Not content to max out the country's geothermal potential using existing technologies, a consortium known as the Iceland Deep Drilling Project (IDDP), which includes the Icelandic government, the U.S. National Science Foundation, the European Union and Alcoa have banded together to tap an exotic and hard to exploit form of geothermal energy: supercritical steam.

When steam exceeds a certain temperature and pressure—in excess of 750 degrees F (400 degrees C) and 250 times greater than normal atmospheric pressure—the density of steam becomes identical to that of liquid water. This steam "would yield five to 10 times as much energy per unit of volume extracted from the Earth," says Sverrir Thórhallsson, head of ÍSOR's engineering department.

Supercritical steam has already been used in coal-fired and nuclear power plants. The mechanism by which it yields higher efficiency is complicated, but ultimately it boils down to this: steam turbines need very hot steam in order to produce power, and supercritical steam is much closer to this temperature than cooler steam, says Ashok Malhotra, who literally wrote the book on the subject (Thermodynamic Properties of Supercritical Steam). As a result, very little energy is wasted in transferring heat from the steam that comes out of the ground to the steam that will spin the turbine. In addition, the entire system can be constructed under the assumption that steam and water don't have to be separated in the early phases of the power generating cycle—because at these temperatures and pressures, these usually distinct phases of water are literally one and the same.

Tapping supercritical steam will require drilling deeper than any geothermal project has ever drilled before; as deep as three miles (five kilometers) below the surface. No one knows exactly what the water will be like at that depth, according to Benedikt Steingrímsson, chief project manager of ÍSOR.

"We have already reach[ed] temperatures of 360 degrees C [680 degrees F] or more only at a depth of 2.2 kilometers [1.4 miles]," Steingrímsson says. "So we're already very close to the supercritical point. The heat is certain—how much fluid there is, what its chemical properties are, and its gas content are unknown."

Dissolved solids, toxic metals and corrosive gases are only some of the obstacles the IDDP will have to overcome in the next 10 years—also at issue is the pressure of the supercritical fluid, which is 10 times greater than existing instruments and power plants have been designed to handle.

"Everyone knows it won't turn on lightbulbs anytime soon," Thórhallsson says. But surely Sturlusson, whose offspring still live in Iceland to this day, would have been proud.