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Dominion Energy intends to move forward alone with developing the nation’s largest proposed offshore wind farm, an enterprise estimated to cost $8 billion, top utility leaders indicated to investors in a third-quarter earnings call Friday morning.
“The project will be developed and owned by Dominion Energy Virginia, with regulated cost recovery subject to approval by the Virginia State Corporation Commission,” said Dominion CEO, Chairman and President Tom Farrell during the presentation.
The company’s approach bucks the dominant trend among East Coast utilities, which have otherwise partnered with private developers to add offshore wind energy to their portfolios.
New Jersey’s Ocean Wind project, which at 1,100 megawatts should power half a million homes, is being developed by Danish company Ørsted, with efforts underway by New Jersey utility Public Service Enterprise Group to acquire a 25 percent stake in the project. New York’s 816-megawatt Empire Wind is owned by private company Equinor, while its 880-megawatt Sunrise Wind is being developed jointly by Ørsted and New England energy utility Eversource. The latter pair are also the drivers behind the Revolution Wind project providing energy to Connecticut and Rhode Island. And in North Carolina, Avangrid is developing the Kitty Hawk wind farm.
Ørsted has been active in Virginia, contracting with Dominion to provide it with the turbines for the utility’s 12 megawatt Coastal Virginia Offshore Wind pilot. But Dominion leaders made no reference to the company during the almost hour-long investor call Friday.
Hayes Framme, Ørsted’s government relations and communications manager for the Southeast, confirmed to the Mercury that the company was still moving ahead “full bore” on the pilot project but emphasized that the larger plans, which call for 220 turbines producing 2,600 megawatts of energy, were “Dominion’s project.”
To fund that project, Farrell said that Dominion expects to roll out construction in three phases, and that, pending State Corporation Commission approval, the costs of each phase will be recouped with a rider, an extra fee that is tacked onto customers’ bills to pay for a specific project.
While officials acknowledged that the $8 billion price tag is far above the $1.1 billion the company told investors in March that it planned to put toward offshore wind between 2019 and 2023, they noted that most of the spending won’t occur until 2024, 2025 and 2026.
In the meantime, Dominion “will work hard to reduce” the additional $7 billion in costs, said Farrell. Possible reductions, according to Paul Koonce, president and CEO of Dominion’s Power Generation Group, could come from the maturing of offshore wind supply chains as the three phases of development progress.
Farrell indicated that Dominion’s 2,600 megawatt project has significant bipartisan support in Richmond — not only from both sides of the legislative aisle, but from Gov. Ralph Northam.
According to Farrell, Northam “specifically said that he recognized that there may be some who want to push back on [the project], on whether it was necessary, required or a good thing for Virginia, [and] that he was going to work very hard to ensure that the public policy and regulatory support was in place to carry out this plan.”
“It was only after those statements,” Farrell continued, “that we went ahead with our announcement of the full deployment.”
Asked to clarify what Northam meant in terms of public policy and regulatory steps and what the administration would do to ensure ratepayers of the investor-owned utility were protected, the governor’s press secretary, Alena Yarmosky, replied, “The governor has made it clear he supports public policy that moves Virginia towards renewable energy — that includes making the commonwealth a leader in offshore wind.”
Northam has officially committed the commonwealth to renewable energy development, most recently through Executive Order 43, which ordered that 30 percent of Virginia’s energy come from renewable sources by 2030 and that the state’s grid be carbon-free by 2050. The 2018 Grid Transformation and Security Act passed by the General Assembly also declared the development of 5,000 megawatts of wind and solar energy to be in the public interest.
The State Corporation Commission, however, has been more skeptical. In November 2018, citing concerns for the risk the utility’s plans bore for captive customers, the SCC only reluctantly approved Dominion’s 12 megawatt offshore wind project, concluding that legislative priorities demanded approval but that it “would not be deemed prudent as that term has been applied by this commission in its long history of public utility regulation or under any common application of the term.”
Farrell said during the call that the company is “very concerned” about customer rates.
“It’s something we focus on all the time because our goal is to ensure that our customer rates stay very competitive, well below national averages, below the regional averages,” he said. “They are now, and we intend for them to stay that way, including with the construction of this wind farm.”
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