JBÍ (Járnbrautarfélag Íslands, e. The Icelandic Rail Company) proudly presents a hopelessly optimistic vision for a national rail network!
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First, let us see the big picture. I suggest three rail lines radiating from the capital Reykjavík; one to Keflavík International Airport. One going east to the towns in the southern lowlands and terminating at the new ferry harbour that connects Vestmannaeyjar with the mainland and finally one going north and terminating in the northern town of Húsavík.
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A close-up of the southwestern part of the country. I suggest one suburban station for each of the long distance lines before the lines merge and terminate at Reykjavík Central station. I know there are some problems associated with having a terminus station as the main station but the geography of Reykjavík does not leave us with much choice since the city center and business district is on a peninsula.
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A close-up view of the red airport line. It is the most logical first section of the system that connects the Reykjavík metro area with the airport and the Town of Reykjanes (Reykjanesbær) which has a population of around 18.000 people. This would be a simple and very straight route over a flat lava desert from the airport to the urban fringes of metro Reykjavík.
I suggest digging a 3.6 kilometer long tunnel under the suburban town of Hafnarfjörður. There is no way to run on the surface through the town and going around it would be difficult because of NIMBY an environmental concerns and would add to the distance of the line as well.
When emerging from the tunnel on the north side of Hafnarfjörður, the line would follow the urban freeway (road 41) north, there is plenty of space in the median there. It would then turn west along road 49 and merge with the other lines to be built later and head into Reykjavík Central. This would be the most expensive portion of the route as it would need to run in a tunnel at least for the final three kilometers into the central station and be wide enough to handle the eventual traffic of both the long distance lines and the urban rail network (more on that later). It makes sense to terminate the airport line at Mjódd (indicated by the blue arrow) at first, until the tunnel could be built.
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A close-up of the blue eastern line. The second priority after the airport line would probably be building this line to Selfoss. Continuing from there would only come after the northern orange line had reached Akranes. The main purpose of continuing to the east would be to connect with the ferry harbor to Vestmannaeyjar (pop. 4000) but the line would swing by at the smaller towns of Hella and Hvolsvöllur. The construction is fairly straight-forward except for the mountain pass between Reykjavík and Hveragerði which is problematic both because of tough winter conditions and steep gradients. A 11 kilometer long tunnel under the highest part of the route solves this. In addition to passengers, the blue line could be an important route for freight rail. Fresh produce by the large fishing industry in Vestmannaeyjar could be quickly transported via rail to the airport for air-freight to markets in Europe and North America.
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The first section of the orange northern line.
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The second section of orange northern line.
The north line is the longest section of the system by far but a low traffic volume allows us to have most of it single-tracked. The Swedish Botniabanan is a potential model for this. The line would head out of the city to the northeast, crossing some sounds and channels by bridges. It would then go via 6.5 km long tunnel under the fjord Hvalfjörður (there is already a road tunnel under the fjord). The line would then go into the town of Akranes (pop. 7000). With a travel time of only 15-20 minutes between Akranes and Reykjavík C, the town would pretty much function as the same urban area. Continuing the line beyond Akranes would probably not be feasible except by going all the way to Akureyri (pop. 17,000) in the north where the train could capture most or all of the current air travel market between Reykjavík and Akureyri. Several small small towns and villages happen along the way so we stop there as well even if most trains should probably bypass them. Sauðárkrókur (pop. 2600) and Borgarnes (pop. 1800) are the most significant.
This is the most difficult line to build because of the geography. Three long tunnels are needed to reach Akureyri and bypass high elevations and gradients. 7 km, 10 km and 22 km long.
On the map I show a further extension of the north line to the town of Húsavík (pop. 2500) by digging a 12 km tunnel under the fjord Eyjafjörður and the mountain immediately by its side. This would not happen with the current situation in the area. Húsavík has however a big potential for industrial expansion that would both increase the population and (more importantly) create demand for freight rail.
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Finally, I suggest that within the Reykjavík metro area, the long distance rail corridors would be used for mass transit as well. This implementation assumes a fast urban rail network with about 1 km interval between stations, shown as pink lines on the map (darker red sections are underground). I also suggest a light rail network, indicated by blue lines, to service the areas that are not well connected to the "heavy" rail network.
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These plans could drastically change how Reykjavík develops as a city. The green shaded areas on the above map indicate areas where new development could take place. These include the site of the current domestic airport near the city center, that airport would become obsolete with a fast rail link to the Keflavík International Airport so the area could be developed as a densely built urban environment that would basically be an extension of the current city center.
Further east are areas that currently have some low value commercial and industrial development but their central location make them ideal for new job centers and dense transit oriented development. To the north are currently undeveloped areas that could become new suburbs, well served by the urban rail.
