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HomeMy WebLinkAboutGeothermal Potential in the Aleutians AKUTAN 1981AKU 006 GEOTHERMAL POTENTIAL IN THE ALEUTIANS: AKUTAN PROPERTY OF: Alaska Power Authority 334 W. 5th Ave. Anchorage, Alaska 99501 Prepared for Alaska Division of Energy and Power Development by Morrison-Knudsen Co. 191 GEOTHERMAL POTENTIAL IN THE ALEUTIANS: AKUTAN 1. INTRODUCTION The Aleutian Island arc, which extends 1800 kilometers from the Alaska Peninsula to the Russian Kamchatka Peninsula, is perhaps the remotest area in the United States. General concerns about rising energy costs and uncertain fuel supplies are magnified on these islands, where difficult transportation and logistics contribute to an expensive and vulnerable energy picture. The situation is complicated by projected boon-town growth in several communities as a result of expanding seafood industries and oil and gas exploration. Villages are faced with outdated energy production = and transmission facilities, energy demands which strain system capacities, and few, if any, alternative energy resources. In many locations, improvements in living and economic conditions are severely constrained by insufficient energy supplies. Geothermal energy is one of the most promising energy alternatives available on the Aleutians. The islands are part of the Pacific "ring of fire," a region of high volcanic and seismic activity resulting from the subduction of oceanic plates under continental plates (Figure 1). In these areas, the natural heat flow is high, and there jis the potential for economic recovery of this geothermal heat. FIGURE PAGE There are three primary types of geothermal resources: hydrothermal, hot dry rock, and geopressured. Hydrothermal resources are systems in which ground water is heated at depth. These systems can be either vapor-dominated (steam) or hot water-donminated, depending on temperature and pressure conditions. The essential ingredients for a hydrothermal system are a heat source near the earth's surface, a sufficient supply of ground water, and a transport medium (porous rock or natural fractures) to bring the heated ground water to relatively shallow depths where it can be developed as an energy resource. Nearly all of the currently developed geothermal resources in the world are hydrothermal resources. The technology is currently available to develop these resources, and their utilization has been demonstrated to be economic. The worldwide hydrothermal electric power capacity in 1979 was 1,500 MWe, with a direct-use total of approximately 7,000 MWt. The two other types of geothermal resources are hot dry rock, which utilizes injected water as a heat transfer medium, and geopressured zones, in which hot water is trapped with natural gas under thousands of meters of sediments. Economic development of these two types of resources is currently in the research stage. Geothermal resources have been developed for applications ranging from space heating to electric power production. The optimum use of a geothermal resource depends not only on its temperature, chemistry, and supply, but also on the nature of the energy demand in its vicinity. Conventional methods of economic geothermal power production require resource temperatures of at least 180 degrees C, although research is being conducted at temperatures as low as 1-3 140 degrees C. Lower temperature resources can be utilized directly in such applications as aquaculture, balneological baths, foot processing, and hybrid energy systems (Figure 2). Hot Springs Bay on the east side of Akutan Island has one of the primary hydrothermal systems identified in the Aleutians. The hot springs have an maximum discharge temperature “of 83 degrees C, with an estimated maximum subsurface reservoir temperature of 180 degrees C. This report presents a sumnary of the geothermal potential at Hot Springs Bay, as well as a market and economic assessment of feasible applications of this energy resource. e—- > eee eM POWER PRODUCTION 350° and UP DRYING OF FISH ALUMINA PROCESSING DRYING FARM PRODUCTS EXTRACTION OF SALTS | | REFRIGERATION (mod.temp.) | CONCRETE BLOCK CURING CRAB PROCESSING | DRYING FISH | SPACE HEATING | | REFRIGERATION (low temp.) GREENHOUSES | BALNEOLOGICAL BATHS OIL_ WARMING | RMENTA DE-ICIN Gl Seite Ae AINSiitaistimrid Pasi rig 2- Wee | me 2.1 2.2 2. SITE DESCRIPTION Location Akutan Island is located approximately 1300 kilometers southwest of Anchorage in the eastern Aleutian Islands (Figure 3). It is the largest of the Krenitzin Islands of the Fox Island group with an area of 33,200 hectares. The island is mountainous, with shorelines dominated by steep cliffs and rocky headlands. Vegetation consists of arctic-alpine species, dominated by heath, grasses, and sedges. Growth below the 300-meter elevation is lush due to abundant precipitation and a relatively mild climate. The modern village of Akutan was established in 1879 on a bench on the north side of Akutan Harbor (Figure 4). It is the only remaining Aleut village with a traditional chief. In 1979, the village was incorporated under Alaska statute as a second-class city and has elected a mayor and city council. Climate Akutan is located in Alaska's maritime climate zone, which is characterized by cool summers and mild winters. Summer temperatures range from 5 - 15 degrees C, with average winter temperatures of -4 to +2 degrees C. There are no records of temperature extremes on the island; however, the lowest 2-1 AKUTAN 4275 AKUTAN a VOLCANO ISLAND AKUTAN BAY HOT SPRING: BAY ° HOT SRING = AKUTAN HOT SPRING AKUN ISLAND HOT SPRING rq CN )0 North, Head Akutan Bay MASS . Ridge Point “2, \ RANT vy, Hot Springs. Aawet i “ys ~ eae » Bay fe . wa ‘S ARound H ae At Sandy Cove e Seredka Bay ound re Re Akutan Pt tS B "ey Akutan re uo Rs aa =U Sight tet ata Tangik | ? / \ 1O~ cm . x — SY) “A Poa | . WN Ce" 7 70 5* \Ooe Safe WV PQS ES i) So ies Easy Cove Jackass Pt a, Hippy | ips ili) \ . aii Liga) ne > Be Our MMi Weel | M60 RaW . ’ 5% BS, YING ml if ee Yo en PL eee 4 25 pb VT \ Mika y C sot Oe. WEx' Broad 67h en un Be VEG* Broad 25. WI NY “ S gas E. Bight YANO AN ks 2 ; ‘ ou ts 4 Wott "a, R13 W z Te: Z R 109 W “a ronaae ROSES get Wo} | 1009 > 6,4 S oe i \ GALS S " ** Point 300 = : Zuo’ ae ; R 110 W & Baby Aslands wo USS ged te. y “+P 4) Bridge + ryt 2.3 recorded temperature at Dutch Harbor, 30 kilometers to the west, is -15 degrees C. Precipation data from Dutch Harbor records indicate an average annual total of 150 centimeters. Snowfall has been recorded in every month of the year except September. The estimated average annual heating degree day total for the village is 