Makushin Geothermal: An Example for Hawaii?

By Michael Markrich

In what may be an example for Hawaii, the Makushin Geothermal Project is moving forward again in Alaska. The originators of the project, the Qawalangin Tribe Native Village Corporation, the Ounalashka Corp., and Chena Energy Corp., signed a Power Purchase Agreement (PPA) with the Unalaska City Council in 2020 with plans to provide energy to the town by 2024. In March, however, the four-year-old effort had come to stand still after funding for the effort dried up and their PPA was allowed to expire. To date, the originators of the 30 MW project have received only $2.5 million in federal dollars (from the Bureau of Indian Affairs) and a $5 million commitment from the Alaska Energy Authority towards the estimated cost of the $250 million project. A new push by Unalaska City and funds from the Environmental Protection Agency may finally help bring the project to completion.

The Makushin Geothermal Project is designed to provide power to the residents of Unalaska, which is best known for the Port of Dutch Harbor, an ice-free deep-water port in the Bering Sea that processes more than $190 million worth of seafood per year (mostly high-valued halibut, crab, and herring). About 400 vessels use the port, which is also the largest seafood container transshipment terminal in the US. The power is to come from Makushin Volcano, which last erupted in 1991. The volcano is about 13 miles from the town.

Unalaska has 4,500 permanent residents who, like Hawaii, have relied on diesel fuel to power its electrical grid. At present, the price per kilowatt hour in Unalaska is 57 cents. Once geothermal comes online, if all goes well, that cost is expected to fall to between 16 cents and 22 cents per kilowatt hour, making a huge difference. The town currently uses 16 million gallons of diesel fuel per year. The seafood processing plants pay for their own diesel and electricity. The price of diesel is expected to go up significantly in the future.

This project started in 2020 as a joint venture between Bernie Karl, the owner of the Chena Hot Springs Resort, and the Qawalangin Tribe Native Village Corporation. They signed a 50-year lease on the land and heat resources with the State of Alaska for the use of the resource. After that was concluded, they signed a 30-year PPA agreement with the City of Unalaska to provide power from their 30 MW plant.

The Qawalangin tribal members are part of the 180,000 Native Alaskan community in Alaska, and for that reason, they have been able to draw on funds and support from the Bureau of Indian Affairs (BIA) and the Department of Energy Office of Indian Energy Policy and Programs. Because of the seafood industry, the promise of cheap power offers great financial possibilities for the future and income of the tribe and town.

But planning has not all gone smoothly. Unalaska is a remote place, and there are said to be numerous supply chain and financing issues. The project was to have been finished by 2024, but after four extensions and attempted negotiations to either find outside funding or receive a higher price to cover upfront costs, the Unalaska City Corporation pulled its support. The company had requested three previous extensions, and after the fourth request to change the terms of the original agreement, the town council members balked. A number of people said soon after that despite all the effort, the project was ‘dead’.

The CEO of Ounalashka Corp., Natalie Cale, was quoted as saying that it was difficult to find enough funders to cover the costs of the small facility. “This has always been an expensive project. The fact that most of the costs are upfront, with the real savings and benefits (economical and environmental) in the long term, seems lost on lenders.”

A determined effort by Unalaska City leaders, the Alaska Governor, and Alaska US Senators appears to have saved the project. This year, the City of Unalaska made an agreement with the Qawalangin Tribe Native Village Corporation and the Ounalashka Corp. to apply for an Environmental Protection Agency Climate Pollution Reduction Grant. The EPA has $5 billion in the fund and offers up to $500 million for promising projects to states, territories, and tribes with no upfront match needed. If all goes as hoped, the Chena Corporation will be bought out and the project will go forward as a joint venture between the City of Unalaska and the Ounalashka Corp.

Despite the frustrations and setbacks, there is a great consensus that geothermal projects are what Alaska needs to go forward in the next century. Alaska has more active volcanoes than any state besides Hawaii and vast resources for geothermal power. The costs are front-end-loaded. After the initial contract is paid, the power price could drop significantly in the long term. Promoters say that a cost reduction could result in the location of a regional hospital in the area to take advantage of the lower rates.

There have been efforts to get a geothermal project going in Alaska since the 1980s, but this has been the closest to success. Already, Alaska Governor Mike Dunleavy has proposed a new bill (which did not pass) to increase access to geothermal power in Alaska, and Geo Alaska has signed an agreement with Ignis Energy to search for more active geothermal power sites.

Upon completion, this visionary project could be the beginning of more geothermal projects in Alaska.

1. Note - There are 4.5 million people under the BIA designation, Native Hawaiians are designated ‘Native Americans’ as are Alaska Natives, Native Hawaiians, Chamorros, and American Samoans. The Department of Hawaiian Home Lands comes under a different federal program.

2. https://alaskapublic.org/2024/03/01/unalaska-pulls-plug-on-makushin-geothermal-project/

3. https://www.kucb.org/science-environment/2024-02-29/end-of-geothermal-project-blamed-on-funding-troubles-extended-timelines

4. https://www.thinkgeoenergy.com/despite-setback-unalaska-intends-to-push-on-with-geothermal-project/