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End of geothermal project blamed on funding troubles, extended timelines

Active fumaroles and yellow sulfur deposits around the summit crater lake at Makushin Volcano. Jul 21st, 2017
Courtesy of Jacob Whitaker
Unalaska was the closest it had ever been to achieving its decades-long goal of developing geothermal energy from Makushin Volcano just a few miles from town.

Alaska has more volcanoes than anywhere else in the United States. So it would seem natural that Alaska could join the ranks of Iceland and New Zealand in developing geothermal energy as a renewable energy source.

Unalaska was the closest it had ever been to achieving its decades-long goal of developing geothermal power from Makushin Volcano just a few miles from town.

But difficulties meeting investment deadlines have led to the end of the Makushin Geothermal Project.

KUCB’s Theo Greenly has been following this saga. He sat down with Alaska Public Media’s Ava White to explain.

This conversation has been edited for length and clarity.


Ava White: Hey Theo, catch us up. What is this project and what happened to kill it?

Theo Greenly: A dozen or so miles away from the center of the City of Unalaska is Makushin Volcano. And people have been trying to develop it as a source of geothermal energy since at least the 1980s. But nobody has been successful in getting a project off the ground.

In 2019, a businessman comes along and he puts Makushin back on people's radar. And that man is Bernie Karl, who owns Chena Hot Springs Resort. He becomes interested in Makushin, and he teams up with Unalaska’s Native corporation, the Ounalashka Corp. They form a joint venture to build a geothermal power plant on Makushin.

But, over the next few years, there are logistical problems. They have trouble securing financing and investment, so they have to keep asking for extensions. Until, this time, they asked to raise the rate they would charge for power.

White: You say logistical problems and troubles securing financing, can you break those down a little bit more for us?

Greenly: In 2020, the city initially signs a power purchase agreement with the company and they agree to some terms. They agree on a timeline and a schedule for how much they're going to pay for power. It goes by kilowatt-hour. Initially, the company says that they can get this power plant running by 2024. But they end up needing more and more time to secure financing. They try to go to private investors, but nobody bites, then they go to public funding, they go back to private, it's this whole back-and-forth, and they're really having trouble finding the money that they need to build this thing.

White: Your reporting says that the geothermal project asked for a timeline extension in the fall. And by that time, they said the cost of doing business had gone up and they wanted to raise the rate they charge the city and ratepayers for the project. So then that basically put the ball in the city's court?

Greenly: Yeah, that's exactly right. It did put the ball in the city's court. And that brings us to Tuesday of this week. Basically, the city had to decide whether or not they wanted to accept the company's new terms. The city council discussed whether or not they wanted to accept the new rate. And at that meeting on Tuesday, the city council opted not to accept the new terms. And that means that the project is dead as we know it.

White: Could the project still go forward down the line in some other form?

Greenly: It's hard to say. The city has, in one way or another, expressed interest in perhaps pursuing this thing on their own. But it's tricky. That joint venture between Bernie Karl and the Ounalashka Corp. have a 50-year lease on the land and the geothermal resource.

White: What does this mean for geothermal power in Alaska? I mean, if Unalaska can't make it work, is it viable anywhere else in the state? What lessons can be learned?

Greenly: Here’s what we know. There are a lot of policymakers who are very interested in geothermal. Gov. Mike Dunleavy proposed a bill last legislative session that championed geothermal energy. Sens. Lisa Murkowski and Dan Sullivan say they want geothermal. But the Makushin Geothermal Project, if nothing else, demonstrates just how difficult it is to really make a project like this viable. And it's not even so much the scientific and physical elements. It's making it economically feasible. They got a contractor, they had everything lined up. But investors just didn't see a big enough return on their investment to want to shell out the capital.

White: Thank you so much.

Greenly: Thank you, I appreciate it.

Theo Greenly reports from the Aleutians as a Report for America corps member. He got his start in public radio at KCRW in Santa Monica, California, and has produced radio stories and podcasts for stations around the country.