9,300. Akutan is located within the North Pacific storm tracks, and periods of high winds are frequent. During the fall of 1977, the remains of tropical storm Harriet hit the Aleutians, and wind speeds exceeding 50 m/sec were recorded at Akutan Bay (Morgan, 1980). Williwaws, which are very strong gusts of cold air blowing downslope along coastal gullies, are a common occurrence (University of Alaska, 1978). Fog occurs frequently in the summer and has been recorded on as many as 20 days during the month of July. Demographics Despite changing economic conditions, Akutan village has maintained a relatively stable population since its establishment. In 1888, there were 59 people in the village; in 1920, there were 66 people in the village; and the 1950 census indicated a population of 86. Although the official 1980 census indicates a population of 169, up 67% from the 1970 census, this number includes workers on some of the temporary process ships. A more accurate estimate of the current village population is 70 (N. Gross, 1981). During the peak of the crab season, an estimated 200-700 workers are stationed on process ships in the harbor. 2.4 As with other villages of the Aleutians, Akutan was evacuated after the Japanese attacked Dutch Harbor and occupied Attu and Kiska during World War II. The natives were allowed to return in 1944, but they returned in reduced numbers. In more recent years, residents have moved elsewhere to take advantage of employment opportunities. There are currently 19 housing units in the village, most of which are old and overcrowded. A HUD grant will double the number of houses in the village, providing some potential for growth. Population projections for Akutan are difficult to make. Although there is presently a lack of facilities for industrial development, there are indications that Akutan could see boom-town growth in the next decade. A village-sponsored feasibility study for a dock and cold storage projects a new village at the head of the harbor with a population of 3,000 (B. Drage, 1981). Econony With the exception of a sulfur mine and smelter which operated on Akun Island at the turn of the century, the economy of the Akutan region has historically been dependent on fisheries. The Bering Sea has an abundance of fish and marine life which equals or exceeds that of all other marine environments. A recently discovered current from the North Pacific provides a constant source of nutrients to the Aleutian region. This results in seafood production rates that are much higher than oceanic areas that regenerate nutrients within their own boundaries (Morgan, 1980). 2-5 The village of Akutan was established as a fur storage and trading port. A small Norwegian-financed whaling venture was incorporated as_ the Alaska Whaling Co. in 1912, and their processing station at Akutan Harbor produced oil, pet food, and fertilizer. The company continued to take approximately 100 whales per year until the beginning of WWII. During the war, the Navy used the dock as a refueling station for Russian freighters, but the facilities were abandoned soon after (Morgan, 1980). The last commercial catch of salmon in the Akutan area occurred in 1962 (Baker, et. al., 1977). Since that time, king crab has dominated the fishing industry. During the 1979-1980 season, more than 60 million kilograms of king crab were taken from the Bering Sea. During the peak of the season, over $120 million of product is landed at Dutch Harbor and Akutan Harbor each month. As many as 14 processors anchor in Akutan Harbor each year to process crab and ground fish. Akutan Harbor is one of the few well-protected harbors in the Aleutian chain and will be the base for any future economic expansion on the island. A feasibility study is presently being conducted for the development of a cold storage and dock facility at the head of the harbor that could be the nucleus for major land-based development. Several processors are considering or are in the process of constructing some facilities in the harbor, indicating a move toward more permanent and stable operations. Transportation to Akutan is limited to boats and amphibious aircraft. Air access is extremely dependent on weather, and conditions can isolate the island for weeks at a time. Winter hazards to shipping are presented by 2-6 2.5 high waves, occasional shorefast ice, and rare pack ice (University of Alaska, 1978). There are no roads or motor vehicles on the island; a boardwalk is the main thoroughfare in the village. The Alaska Department of Transportation and Public Facilities has considered road and airport development at Akutan; however, there are currently no firm plans to proceed with these facilities (OTT Water Engineers, 1980). Land Use and Institutional Considerations Land status in Alaska has historically been complicated. Recent legislation to resolve conflicts include the Alaska Native Claims Settlement Act (1971) and the Alaska Lands Bill (1980). Native claims to Alaska lands date back to the purchase from Russia, at which time the U.S. agreed to "honor all native claims". Under ANCSA, a total of 18 million hectares and approximately $960 million were conveyed to natives through approximately 230 village corporations and 13 regional corporations. These corporations function basically as investment companies, with land, money, and stock as corporation assets (Wayne Lewis, 1981). The amount of land each village corporation received was a function of the number of shareholders. The Akutan (village) Corporation selected all unpatented lands on the island of Akutan, plus some lands on neighboring Akun. As part of the reconveyance process, title to a minimum of 520 hectares will be transferred to the municipality. Although the village corporation's stock cannot be sold for 25 years, the land conveyed to the corporation is surface real estate that can be sold with no restrictions. 2.6 The Aleut (regional) Corporation, in general, owns the subsurface rights under land held by village corporations within the region. According to Alaska state law, geothermal resources are defined as “the natural heat of the earth at temperatures greater than 120 degrees C, measured at the point where the highest temperature resources encounter, enter or contact a well or other resource extraction device..."