First, let us see the big picture. I suggest three rail lines radiating from the capital Reykjavík; one to Keflavík International Airport. One going east to the towns in the southern lowlands and terminating at the new ferry harbour that connects Vestmannaeyjar with the mainland and finally one going north and terminating in the northern town of Húsavík.
A close-up of the southwestern part of the country. I suggest one suburban station for each of the long distance lines before the lines merge and terminate at Reykjavík Central station. I know there are some problems associated with having a terminus station as the main station but the geography of Reykjavík does not leave us with much choice since the city center and business district is on a peninsula.
A close-up view of the red airport line. It is the most logical first section of the system that connects the Reykjavík metro area with the airport and the Town of Reykjanes (Reykjanesbær) which has a population of around 18.000 people. This would be a simple and very straight route over a flat lava desert from the airport to the urban fringes of metro Reykjavík.
I suggest digging a 3.6 kilometer long tunnel under the suburban town of Hafnarfjörður. There is no way to run on the surface through the town and going around it would be difficult because of NIMBY an environmental concerns and would add to the distance of the line as well.
When emerging from the tunnel on the north side of Hafnarfjörður, the line would follow the urban freeway (road 41) north, there is plenty of space in the median there. It would then turn west along road 49 and merge with the other lines to be built later and head into Reykjavík Central. This would be the most expensive portion of the route as it would need to run in a tunnel at least for the final three kilometers into the central station and be wide enough to handle the eventual traffic of both the long distance lines and the urban rail network (more on that later). It makes sense to terminate the airport line at Mjódd (indicated by the blue arrow) at first, until the tunnel could be built.
A close-up of the blue eastern line. The second priority after the airport line would probably be building this line to Selfoss. Continuing from there would only come after the northern orange line had reached Akranes. The main purpose of continuing to the east would be to connect with the ferry harbor to Vestmannaeyjar (pop. 4000) but the line would swing by at the smaller towns of Hella and Hvolsvöllur. The construction is fairly straight-forward except for the mountain pass between Reykjavík and Hveragerði which is problematic both because of tough winter conditions and steep gradients. A 11 kilometer long tunnel under the highest part of the route solves this. In addition to passengers, the blue line could be an important route for freight rail. Fresh produce by the large fishing industry in Vestmannaeyjar could be quickly transported via rail to the airport for air-freight to markets in Europe and North America.
The first section of the orange northern line.
The second section of orange northern line.
The north line is the longest section of the system by far but a low traffic volume allows us to have most of it single-tracked. The Swedish Botniabanan is a potential model for this. The line would head out of the city to the northeast, crossing some sounds and channels by bridges. It would then go via 6.5 km long tunnel under the fjord Hvalfjörður (there is already a road tunnel under the fjord). The line would then go into the town of Akranes (pop. 7000). With a travel time of only 15-20 minutes between Akranes and Reykjavík C, the town would pretty much function as the same urban area. Continuing the line beyond Akranes would probably not be feasible except by going all the way to Akureyri (pop. 17,000) in the north where the train could capture most or all of the current air travel market between Reykjavík and Akureyri. Several small small towns and villages happen along the way so we stop there as well even if most trains should probably bypass them. Sauðárkrókur (pop. 2600) and Borgarnes (pop. 1800) are the most significant.
This is the most difficult line to build because of the geography. Three long tunnels are needed to reach Akureyri and bypass high elevations and gradients. 7 km, 10 km and 22 km long.
On the map I show a further extension of the north line to the town of Húsavík (pop. 2500) by digging a 12 km tunnel under the fjord Eyjafjörður and the mountain immediately by its side. This would not happen with the current situation in the area. Húsavík has however a big potential for industrial expansion that would both increase the population and (more importantly) create demand for freight rail.
Finally, I suggest that within the Reykjavík metro area, the long distance rail corridors would be used for mass transit as well. This implementation assumes a fast urban rail network with about 1 km interval between stations, shown as pink lines on the map (darker red sections are underground). I also suggest a light rail network, indicated by blue lines, to service the areas that are not well connected to the "heavy" rail network.
These plans could drastically change how Reykjavík develops as a city. The green shaded areas on the above map indicate areas where new development could take place. These include the site of the current domestic airport near the city center, that airport would become obsolete with a fast rail link to the Keflavík International Airport so the area could be developed as a densely built urban environment that would basically be an extension of the current city center.
Further east are areas that currently have some low value commercial and industrial development but their central location make them ideal for new job centers and dense transit oriented development. To the north are currently undeveloped areas that could become new suburbs, well served by the urban rail.
Although I think light rail for Reykjavik area would be more feasible than full scale 'real' railway line connecting several towns. Real problem would be cost - both building the line (railway building is expensive) and maintaining it. Keeping it running might be even bigger issue - really small population means low passenger traffic which might need yearly government funding to keep railway running (and we all know how unpopular rising taxes are 
