As well as his fabled Tate Modern sun, the ever-modest Icelandic-Danish artist Olafur Eliasson has made waterfalls in New York and rivers run green all over the world. But what’s he up to in Manchester with Wayne McGregor and Jamie xx?

Olafur Eliasson, the Icelandic-Danish artist who will probably always be best known for the vast sun he induced to rise inside the Turbine Hall at Tate Modern in 2003, works in Berlin in a building that once housed a brewery. Artists haven’t been associated with garrets for a while now, but even by 21st-century standards this place is something else. While Eliasson calls it a “reality-producing machine”, a term born of his conviction that, far from being rarefied and utopian, the projects it turns out are deeply involved with the world in which they’re made, it seems more like a kind of factory to me, albeit one devoted to the manufacture of ideas rather than of things.

Eighty people are employed in its cavernous spaces, working on everything from the archive to the production of catalogues, the staging of international exhibitions to the design of full-scale architectural projects. At the top of the building is the office canteen, a kitchen so modish it has been visited by such famous cooks as Alice Waters and Rene Redzepi, and will shortly publish its own recipe book; the staff eat its mostly vegetarian offerings together, and must each add their names to the washing-up rota. At the bottom, where my tour ends, is Eliasson’s lair, a tiled room that brings to mind a Victorian swimming pool, and which is filled with mid-century furniture and all manner of oddities, his collection of lightbulbs and a dashing cocktail cabinet among them. In this covetable realm, I stand for a moment on an island-shaped rug whose lurid green just about matches my mood. Never mind working here. I wouldn’t mind moving in.

Facebook Twitter Pinterest Psychedelic sublime: Olafur Eliasson’s sun, properly titled The Weather Project, at Tate Modern’s Turbine Hall in 2003. Photograph: Alamy

Today is a German national holiday. The place is quiet: only a few of the young staff are around, and all of them wear headphones. Even so, the artist himself manages to slip in unnoticed, his entourage consisting only of his small daughter and her friend. Among curators and other art world people, Eliasson is known both for his politeness and modesty, and when you meet him, his straightforwardness and grace – I’ve never heard someone sound so sincere when accepting compliments – strike you immediately as all of a piece with his nubby Scandinavian clothes, his understated gestures, his instinctively democratic manner. Eliasson would rather die than refer to himself as “famous” – he prefers the word “exposed” – and thanks to this you wonder about his ego, which seems somehow to have gone missing. But then you take in his eyes, huge and heavy-lidded behind smeary glasses. Beyond the discretion lies an intensity he cannot entirely disguise. It registers in conversation as an absence, as if it had been cordoned off for its – or more likely his – own safety.

I’m here to talk to him about Tree of Codes, a new ballet that will premiere at the Manchester international festival next month, and which takes its inspiration from the 2010 book of the same name by Jonathan Safran Foer (the young American novelist “wrote” Tree of Codes by cutting into the pages of The Street of Crocodiles by Bruno Schulz; the result was both a new story and a sculptural artwork).

The ballet is choreographed by Wayne McGregor, and scored by producer and DJ Jamie xx, while Eliasson is responsible for its “visual concept”, though what this amounts to he is unable to say precisely: ultimately, his design will owe a great deal of its effect both to McGregor’s dancers and to the audience.

Facebook Twitter Pinterest Eliasson in his Berlin studio. He would never call himself famous – he prefers the word ‘exposed’. Photograph: Malte Jaeger/Observer

“I am hosting them. All along, I was very focused on how I might exercise that sense of hospitality. On stage will be a mirror, and it will reflect the room. It’s a stretch to say that it puts the audience on the stage. However, they will be conscious of being visible there. But anyway, let’s see how it works.”

Will he be nervous? If his description is accurate, his ideas won’t exist at all until the opening night. He shakes his head. “Unlike a painter, who I deem lucky and safe, who can always look at a painting and say: ‘No, I’m not going to take that into the show’, I’ve always had to live with risk. When I did the Turbine Hall, I saw it at the opening along with everyone else. I couldn’t test it in the studio.” He blinks slowly. “That is how it is for me.”