(Reeder, et. al., 1980). Under this definition, rights to geothermal resources with temperatures above 120 degrees C are controlled by the regional corporation (in this instance, the Aleut Corporation). The Aleut Corporation has not yet established a policy for geothermal leasing or development. Rights to the use of resources below 120 degrees C are transferred by means of a water right under the Alaska Water Use Act. To minimize potential conflicts between geothermal resource rights and water rights, Alaska law exempts geothermal fluids (less . than 120 degrees C) from regulation under the Water Use Act. However, to protect water rights, geothermal drilling cannot begin until: 1) it is determined that the well will not interfere with or substantially impair prior water rights, 2) water rights have been acquired to offset any potential interference, or 3) an equivalent amount of replacement water of comparable quality has been supplied to the affected water right holder (Reeder, et. al., 1980). Current Energy Use Energy needs on Akutan are presently supplied by hydropower and diesel fuel. D.C. electric power is provided by a 90-centimeter Pelton wheel installed in 1924. The system operates relatively well, except when low 2-8 2.7 water in the winter limits generation capacity. The electricity jis distributed as 90 volts (D.C.) from the 20 kw generator at an annual cost of about $12.50 per household (University of Alaska, 1978). Several private diesel generators are operated in the village which has a total estimated demand of 110 kw. Houses in the village are heated with oil supplied from a 20 cubic meter storage tank in the harbor. The present price is approximately $0.41 per liter (N. Gross, 1981). The processing ships in the harbor are completely self-contained, utilizing diesel for electrical generation, process heat and space heating. Crab processing requires temperatures of 100 degrees C for the cookers. An estimated 40% of the total process energy requirements are used for refrigeration. Energy Demand Projections The future energy demand on Akutan will be a function of the impact expanded fisheries and oil and gas exploration will have on industrial development. Peak power loads for the village, considering moderate population growth, are projected at 455 kw by the year 2005 (N. Gross, 1981). The feasibility study for the cold storage and dock facility projects a total demand of 9000 kw associated with industrial development. 2.8 Energy Alternatives Akutan's existing generating facilities cannot meet even the present residential demand in the village. Two feasibility studies conducted for the village identified run-of-the-river hydroelectric potential of 40 to 190 kw just west of the village (OTT Water Engineers, 1980) and 100 to 300 kw from a site at the end of the harbor (B. Drage, 1981). The costs for developing the run-of-the-river system were $2.4 million, with a recommended rate structure of 337 mills per kilowatt hour (N. Gross, 1981). The village received a grant for a 150 kw diesel generator this year. Their selection of a diesel system over a hydroelectric project was based on: 1) the projected busbar costs of the diesel system were comparable to those of the hydroelectric development, and 2) diesel facilities can be brought on line relatively quickly and do not require massive construction. One of the potential alternatives to diesel generation on Akutan is geothermal energy. The occurrence of geothermal resources on Akutan Island and the potential for meeting future energy needs are addressed in the following sections. 2-10 3. GEOTHERMAL RESOURCE EVALUATION The Aleutian Islands are the crests of a chain of submarine volcanoes which rise to a maximum height of 10,000 meters above the ocean floor. At least 26 of the 46 active volcanoes in the chain appear to have erupted since 1760. Akutan Volcano has had considerable activity, erupting at least 23 times in recorded history. The most recent eruptive period occurred during the fall of 1978. Ash from the eruption was a problem for processors in the harbor, who had trouble keeping their processing equipment clean (D. Hallman, 1981). The volcanic activity on Akutan is an indication of a geologic environment in which it is not uncommon to find geothermal resources. Several hot springs occur in Hot Springs Bay and are thought to be fault-controlled discharge points for a potential hydrothermal system. There are also fumaroles reported on Akutan Volcano (Muffler, 1979) and a tidal hot spring has been observed near the old whaling station (L. Shelikoff, 1981). 3.1 Geology Akutan Island is composed of quaternary volcanic rocks, primarily basaltic and andesitic lava flows and pyroclastic materials (Beikman, 1975). The geologic history of Akutan Island appears similar to that of Unalaska Island, whose geology consists of basalt and andesite with granodiorite 3.2 plutons. Geologic and geophysical surveys being conducted this summer should provide more detail on the lithology of the island and the structures which could control the geothermal resource. The soils at Hot Springs Bay are organic deposits (muskeg) of undetermined thickness. The low ridges paralleling the coast near the mouth of the valley appear to be composed of fine sand and silt. Geothermal Resources Three hot springs have been identified in the valley at the head of Hot Springs Bay. All hot springs areas are located at the western margin of the valley bottom, one in the intertidal area, another approximately one-half kilometer inland, and the third about one kilometer inland from the beach (Figure 5). All three spring areas appear to be fault-controlled thermal discharge points. The intertidal spring area consists of a beach seep at the salt water interface. As described by Baker, et. al. (1977), the hottest discharge was through the creek channel which, at the time of the survey, was covered by approximately one meter of beach sands. Discharge is estimated at approximately 11 liters per minute over an area of 15 meters in diameter. Temperature of the discharge is 55 degrees C. The middle spring area consists of three discharge points covering about 60 meters in length. The largest discharge was estimated at 20 to 40 liters per minute at a maximum temperature of 55 degrees C. The next point, 5 to 3-2 HOT SPRINGS BAY AKUTAN ISLAND ” AKUTAN AKUTAN HARBOR, HOT SPRINGS MILES HOT SPRINGS BAY 7 ee a Se D aaa POTENTIAL es 7 = HATCHERY 1© / in . SITE ——~-2 1000 — — \ 206 7 eo 7 ; 30 s 7 ey ° + J /&% A & J 7 « < A = / C % NX Fie wel 7 AKUTAN HOT. SPRINGS MILES ° 1/2 { a Figure 6% Akutan hot springs. DAMES OE MCOnRF OS mm 3.3 10 meters upstream, flowed at 8 liters per minute with a temperature of 60 degrees C. The last point, located 45 meters downstream, flowed at 11 liters per minute with a temperature of 60 degrees C. Maximum flow from the area is estimated to be 75 liters per minute. The upstream spring also contains three discharge points. The largest discharged at an estimated flow of 20 liters per