Britain's energy plans call for tapping Iceland's geothermal resources in a move that could rekindle talk of creating a supergrid for electricity linking the continent, UK, North Africa and Iceland.
But experts say the project is too expensive and technically challenging to be feasible in the foreseeable future.
Interconnectors in North West Europe will lead to electricity flows following the rules of supply and demand. So it will flow where it is needed, which is good for our security of supply, the UK's Department of Energy and Climate Change (DECC) said.
UK energy minister Charles Hendry and the Icelandic ambassador have discussed the idea of an interconnector to transport renewable energy from Iceland's geothermal and hydro sources to UK homes.
Hendry plans to visit Iceland again next month to discuss the matter further, DECC said.
Interconnectors are high voltage power cables that link electricity grids.
The EU Commission aims to use these to integrate Europe's national electricity grids into one pan-European power market.
However, the connection to Iceland would require the world's longest interconnector, spanning 1,800 kilometres on the seabed of the North Atlantic at depths of up to 3,000 metres.
Laying an underwater (power) cable of unprecedented length to Iceland would be hugely expensive. It involves a leap into the conceptual wilderness beyond supergrids, said David Stokes, director at consultancy Timera Energy.
Britain is currently linked to France and the Netherlands by interconnectors with a capacity of 3.5 gigawatts (GW), or the equivalent of 3 to 4 standard European nuclear power plants. An interconnector is also under construction between Britain and Ireland.
Eventually, Britain could have access to over 10 GW of capacity if its plans to connect to several other countries go ahead.
It has plans for another 9 GW of interconnection, possibly linking the UK to Belgium, Norway, Spain, Iceland, the Channel Islands, as well as adding to current links with France.
Interconnectors ... add diversity to our electricity mix and strengthen security of supply, the Energy Networks Association's Tony Glover said.
For consumers the ability to link electricity supplies from the rest of Europe is good for competition in the market and will generally help to keep prices competitive.
Britain is already working with countries including France, Germany, Norway and Sweden to negotiate the North Sea Countries Offshore Grid Initiative, a network of underwater cables that would connect offshore wind farms and other power sources to nearby countries.
The plans are part of an idea of a electricity supergrid that could one day span Iceland and Scandinavia, Britain, continental Europe and across the Mediterranean into North Africa.
But experts say that such plans could be overambitious.
An EU-wide supergrid is not feasible in the near future, with costs estimated at as much as 100 billion euros ($131.20 billion).
To make any progress, the government will need to confront the reality that plans to deliver projects of this scale are inconsistent with the fiscal and balance sheet constraints faced by European governments and companies, Timera Energy's Stokes said.
Plans for a cable between Britain and Spain would be of a similar scale as the Iceland-UK link, and would come at a time when Spain is cutting back expenditure amid the European sovereign debt crisis.
Spain currently has a one-way interconnector in place with France which only enables it to import electricity.
The world's longest power connection currently in operation is the 580 km NorNed cable that links Norway and the Netherlands, which opened in 2008 at a completion cost of 600 million euros.
The longest power cable in planning is the 1.5 billion euro EurAsia Interconnector project that plans to cross 1,000 km from Israel via Cyprus to Greece at depths up to 2,000 metres.
Stokes said interconnectors were difficult to finance given their return is driven by uncertain future price differentials between markets.
Interconnectors currently make little sense as a way of sourcing baseload energy over large distances, he said.
($1 = 0.7622 euros)
(Editing by Jason Neely)