Energy

Joint venture tries again to advance Unalaska geothermal energy project

Unalaska city leaders, a local Native corporation and a team of renewable energy experts from Fairbanks are working to unlock the energy potential inside a volcano near the Aleutian fishing port.

The geothermal resource in the base of Makushin Volcano — a prominent feature about 15 miles west of the city — is well documented, according to Dave Matthews, a program manager with the Ounalashka Corp. and Chena Power LLC joint venture.

However, the cost and logistical challenges common to rural Alaska projects, along with prior land ownership issues, have precluded development to date.

“Tens of millions of dollars have been spent in the last 40 years on the Makushin resource. There’s actually been 13 plans for development there,” Matthews said during a June 4 video conference presentation hosted by the policy think tank Commonwealth North. “People have written papers and gotten their Ph.D.s based on this resource. It’s well known in the geothermal world.”

Geothermal energy is one of the most consistent forms of renewable energy, whether used for heat, power generation, or both. Wells are drilled into a geothermal reservoir that emits steam that can then be captured and used in multiple ways.

Chena Power currently operates the only geothermal power system in Alaska.

A traditional geothermal power project will utilize the steam to turn a turbine generator, after which the steam is sent through cooling towers before being injected back to the reservoir.

At the Makushin project, the steam will be produced at about 390 degrees Fahrenheit and it will be injected as liquid water of 80 to 100 degrees, according to Matthews.

“The whole concept is to try to extract as much geothermal energy as you can from the geothermal reservoir before you put it back into the ground where it gets reheated again,” he said.

Based on a 1983 test well, the Makushin resource has been “ballparked” to be capable of supplying steam to generate 500 megawatts for 500 years, he added.

Unalaska, with a population that peaks at nearly 10,000 during the height of fishing activity, needs only a fraction of that, according to City Manager Erin Reinders, and that’s part of the problem.

The city currently relies on diesel power generation and has a peak demand of about 11 megawatts. The seafood processors that help make nearby Dutch Harbor the largest volume fishing port in the country, along with a handful of other isolated power consumers, generate nearly 20 megawatts at peak demand themselves.

Getting the processing companies or others to connect to the city grid is imperative, according to Reinders.

“In order to make this pencil out we’ll need to have more (power) sales,” Reinders said in an interview.

She also noted that the project has the potential to displace more than 2.5 million gallons per year of diesel consumed by the city’s current power generation.

Residential power rates in Unalaska were approximately 28 cents per kilowatt-hour in 2020 after the state Power Cost Equalization subsidy was applied, based on Alaska Energy Authority data. Commercial customers are not eligible for PCE subsidies.

Simply put, the seafood processors — already in a highly volatile industry — don’t want to relinquish control over their all-important power supply, even if doing so would mean forgoing millions of gallons of diesel purchases each year.

Matthews said the fixed development costs, such as that for the 10-mile road to the site, along with the inherent nature of the ostensibly free heat resource, mean developing a larger plant up-front will lead to lower electric rates over the long-term if other customers can be added to Unalaska’s grid.

For that reason, Ounalashka and Chena Power plan to install a net 30-megawatt plant with three individual generation systems. Having three smaller systems is more expensive than one large system but it will allow the plant to better match demand fluctuations, which will be a necessity given the Makushin plant will be Unalaska’s primary power if it is seen through, according to Matthews.

“The thing with geothermal is it’s a high capital cost but once you get it installed your price is pretty much fixed for 30 years,” Matthews said, noting the larger plant provides ample opportunity for grid growth.

The City of Unalaska signed a 30-year power purchase agreement, or PPA, with Ounalashka and Chena Power last August, which calls for fixed payments starting at $16.3 million with a 1 percent annual escalator that puts the 30th year total at $22 million to power the city.

Reinders said the Unalaska City Council approved the deal in part because the processors publicly supported the project even if they aren’t ready to commit to it yet.

“In the past the other showstopper was that the processors weren’t on board,” she said.

Matthews emphasized the benefit to the companies is the consistent cost of the power, adding that the reliability can be proven to them over time.

“The power that we’re providing to the city is pretty close to the diesel cost in the next few years and will become cheaper over time, of course,” he said.

The project is currently on schedule to produce its first power in late 2023 shortly after a 4-mile, redundant subsea power line is laid to connect Unalaska to the Makushin project, according to Matthews.

Finalizing the PPA qualified the development group to seek financing for the full project, Reinders said, noting it is also a step that has never been reached before in other development attempts.

Matthews said the joint-venture, which is aided by Ounalashka owning the land, is self-funding the road and pad construction that started in May.

He declined to disclose the overall price estimate for the project, but said bids are due from two international geothermal plant developers later this month.

“We’ve gone a long ways on getting the details of the cost and logistics plan put together,” Matthews said.

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