minute with a temperature of 83 degrees C. The other points discharged at 8 and 10 liters per minute with temperatures of 37 degrees C and 42 degrees C respectively. Chemical analyses of samples taken from the springs are shown in Table 1. Reservoir Hydraulics The thermal springs at Hot Springs Bay represent fault-controlled discharge points with a maximum surface discharge temperature of 83 degrees C. The Maximum estimated subsurface resource temperature is 180 degrees C, with geothermometer temperatures of 126 degrees C (chalcedony), 136 degrees C (Na-K-CA, flg-corrected), and 151 degrees C (quartz conductive). The estimated mean thermal energy of the reservoir is 1.1 + 0.31 x 1018), and the estimated wellhead thermal energy available is 0.27 x 1018J (Muffler, 1979). The Hot Springs Bay thermal system appears to consist of a shallow sedimentary thermal system, a fault-controlled thermal system, and an intermediate depth hydrothermal system. Na Ni Sig Ci- F- HC037- NO37- S04= TDS pH Cond. T (°C Disch (a) (b) (c) (d) Table 1 Chemical Analysis of Samples, Hot Springs Bay, Akutan (_ mhos/cm) ) (L/min) Baker, et al, 1978 Motyka, et al, in press, designated A2 Motyka, et al, in press, designated D2 Waring, 1965 (in mg/L) (a) 0.04 3.2 8 10 1.0 0.004 150 0.005 40 140 0.96 0.3 195 490 7.2 600 24 3-5 (b) 11. 11. 24. 323 145 424 42. 84 118 4 3 -98 im} 9.3 11.8 128 91 128 58.9 20 10 288 129 350 192 39 952 82 The shallow sedimentary system is assumed to consist of a semi-confined production zone within the valley floor sediments, capable of an estimated yield of 10 to 30 L/sec with a production temperature estimated at 100 degrees C. The fault-controlled thermal system appears to be the source of thermal discharge to the shallow system. The estimated production temperature of the fault-controlled system is 180 degrees C. The potential yield and storage capacity of the system is controlled by the length and width of the controlling faults. This system has an estimated production potential greater than 30 L/sec. It appears that an _ intermediate-depth hydrothermal system underlies the Hot Springs Bay Valley, but geologic data are too limited to evaluate this potential. A second potential geothermal system is located in Akutan Harbor at the old Whaling station. This hot spring site is an intertidal spring which is visible at low tide. This system appears to consist of a fault-controlled discharge point and an intermediate-depth hydrothermal system... It is assumed that this reservoir is similar to that at Hot Springs Bay and is capable of a production temperature of 150 to 180 degrees C. The shallow fault system may produce a fluid consisting of a fresh water/sea water mix. The intermediate system should consist of a fresh water fluid. Akutan Volcano is a young, active volcanic area with numerous fractures and large volumes of young volcanic material. The presence of active volcanism and hot springs indicate the locality is experiencing high heat flow. There is a clear indication that this area, when adequately explored and tested, could ultimately produce economically-developable geothermal resources. It is recommended that a detailed geologic and geophysical exploration and drilling program be initiated at both the Hot Springs Bay and Akutan Harbor sites. A target depth of 150 meters is recommended for the drilling program in order to provide geologic characterization and thermal gradients. 3-7 4. GEOTHERMAL DEVELOPMENT POTENTIAL Geothermal resources in Alaska have not been developed to any significant extent. Much of the lack of interest in geothermal development is related to little knowledge of the resouce, high development risk, and scattered energy demand centers. The hot springs on Akutan indicate that a geothermal resource is present that could be developed economically. The temperature and flow from the hot springs at Hot Springs Bay are such that they could be utilized for a direct application without further resource development; however, the remoteness of the location makes such a small development using the existing spring discharge uneconomical. An evaluation of using the springs for a salmon hatchery concluded that such a development would be difficult due to logistics, water quality, and lack of fresh water (Baker, et. al., 1977). 4.1 Development Scenarios The estimated geothermal reservoir temperatures based on geothermometry are high enough that development of the Hot Springs Bay resource for power production is a potential. A 10 MW plant size was selected based on the resource potential and the projected energy demand for Akutan. The relatively low temperature of the resource indicates that a binary cycle 4-] utilizing a secondary fluid (see Figure 6) would provide the most efficient use of the resource. It is estimated that four production wells would be required to supply geothermal fluid to the power plant. Approximately eight kilometers of transmission line would be required to transport the produced power to Akutan Harbor. Logistically, hauling equipment over land from Akutan Harbor to the plant site would not be feasible due to the steep valley slopes. It is recommended that equipment be hauled by barge to Hot Springs Bay and landed at high tide. A detailed economic analysis of this plant is summarized in Section 5 of this report. Previous experience with geothermal power developments indicates that it would take an average of seven years to bring a 10 MW plant on line (Figure 7). Therefore, the earliest that geothermal power would be available on Akutan is 1989. The economic analysis assumes that, at this point, the power demand on Akutan would represent 60% of the plant's capacity, increasing 10% per year there after. Existing diesel facilities could be left as back-up systems. Effluent from the power plant could be used to supply heat for a fish hatchery and farm. Assuming a plant outlet temperature of 80 degrees C and a temperature drop of 50 degrees C in a heat exchanger, 1.5 x 108 Btu/hr could be supplied. The expected chemical quality of the geothermal Fluids is such that a fresh water supply would be required for use in the fish tanks. 