Working on Tree of Codes has been wonderful, he says. “I was very excited. We were lucky that Jamie xx said yes. He comes from a field where he blends popular with experimental music, and that created the first architectural grid on which Wayne and I had our conversations. I know Jonathan quite well; we have a shared interested in books as objects. By sculpting out the story, he created a new space, and Wayne reacted to that: the way he [McGregor] works is often based on taking out moves rather than adding them. People see space as a compilation, the placing of layers on top of each other. But you can also make a space by removing all the surrounding elements and then seeing what’s left. In Ethiopia, Coptic churches are carved out of mountains.”

Facebook Twitter Pinterest Green river, the Northern Fjallabak Route, Iceland, 1998. Photograph: Courtesy the artist and Frith Street Gallery

McGregor’s practice has long appealed to Eliasson, not only on account of these “architectural components”, but because he appreciates the “socially driven ideologies” it has introduced into dance. “The way the team of dancers care for one another, the mix of genders, the fact that both a man and a woman can play the same role, the ethnic mix of the dancers, and so on. All this meant we could have a good conversation.”

Of course, in the scheme of things, this is a relatively small project for Eliasson – or so it looks from the outside. Occasionally, he will indeed turn out a single piece for a private collector; I’ve just seen one, a giant globe-thing destined for South America. Sometimes, too, he will stage exhibitions in small galleries as well as large (his most recent show of new work took place at the Museum of Modern Art in Addis Ababa). But usually he works on an almost preposterously grand scale, across all media, and oblivious to barriers of any kind, whether psychological or physical. In 1998, he used uranin, a dye used to detect plumbing leaks, to colour a Berlin river green. In 2008, he created four huge manmade waterfalls in New York harbour. In 2011, he designed the exterior of Harpa, Reykjavik’s new concert hall, a soaring cliff of hexagonal glass tubes and mirrored panes inspired by Iceland’s volcanic geology. Even when he’s working in smaller, off-the-radar museums, he’s apt to push at the limits of what would appear to be possible. At the Danish Louisiana Museum of Modern Art last year, he filled an entire wing with a landscape of stones and water as part of an installation called Riverbed (he described this, with some understatement, as a “stress-test” of the modernist building’s physical capacity).

Facebook Twitter Pinterest Eliasson’s Riverbed, 2014, installed at Copenhagen’s Louisiana Museum of Art. Photograph: Martin Brink/Alamy

Eliasson, though, doesn’t quite see it this way. “You think so?” he asks, when I point this out. “I don’t think my scope is wide enough. My projects are all connected. There’s a high degree of synchronicity. And I have a lot of confidence in things like abstraction, so it’s not a big step for me to move from one medium to another.”

All the same, doesn’t he ever feel weary? Aren’t there times when he longs just to sit somewhere quietly with only a sketchbook for company? “I do some contemplative exercises occasionally,” he says, though his voice rather lacks conviction. “I’m interested in atmospheric questions: stress reduction, empathy, social neuroscience. A fair amount of my time here at the studio is about addressing the quality of an experience. In a good week there are plenty of pockets of time when I look at my own art works, though of course there can be pain involved in that if they don’t look how I want them to.”

Does his work make him anxious or happy, or both? A few moments pass before he answers. “Actually, the challenge is to be happy or anxious. On a good day, I’m emotionally involved enough to get aroused in one direction or the other. The trouble is that I’m so interested in technical things, and I get numb; I sit there for so long, I can’t see whatever it is that I’m looking at. I have to get someone I know to come in, and I stand behind them and see it through their eyes. Sometimes, I can’t see something, and I tell myself: just sit here for 10 minutes, and then the work of art will tell you what you think about it. Or else I try to decipher the atmosphere around it. If these tricks don’t work, I take a walk and come back to it.”

