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UNALASKA, Alaska — A company formed by Alaska Native-owned Ounalashka Corporation and Fairbanks-based Chena Power LLC has signed a 30-year power purchase agreement with the City of Unalaska for a new geothermal energy project.

Under the agreement, the municipality agreed to spend an estimated $557 million on power generated by the company, which will tap into the nearby Makushin volcano to supply electrical power and heat to the city, located in the western Aleutian Islands. 

To develop the 18-30 megawatt Makushin Geothermal Project, Ounalashka Corporation and Chena Power formed OCCP LLC, which is 51 percent owned by the Alaska Native Village Corporation. Ounalashka Corp., which has about 500 Native shareholders, has leased more than 7,000 acres of land and its subsurface rights to OCCP for the project. 

“There is much excitement and interest in the potential for a geothermal project and what it might mean for our community,” City Manager Erin Reinders wrote in a memorandum to the City Council ahead of an Aug. 25 vote on the power purchase agreement. 

“It could result in growth and the expansion of our economic base,” she wrote. “Indeed, this is a very exciting opportunity, but not an opportunity that can be taken lightly.” 

Natalie Cale, general counsel for the Ounalashka Corporation, told Native News Online that the next step for OCCP is to assemble a financing package via a special loan program “meant to encourage the reduction of greenhouse gas emissions, using new and innovative technology.”

The debt financing for the project is estimated to be in the $350-500 million range, according to a report from Alaska Public Radio.

“OCCP has been advancing the project on its own for the past 1.3 years and has made considerable progress with project definition, permitting baseline evaluation, and securing of contractors,” Cale said in an email. 

City discussions around the geothermal project started in late 2019 after a lobbying trip to Washington, D.C. where members of the Qawalangin Tribe of Unalaska and Ounalashka Corporation determined that the U.S. Department of Energy supported the idea, according to the memo. 

Originally, the city had hoped to secure power purchase agreements with various seafood processing facilities on the island, but was unable to secure any long-term commitments from the companies, most of which generate their own power, according to city documents. 

While Reinders recommended the City Council delay its vote on the power purchase agreement until it could obtain written commitments from the producers, council members ultimately voted 5-1 in favor of the deal. 

“This is big,” Council member Shari Coleman said during a discussion of the agreement at the Aug. 25 meeting, the audio of which was posted online. 

Taking a multi-generational view and weighing the risks, Coleman said the project has good potential to be positive for the community, which does not have enough generating capacity to lure in new companies. 

“This is an avenue into doing that,” Coleman said. “The potential outcome could be huge for the city.”

Under the agreement, the city committed to purchasing 100 million kilowatt hours (kWh) annually. Despite only having an annual baseload of about 40 million kWh, the expectation is that the additional capacity will spur new development, as well as garner interest from the seafood processing facilities given the project’s green energy source compared to their existing diesel generators, according to city documents and discussion at the meeting. 

For any demand above 100 million kWh, OCCP agreed to split the proceeds with the city, which the city attorney’s office called a “win-win.” The company also agreed to build two 3-mile undersea cables to the city’s connection to improve system reliability, according to a memo from the city attorney. The power plant itself is located about 14 miles from Unalaska. 

Previous developers targeting the Makushin site abandoned their plans after determining the project's startup costs were uneconomic. 

Cale at Ounalashka Corporation said OPPC expects to have permitting completed by the end of September 2021, with construction and equipment installation wrapped up in July 2023. 

The plant is targeted to begin operation in October 2023, Cale said.

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About The Author
Joe Boomgaard
Author: Joe BoomgaardEmail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Joe Boomgaard is the editor of Michigan-based regional business publication MiBiz and a contributing writer to Native News Online on business, economic development and related topics. He can be reached at [email protected].