4-2 TURBINE-GENERATOR . COOL! NG CIRCULATING WATER PUMP PumP FROM TO PRODUCTION INJECTION WELLS ¢ WELLS (WY tose” ~ JOST E tla, 7 Jos TITLE_ CONTRACT wo. Auto “7-4 DESCRIPTION SHEET NO.. MACE BY CHECKED BY. DATE 9 % 4 FORM enc 126/74 Typical Ce on hornn~oS Posen Developrat Seluduly 4.2 If there is a significant hydrothermal resource in Akutan Harbor, as evidenced by the reported hot springs near the whaling station, the resource could be developed for direct use. The most feasible applications include direct process heat or boiler preheat for fish processing and residential space heating. The economics of such applications will depend on the energy demand and the temperature and quality of the geothermal resource. A preliminary economic analysis of a residential space heating system for the village of Akutan indicates that the demand is too low for the system to be economic (primarily as a result of pipeline costs). If a town of 3,000 does develop at Akutan as a result of industrial development, geothermal space heating could be competitive with diesel at today's diesel prices. Additional resource evaluation will be required to define the potential for geothermal development in Akutan Harbor. Logistics and Hazards Akutan Island is a remote location and transportation to the island can be difficult. The construction and operation costs used in the economic analysis of various types of geothermal development have been escalated to reflect this. Any significant geothermal development (e.g., a power plant) would have to take into consideration the natural hazards which exist on the island. Akutan Island is located in Seismic risk zone 4, indicating the magnitude of the largest expected earthquake exceeds 6.0. Between 1947 and 1959, the 4-5 Aleutians recorded 20 earthquakes with a magnitude of 7 or greater, and one event with a magnitude of 8 (Morgan, 1980). Earthquakes as high as magnitude 7 have been recorded within 30 kilometers of Akutan Island. Due to the frequent activity of Akutan Volcano, the potential for risks associated with volcanic activity also need to be considered. Most of the recent eruptions of Akutan have involved only steam and ash, although recent lava flows have occurred on the north side of the island. Slope stability and the susceptibility of soils in Hot Springs Bay to liquefaction will significantly affect facility design and construction of a power plant in this location. 4-6 5. ECONOMIC ANALYSIS 5.1. Overview The economic analysis focuses on the feasibility of developing the geothermal resources from two perspectives. These are delineation of economic activities which could be developed by the private sector and delineation of economic activities which could be developed by the public sector (utilities and rural electric associations). These activities are as follows: Private Sector Investment Public Sector Investment Fisheries Electric Power Generation thoy yes 3 Space Heating Systems Several geothermal locations are feasible for _ 7 teed fisheries activities, consequently the economic analysis conducted on these activities is generic to most locations. The analysis conducted on public sector activities is site specific due to minimal requirements of temperature and flow for the geothermal resource, and requirements of populated areas with electric and heating requirements for consumption of output. 5.2 Sater 5-02.41 Fisheries Assumptions For Analysis of Salmon Fisheries The following assumptions apply to the analysis: I. It. III. Methodolgy - Discounted Cash Flow Rate of Return Analysis (DCFROR The analysis calculates the net after tax cash flow for two hatcheries, a shallow system hatchery and a deeper system hatchery. A DCFROR is calculated over the entire life of both projects which entails a two year construction period and twenty-five year production period. Escalation Rates Investment, revenues, and operating costs are escalated at the following rates: Year Esclation Rate 1982 10.5% 1983 10.0% 1984 9.5% 1985 9.0% 1986 8.5% 1987 8.0% 1988 and all 7.5% future years Investment Shallow System: Investment in 1981 dollars is estimated to be $4.95 million. The hatchery requires two years to construct with 40% of investment occurring in 1982 and the remaining 60% in 1983. The hatchery begins production in 1984 and has a total production life of 25 years. Revenue from sales on returning fish commences in 1986. Deep System: Investment in 1981 dollars is estimated to be $10.01 million. The hatchery requires two years to construct with 40% of investment occurring in 1982 and the remaining 60% in 1983. The hatcherty begins production in 1984 and has a total production life of 25 years. Revenue from sales of returning fish commences in 1986. IV. Revenues Shallow System: The analysis assumes a 1.0% return of fish beginning in 1986. The average weight of returning fish is assumed to be five pounds. Revenue in 1981 dollars is calculated as follows: Revenue from commercial sales: Revenues Number of From Returning Pounds Per Sales Price Percentage Commercial Fish Fish Per Pound Sold Sales 69,440 x 5 x $2.53 x 508 = $439,208 Revenue from Brood: Pounds of Percentage Returning ' Used For Price Per Revenue From Fish Brood Pound Brood 347,200 xX 50% x $0.33 = $57,288 Revenues are escalated at the above rates giving annual revenues in the beginning year of production (1986) of $779,000. Deep System: The analysis assumes a 1.0% return of fish beginning in 1986. The average weight of returning fish is assumed to be five pounds. Revenue in 1981 dollars is calculated as follows: Revenue from commercial sales: Revenues Number of Percentage ' Price From Returning - Used For Per Percentage Commercial Fish Fish Pound Sold Sales 280,000 x 5 x $2.53 x 503% = $1,771,000 Revenue from Brood: Pounds of Percentage Price Revenue Returning Used For Per From Fish Brood Pound Brood 1,400,000 x 50% x $0.33 = $231,000 Revenues are escalated at the above rates giving annual revenues in the first year of fish return (1986) of $3,151,000. Vv. vi. VII. Operating Costs Shallow System: Total annual operating costs in 1981 dollars are estimated to be $165,000. Deep System: Total annual operating costs in 1981 dollars are estimated to be $330,000. Depreciation Shallow System: Depreciation on total escalated investment is taken double declining balance, switching to straight line over a twenty year life. Depreciation commences in 1984. Deep System: Depreciation on total escalated investment is taken double declining balance, switching to straight line over a twenty year life. Depreciation commences in 1984. Net Income Before Tax Net income before tax for both hatcheries is the sum of revenue less annual operating expenses less annual depreciation. VIII.Federal and State Tax Rate IX. xX. The combined federal and Alaska state tax rate is assumed to be 51%. The assumption is made that tax savings occur in years during operating losses. Investment Tax Credit The investment tax credit is assumed to be 10% of escalated investment for both hatcheries. The investment tax credit is taken in 1984. The assumption is made that the investor has other projects generating sufficient tax liability to allow the credit to be taken as a deduction in this year. Net Income Net income for both hatcheries consists of the sum of net income before taxes less taxes plus the investment tax credit. 