Facebook Twitter Pinterest Eliasson designed the facade of Harpa Concert Hall and Conference Centre in Reykjavik, Iceland, in collaboration with Henning Larsen architects. Photograph: Nic Lehoux

Does he read what the critics have to say about his work? “Sometimes. Though by then, it’s too late. There’s a sense of hopelessness. The work is done. But I’m not from the school of the-artist-versus-the-critic. There’s such a lack of appreciation of critics [now] that those few who are in the newspapers deserve to be read.”

It is, he believes, a mistake to expect artists to be so “brilliant” they can immediately articulate “the path” between an idea and the work of art it will eventually become.

“You have an idea… an intuition, a feeling, a subconscious thing. It comes in many versions, but when it does it is sometimes better to go back and ask where it came from than to immediately decide where it is about to go. If you know where it came from, you might know why you had it, and once you know why, it’s easier to know how. The brush or the pencil: they’re just tools. The playing, the fooling around; you need to step out of the macho-driven goal-orientated brutality of today’s success criteria. You need to be confident of the step you are taking, not of where it will take you because the moment you put the pencil to paper is the moment when you change the world.” On paper, this sounds at once grandiose and a touch hippy, something from a Ted talk or a book by Elizabeth Gilbert. But Eliasson’s tone is even, careful, dispassionate. He could just as easily be talking about making dining chairs as he could art.

Eliasson was born in 1967 in Copenhagen, the city to which his 21-year-old parents, Elías Hjörleifsson and Ingibjörg Olafsdottir, had emigrated from Iceland a year earlier in search of work, his father as a cook, his mother as a dressmaker. His mother was from an Icelandic fishing village that could be traced back to the 11th century; his father’s family belonged to artistic Reykjavik (his grandmother was a photographer, and his grandfather a publisher). When he was four, however, his parents separated, and eventually his father returned to Iceland. The distance between the two of them must have been painful, but it stirred his son, already keen on drawing, into creativity. Elías was also artistic: he painted watercolours, drew fossils and, in a studio he set up on a boat, suspended a pen above a sheet of paper in such a way that the rocking of the waves would produce drawings. “I didn’t see him often. He was a cook on a fishing boat, and away a lot. So when I did, I wanted to impress him. I would make these amazing drawings to capture his attention” Did it work? “That’s private,” he says, softly. But whether it did or not, by the time he was 14, he could draw every bone in the human body.

At around the same time, he saw breakdancing on television. Captivated, he and two friends formed a group — the Harlem Gun Crew — and, wearing silver spandex costumes made by his mother, began performing at clubs; they went on to win the Scandinavian championship. His interest in space, and how the body might move through it, can be traced back to this period, though his eyes were by now on another prize: art school.

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Facebook Twitter Pinterest Between Piers 4 and 5 (Brooklyn), The New York City Waterfalls, 2008. Photograph: © Olafur Eliasson, 2008 Courtesy Public Art Fund

In 1987, his father having been hospitalised for alcoholism, Olafur returned to Iceland to help care for his small half-sister, at which point, with time on his hands, he decided to apply for the Royal Danish Academy of Fine Arts. He submitted five examples of his work, one of which was a circular black tombstone he had lacquered 100 times. He was duly awarded a place. Was he thrilled? Was he filled with ambition? “I would be lying if I said there wasn’t an element of escapism in my interest in art as a teenager,” he tells me now. “Making no sense seemed more attractive to me than making sense. Applying to art school was a lovely way for me to disconnect. Once I got there, though, I realised that art is about connecting. Instead of stepping out of the world, I was stepping right into the heart of it. This was a revelation for me. I thought it was only about being a good artist so that my father would like me. But it was more about shaping the world.”