52 2.2 XI. Net Cash Flow Net cash flow for both hatcheries consists of the sum of net income less investment plus depreciation. Results of Economic Analysis Shallow System: The DCFROR (Internal Rate of Return) over the hatchery life is 8.8% given the assumptions above. This return is below the required minimum return of 20.0% and is probably not sufficiently high to attract private investment. Deep System: The DCFROR (Internal Rate of Return) over the project life is 16.0%. This return is below the required minimum return of 20.0% for private investors. However, the return is high enough that interest by private investors could be generated through the use of government subsidies. Subsidies would probably have to range between 10% - 20% of total investment. 5.2.3 Salmon Hatcheries Economic Analysis AUGUST 6, 1981 SHALLOW SYSTEM INVESTMENT CAPITAL EXPENDITURES TOTAL INVESTMENT DEEPER SYSTEM INVESTMENT CAPITAL EXPENDITURES TOTAL INVESTMENT SHALLOW A 1982 1983 2,188 3,610 2,188 3,610 4,424 7,300 ND DEEPER SYSTEMS - TOTAL \ SALMON HATCHERY $000 INVESTMENT 100% EQUITY AUGUST 6, 1981 i » SALMON HATCHERY 100% EQUITY SHALLOW AND DEEPER SYSTEMS - RATE OF RETURN $000 1982 1983 1984 1985 1986 1987 1988 1989 1990 SHALLOW SYSTEM ANALYSIS _ REVENUE 0 0 0 905 972 1,045 OPERATING EXPENSES 0 302 324 348 DEPRECIATION 0 380 342 308 NET INCOME BEFORE TAXES 223 306 389 FEDERAL & STATE TAX AT 51% 114 156 198 INVESTMENT TAX CREDIT 0 0 0 NET INCOME 109 150 191 CASHFLOW & RATE OF RETURN tt INVESTMENT 0 0 0 0 0 0 0 DEPRECIATION 580 522 470 423 380 342 308 NET INCOME 188 (373) 2h 68 109 150 191 NET CASH FLOW 768 149 494 490 490 492 499 PAYBACK (5,030) (4,881) (4,387) (3,897) (3,407) (2,915) (2,416) INTERNAL RATE OF RETURN 0.0 0.0 0.0 0.0 0.0 0.0 0.0 DEEPER SYSTEM ANALYSIS REVENUE 0 0 0 0 3,151 3,403 3,659 3,933 4, 228 OPERATING EXPENSES 0 0 439 479 519 561 603 648 697 DEPRECIATION 0 0 1,172 1,055 950 855 769 692 623 NET INCOME BEFORE TAXES 0 0 (1,612) (1,534) 1,682 1,988 2,286 2,592 2,908 FEDERAL & STATE TAXES AT 51% 0 0 (822) (782) 858 Vo 1, 166 1, 322 1,483 INVESTMENT TAX CREDIT 0 0 1,172 0 0 0 0 0 0 NET INCOME 0 0 "383 (752) 824 974 120 CASH FLOW AND RATE OF RETURN INVESTMENT (4,424) (7,300) 0 0 0 0 0 0 0 DEPRECIATION 0 0 1,172 1,055 950 855 769 692 623 NET INCOME 0 0 383 (752) 824 974 1,120 1,270 1,425 NET CASH FLOW (4,424) (7,300) 1,555 304 1,774 1,829 1,890 1,963 2,048 PAYBACK (4,424) (11,725) (10,169) (9,866) (8,092) (6,263) (4,374) (2,411) (363) INTERNAL RATE OF RETURN 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 AUGUST 6, 1981 . ’ SALMON HATCHERY 100% EQUITY SHALLOW AND DEEPER SYSTEMS - RATE OF RETURN $000 1991 1992 1993 1994 1995 1996 1997 1998 1999 SHALLOW SYSTEM ANALYSIS REVENUE 1, 124 1, 208 1,299 1, 396 1,501 1,613 1,734 1,864 2,004 OPERATING EXPENSES 375 403 433 465 500 538 578 621 668 DEPRECIATION 277 250 202 202 202 202 202 NET INCOME BEFORE TAXES 472 556 798 873 954 1,041 1,134 FEDERAL & STATE TAX AT 51% 2ui 283 407 45 487 531 578 INVESTMENT TAX CREDIT 0 0 o 0 0 NET INCOME 231 “272 391 "428 467 CASH FLOW & RATE OF RETURN INVESTMENT 0 0 0 0 0 0 0 0 0 DEPRECIATION 277 250 225 202 202 202 202 202 202 NET INCOME 231 272 314 357 391 428 467 ~ 510 556 NET CASH FLOW 509 522 539 559 593 630 670 712 758 PAYBACK (1,908) (1,386) (847) (288) 305 936 1,605 2,317 3,075 INTERNAL RATE OF RETURN 0.0 0.0 0.0 0.0 8 2.1 3.2 4.1 4.9 DEEPER SYSTEM ANALYSIS REVENUE 4,545 4, 886 5,252 ' 5,646 6,070 6,525 7,015 7,541 8,106 OPERATING EXPENSES 749 805 866 931 1,001 1,076 1,156 1,243 1,336 DEPRECIATION 561 505 u54 409 409 409 409 409 409 NET INCOME BEFORE TAXES 3,235 3,576 3,932 4,307 4,661 5,041 5,449 5,889 6,361 FEDERAL & STATE TAXES AT 51% 1,650 1,824 2/006 2°197 2:377 23571 2/779 3/003 3,244 INVESTMENT TAX CREDIT 0 0 0 0 0 0 0 0 0 NET INCOME 1,585, 1,752 1,927 2,110 2,284 2,470 2,670 3,117 CASH FLOW AND RATE OF RETURN 7 i INVESTMENT 0 0 0 0 0 0 0 0 0 DEPRECIATION 561 505 454 409 409 409 409 409 409 NET INCOME 1,585 1,752 1,927 2,110 2,284 2,470 2,670 2,886 3,117 NET CASH FLOW 2,146 2,257 2,381 2,519 2,692 2,879 3,079 3,294 3,526 PAYBACK 1,783 4; 040 6,421 8,940 113633 13511 17,590 20, 885 26-414 INTERNAL RATE OF RETURN 2.7 5.3 7.3 8.8 10.1 11.1 12.0 12.7 13.3 AUGUST 6, 1981 SHALLOW SYSTEM ANALYSIS REVENUE OPERATING EXPENSES DEPRECIATION NET INCOME BEFORE TAXES FEDERAL & STATE TAX AT 51% INVESTMENT TAX CREDIT NET INCOME CASH FLOW & RATE OF RETURN INVESTMENT DEPRECIATION NET INCOME NET CASH FLOW PAYBACK INTERNAL RATE OF RETURN DEEPER SYSTEM ANALYSIS REVENUE OPERATING EXPENSES DEPRECIATION NET INCOME BEFORE TAXES FEDERAL & STATE TAXES AT 51% INVESTMENT TAX CREDIT NET 1!NCOME CASH FLOW AND RATE OF RETURN INVESTMENT DEPRECIATION NET INCOME NET CASH FLOW PAYBACK INTERNAL RATE OF RETURN : . SALMON HATCHERY SHALLOW AND DEEPER SYSTEMS - RATE OF $000 2000 2001 2002 2003 2,677 892 202 0 0 0 0 202 202 202 202 605 658 714 715 807 860 916 OTT 3,882 4,742 5,658 6,636 5.6 6.2 6.7 7.2 8,714 9,368 10, 826 1,436 1,544 1,784 409 409 409 6,869 7,415 8,632 3,503 3,782 4,402 0 0 0 3,366 3,633 “4, 230 0 0 0 0 409 409 409 409 3, 366 3,633 3,921 4,230 3,775 4,042 4,330 4,639 28,185 32,227 36,557 41,195 13.8 WW.2 14.6 WW.9 RETURN 2004 100% EQUITY 2006 2007 2008 3,325 3,575 3,843 1,108 1,192 1,281 0 0 0 2,217 2,383 2,562 1,131 1,215 1,307 0 0 0 0 0 0 1,086 1,168 1,255 1,086 1,168 1,255 9,672 10,840 12,095 8.3 8.6 8.8 13,449 14,457 15,541 2,217 2,383 2,562 0 0 0 11,232 12,074 12,980 5,728 6,158 6,620 0 0 0 0 0 0 5,504 5,916 6,360 5,504 5,916 6,360 56,581 62,497 68,857 15.6 15.8 16.0 5.3. Public Sector Investment Public sector activities include geothermal electric power generation and geothermal space heating. The required investment in these activities can be raised through the formation of local utilities, Rural Electric Associations and Rural Water Power Associations. All analyses which follow assume that investment is raised through the formation of the entities above. The analyses assume that the entities involved are tax exempt and issue tax exempt bonds to raise the required investment. In the case of Adak Island the assumptions are the same except that the U.S. Government issues the bonds. As tax exempt entities own the power plants and space heating systems an after tax analysis is not required. The analyses calculate the rate which must be charged by the tax exempt owner to recover operating costs and payments of loan principal and interest on the debt issued to finance the construction costs of the plant. 5.3. / Akutan Economic Analysis The analysis for Akutan is based on one 10 MGW geothermal “power plant. S.c.2 Assumptions For Akutan Economic Analysis The following assumptions apply to the analysis: I. II. IIlI. Methodology The analysis develops the required mill rate per gigawatt hour of electricity sold to recover operating costs, loan principal payments and interest payments for a 10 MGW power plant. The mill rate per gigawatt hour of supplying the same amount of electricity using a diesel fuel is calculated in answer to the following question: "Assuming the average cost of tax exempt bonds is 10.0% annually (this implies an annual discount rate of 10.0%); at what rate must the annual price of diesel fuel escalate to make investment in a geothermal power plant economically feasible?" Escalation Rates Investment and operating costs of the geothermal plant are escalated at the following rates: Year Escalation Rate 1982 10.53% 1983 10.0% 1984 9.5% 1985 9.0% 1986 8.53% 1987 8.0% 1988 and all 7.5% future years : Investment Investment in 1981 dollars for the power plant is estimated to be $52.2 million. In addition five miles of transmission is required at an estimated cost of $0.5 million. The total estimated investment is $52.7 million. Permitting, engineering, well development and plant construction are estimated to require seven years beginning in 1982. The assumption is made that the geothermal resource proves adequate in temperature and flow to support the power plant Iv. with four wells. The plant begins production in 1989 and has a production life of 25 years. Annual Power Production and Sales Power production begins in 1989 with the plant producing 68 gigawatt hours of electricity annually. Power production is calculated according to the following formula: Net Production 68GWH = 10 MGW x 91% net x 8760 hours per year + 1000 GWH/MGW x 85% efficiency on brine filtration. Sales of power are based on projections of population growth and commercial business activities. Net annual sales of geothermal power are as follows: Power Sold Year GWH/Year 1989 40.8 GWH 1990 47.6 GWH 1991 54.4 GWH 1992 61.2 GWH 1993 and all 68.0 GWH future years Annual Operating Costs Annual operating costs in 1981 dollars are estimated to be $2.48 million per year. Operating costs are escalated at the rates listed above. A breakdown of operating costs in 1981 dollars is as follows: Item Expenditure Operating and Maintenance Expense i $ 420,000 General and Administrative Expense 42,000 (10% of O & M) Insurance 318,000 Royalty 1,700,000 (25 mills/KWH) Total $2,480,000 vI. VII. VIII. IX. Loan Principal and Interest The assumption is made that the plant is financed during construction through the issuance of government bonds at an assumed average annual interest rate of 10.0%. Interest on debt is rolled over during construction and becomes part of the cumulative debt owed on the plant. Repayment of debt commences in 1989. Debt on the plant is repaid over a 20 year term in annual installments of level principal plus declining interest at a rate of 10.0%. Total Expenses Total annual expenses consist of the sum of annual operating costs and annual principal and interest payments. Total Expenses Mills/GWH Total expenses for both plants are converted to mills per gigawatt hour by dividing annual power sold into annual expenses. Diesel Fuel Savings The estimated saving in diesel fuel for each gigawatt hour of geothermal power sold is 100,000 gallons. One gallon of diesel fuel is estimated to cost $1.25 in 1981 dollars. The annual savings in diesel fuel of producing one gigawatt hour of geothermal power is as follows: $1.25/gallon x 100,000 gallons/GWH + 1,000 mills/GWH. 125.0 Results of Analysis The total annual costs of providing geothermal power from the plant in mills/GWH are subtracted from the annual savings in diesel fuel in mills/GWH. The results show the net annual (costs) or savings of providing geothermal power over the proposed combined system. The annual (costs) or savings are discounted at a rate of 10% beginning in 1982. The discounted values are then added together to yield an NPV. Results of the analysis indicate that if diesel fuel escalates at an annual rate above 6.46% then the discounted savings of providing geothermal power are greater than the discounted costs (NPV is positive). Therefore, the cost of providing geothermal power over the production life of the plant is less than providing the equivalent amount of power with a diesel generating system. If diesel fuel escalates at an annual rate below 6.46% then the discounted cost of providing geothermal power exceeds the discounted savings (NPV is negative). Therefore, the cost of providing power with a diesel generating system is less than providing an equivalent amount of power using geothermal energy. 5.5.4 Akutan Economic Analysis AUGUST 6, 1981 AKUTAN GEOTHERMAL POWER PLANT 10% DEBT STATEMENT OF INVESTMENT - 10 MEGAWATTS $000 1982 1983 1984 1985 1986 1987 1988 TOTAL ESCALATED PLANT INVESTMENT WELL SYSTEMS 13,309.7 5,803. 0.0 oO. 26,184.8 PLANT AND ENGINEERING - 0.0 2,611. .0 6,579. 30,043.7 PERMITTING AND MISCELLANEOUS . -6 3,084. 13, 494.8 TRANSMISSION LINES : 5 MILES 0 . BRINE SYSTEM 0 TOTAL INVESTMENT SCHEDULE OF DEBT ANNUAL LOAN DRAW 3,453.1 6,366.8 14,507.6 10,638.4 11,254.6 20,957.6 12,112.7 719,290.9 CUMULATIVE DRAWDOWN 3,453.1 9,819.9 24, 327.5 34,965.9 46,220.6 67,178.2 79,290.9 79,290.9 ANNUAL INTEREST 345.3 982.0 2,432.8 3,496.6 4,622.1 6,717.8 7,929.1 26,525.6 CUMULATIVE INTEREST 345.3 1,327.3 3,760.1 7,256.6 11,878.7 18,596.5 26,525.6 26,525.6 INTEREST ON INTEREST 0.0 34.5 132.7 376.0 725.7 1,187.9 1,859.7 4,316.5 ANNUAL DEBT AND INTEREST Niw CUMULATIVE DEBT 110,132. 