His career began in 1993, when he moved to Cologne and, while employed hanging other people’s shows, began experimenting with installations of his own. At the Cologne Art Fair, he showed a wall covered with moss he’d imported from Iceland; his first solo show, a few months later, featured an indoor rainbow made from a garden hosepipe. In 1998, he began to attract international attention with The Green River. In 2003, he created The Weather Project in the Turbine Hall at Tate Modern, at which point, everything changed. In 2006, a friend of the artist told the New Yorker that he once telephoned Eliasson while he was visiting the Tate; the sound of the crowds roaring their pleasure – that day, they’d used their bodies to spell out the words “Fuck Bush” in the mirror on the ceiling – was so loud, Eliasson thought he must be calling from a rock concert. He would deny it, but the noise has continued, metaphorically speaking, ever since.

Eliasson now commutes between Berlin and his family in Copenhagen (he is married to the Danish art historian Marianne Krogh Jensen and they have a son and a daughter, both of whom they adopted in Ethiopia). He is fluent in four languages, and thinks in whatever he happens to be speaking at the time. “Identity is the compilation of where you spend time,” he says, when I ask him if he feels Icelandic or Danish or something else altogether. “What defines it is a sense of belonging, the people I meet as well as the places I’ve been. I feel like an onion: there are layers and layers, but at the core, there’s nothing.”

Is it possible for him to match the artist he is now with the boy he was at 16? “There are two sides to that. The first is that I’m still 16 inside and I’m holding hands with myself. I’m very serious about that: it only seems like a minute ago. The other is that I’m very aware that I’m lucky to work with amazing people who have brought me quite far. I have a strong team, and gallerists who are not exploitative market fascists.”

Does the market as it is today – swollen, vulgar, endlessly distracting – worry him?

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“Art is incredibly robust. The cultural sector underestimates how strong that is. There is so much trust in art on the street. That’s why so much private funding is going into it. My view is that it is so strong, it can handle the challenges that the relatively exploitative market introduces. I welcome private initiatives like the Fondation Louis Vuitton [he showed there earlier this year]. They can be less conservative than those initiatives that use public money.

“The only drawback is when politicians use private money as an excuse to cut back on public money. I see that as a sign of political ignorance. The experience of the Manchester festival shows that if politicians have a bit of confidence, they can turn water into wine.”

Would he have continued to work as an artist if he hadn’t made any money?

Facebook Twitter Pinterest Eliasson’s Little Sun is a solar-powered lamp he designed to help the 1.2bn people in the world without electricity. Photograph: Tomas Gislason

“I think so, yes. I’m interested in what I’m interested in, and that has very little to do with the economy I am in. But I think your question implies that I am something now that I was not then. I don’t think that is the case. I have a lot of exposure, but that doesn’t make me special. I’m not special.” I give him a look, and he gives me one back. “I’m quite serious,” he says.

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What will he do next? He’s proud of Little Sun, the solar-powered lamp he designed to help the 1.2 billion people who have no electricity (a sun-shaped torch you can buy in the UK, though it is also available in 10 African countries where, among other things, it helps children study), and would now like to address some of the macro challenges that come with the movement of people in sub-Saharan Africa.

“The hierarchies are changing. I can see the cultural sector taking on more leadership when it comes to shaping the world in the future.”

He talks of a dinner at the Venice Biennale that was attended by, among others, a high-ranking Chinese cultural official, and museum directors from Austria and Japan.

“The discussion was so intense and robust and about what we share rather than what separates us. Imagine a dinner like that of foreign ministers – it would be a complete waste of time and money. But imagine a biennale for policymaking. There are 300 biennales in the world today. We could make them into the parliament of the world.”

He considers my face, on which scepticism must by now surely be blooming. “I know it sounds utopian,” he says, “but think about it.” For the first time since we met, his voice sounds close to urgent.

Tree of Codes is at the Opera House, Manchester, 2-10 July. Olafur Eliasson will be speaking at Interdependence, a two-day festival in Manchester commissioned by Guardian Live and Manchester international festival, on Saturday 4 July.