110,132.9 \UGUST 6, 1981 AKUTAN GEOTHERMAL POWER PLANT 10% DEBT NET PRESENT VALUE COMPARISON TO FUEL PLANT $000 1982 1983 1984 1985 1986 1987 1988 1989 PRODUCTION : GWH PER YEAR | 0 0 0 0 0 0 0 68 -XPENSES OPERATING AND MAINTENANCE 0 0 0 0 0 0 0 825 GENERAL AND ADMINISTRATIVE 0 0 0 0 0 0 0 83 !NSURANCE 0 0 0 0 0 QO 0 623 ROYALTY oO 0 0 0 0 0 0 3,340 DIRECT cXPENSES 0 0 0 0 0 0 0 4,870 THER EXPENSES LOAN PRINCIPAL 0 0 0 0 0 0 5,507 INTEREST 0 0 0 0 0 0 11,013 TOTAL EXPENSES 0 0 0 0 0 0 21,390 ‘REAKEVEN FUEL TO GEOTHERMAL COMPARISON GW HOURS SOLD 0.0 40.8 UEL ESCALATION RATE - 6.46% FUEL EXPENSES - MILLS/GWH 0.0 206.3 GEOTHERMAL EXPENSES - MILLS/GWH 0.0 524.3 SAVINGS OF GEOTHERMAL PLANT ; 0.0 (318.0) SAVINGS DISCOUNTED AT 10% 0.0 (148.4) NET PRESENT VALUE OF SAVINGS 0.0 (148.4) AUGUST 6, AKUTAN GEOTHERMAL POWER PLANT NET PRESENT VALUE COMPARISON TO FUEL PLANT $000 1990 1991 1992 1993 PRODUCTION : GWH PER YEAR : 68 68 EXPENSES OPERATING AND MAINTENANCE 887 1,025 1,102 GENERAL AND ADMINISTRATIVE 89 110 INSURANCE i 670 832 ROYALTY 3,590 3,860 4,149 4,460 DIRECT EXPENSES 5,236 5,628 6,051 6,504 OTHER EXPENSES LOAN PRINCIPAL 5,507 5,507 INTEREST TOTAL EXPENSES BREAKEVEN FUEL TO GEOTHERMAL COMPARISON GW HOURS SOLD 47.6 FUEL ESCALATION RATE - 6.46% FUEL EXPENSES - MILLS/GWH 219.6 GEOTHERMAL EXPENSES - MILLS/GWH 445.5 SAVINGS OF GEOTHERMAL PLANT SAVINGS DISCOUNTED AT 10% (95.8) NET PRESENT VALUE OF SAVINGS (244.2) (59.0) (303.2) (13.1) (1.2) 10% DEBT 2001 AUGUST 6, 1981 AKUTAN GEOTHERMAL POWER PLANT NET PRESENT VALUE COMPARISON TO FUEL PLANT $000 1998 1999 2000 PRODUCTION : GWH PER YEAR 68 68 68 EXPENSES OPERATING AND MAINTENANCE 1,582 1,701 1,828 GENERAL AND ADMINISTRATIVE 158 170 183 INSURANCE 1,195 1,284 1,381 ROYALTY 6,403 6,883 7,400 DIRECT EXPENSES 9,338 10,038 10,791 OTHER EXPENSES LOAN PRINCIPAL 5,507 5,507 5,507 INTEREST TOTAL EXPENSES BREAKEVEN FUEL TO GEOTHERMAL COMPARISON GW HOURS SOLD 68.0 68.0 68.0 FUEL ESCALATION RATE - 6.46% FUEL EXPENSES - MILLS/GWH 362.3 385.7 410.6 GEOTHERMAL EXPENSES ~- MILLS/GWH 307.4 309.6 312.6 SAVINGS OF GEOTHERMAL PLANT SAVINGS DISCOUNTED AT 10% 10.9 13.7 16.0 NET PRESENT VALUE OF SAVINGS (335.0 19.5 10% DEBT 2003 2004 2005 68 68 68 2,271 2,441 2,625 227 244 262 1,715 1,844 1,982 9,192 9,882 10,623 13,406 14,411 15,492 5,507 5,507 2,203 "23,201 68.0 68.0 68.0 495.5 527.5 561.5 326.7 333.4 341.2 168.8 4 20.7 21.7 22.4 (247.1) (225.4) (203.0 AUGUST 6, 1981 AKUTAN GEOTHERMAL POWER PLANT 10% DEBT NET PRESENT VALUE COMPARISON TO FUEL PLANT $000 2006 2007 2008 2009 2010 2011 2012 2013 PRODUCTION : GWH PER YEAR 68 68 68 68 68 68 68 68 EXPENSES OPERATING AND MAINTENANCE 2,821 3,033 3,260 3,505 3,768 4,050 4,354 4,681 GENERAL AND ADMINISTRATIVE 282 303 326 350 377 405 435, 468 INSURANCE 2,131 2,290 2,462 2,6u7 2,845 3,059 3,288 3,535 ROYALTY 11,420 12,276 13,197 142187 152251 16,395 17,624 18,946 DIRECT EXPENSES 16,654 17,903 19,246 20,689 22,201 23,909 25,702 27,630 OTHER EXPENSES LOAN PRINCIPAL 5,507 5,507 5,507 0 0 0 0 0 INTEREST 17652 17101 551 0 0 0 0 0 TOTAL EXPENSES “23,813. 24,511 -—=—« 5, 303.——*~*«, BD 22,241 23,909 2 27,630 BREAKEVEN FUEL TO GEOTHERMAL COMPARISON GW HOURS SOLD 68.0 68.0 68.0 68.0 68.0 68.0 68.0 68.0 FUEL ESCALATION RATE - 6.46% FUEL EXPENSES - MILLS/GWH 597.8 636.4 677.6 721.3 767.9 817.5 870.3 926.6 GEOTHERMAL EXPENSES - MILLS/GWH 350.2 360.5 372.1 304.3 327.1 351.6 378.0 406.3 SAVINGS OF GEOTHERMAL PLANT 27.6 276.0 305.5 417.1 440.9 520.2 SAVINGS DISCOUNTED AT 10% 22. 23.2 28.9 27.8 2u.6 9 NET PRESENT VALUE OF SAVINGS (180.2) (157.0) 6. CONCLUSIONS Although the current energy demand in the village of Akutan is low (approximately 100 kilowatts), the village is experiencing an energy shortage due to the lack of capacity in its energy system. To meet the current demand, as well as to support economic growth, additional energy development must occur. The most viable alternatives for development are diesel, hydroelectric, and geothermal. The two areas on Akutan Island which have identified geothermal potential, Hot Springs Bay and Akutan Harbor, could provide the base for energy resource development. The most feasible geothermal applications, based on estimates of resource temperature and availability, are: 1. A 10 Mie power plant in the Hot Springs Bay Valley. Investment in the plant, including wellfield and transmission lines, is estimated at $52.2 million in 1981 dollars. A preliminary economic analysis indicates that a geothermal power plant would be more economic than diesel power generation if diesel prices escalate at an annual rate of at least 6.5%. The estimated power costs for this plant are 320 mills per kilowatt-hour. 6-1 2. A salmon aquaculture facility utilizing the Hot Springs Bay resource or effluent from the power plant. Initial analyses indicate that development of a deeper, higher temperature resource to support this facility would be more economic that developing a shallower (on the order of 15 meters) system. The most economic application is utilizing power plant effluent. The estimated internal rate of return for a project not coupled to a power plant is 16%. Although this return is below the minimum 20%, it is high enough that private investors may be interested if creative financing or subsidies were available. 3. Space heating based on developing a resource in Akutan Harbor. There are no geologic data available on this resource; consequently, only a preliminary analysis could be performed. The controlling factor in the economics of a space heating application is transmission pipeline costs. Initial analyses indicate that if a village with a population on the order of 3,000 people were to develop in Akutan Harbor, development of the geothermal resource for space heating could be economic. Providing an accurate analysis of geothermal resource development on Akutan Island is difficult due to the lack of definitive resource data. More exploration will be required to evaluate the resource potential and determine the feasibility of development. Once a better understanding of the resource is available, the key to whether or not geothermal development is feasible will depend on the industrial and population growth which actually occur on the island. 6-2 7. REFERENCES Baker, R. 0., R. C. Lebida, W. D. Pyle, and R. P. Britch, 1978. An Investigation of Selected Alaska Geothermal Spring Sources as Possible Salmon Hatchery Sites, ERDA 1D0/1624-1. Beikman, H. M., 1975. Preliminary Geologic Map of Alaska Peninsula and Aleutian Islands, U.S. Geological Survey miscellaneous field studies, Map MF-674,. Drage, B., Peratrovich & Nottingham, communication with S. G. Spencer, 6/30/81. Gross, N., Administrator, City of Adkutan, communication with S. G. Spencer, 6/19/81 and 8/3/81. Hallman, D., Sea West Industries, Inc., communication with S. G. Spencer, 6/22/81. Lewis, W. F., Executive Assistant, The Aleut Corporation, communication with S. G. Spencer, 6/25/81. Morgan, L., editor, 1980. The Aleutians, Alaska Geographic, V. 7, No. 3. Motyka, R. J., M. A. Moorman, and S. A. Liss, in press. Assessment of Thermal Spring Sites, Aleutian Arc, Atka Island to Decherof Lake, Preliminary Results and Evaluation, U.S. Geological Survey. Muffler, L. P. J., editor, 1979. Assessment of Geothermal Resources of the United States - 1978, U.S. Geological Survey Circular 790. OTT Water Engineers, Inc., 1980. Akutan Hydropower, Preliminary Design Report. Reeder, J. W., P. L. Coonrod, N. J. Bragg, and D. R. Markle, 1980. Draft Alaska Geothermal Implementation Plan. , Shelikoff, L., Akutan chief, communication with S. G. Spencer, 6/22/81. University of Alaska, Arctic Environmental Information and Data Center, 1978. Akutan.