The State Corporation Commission has endorsed a pair of Dominion Energy renewable energy projects: two offshore wind test turbines and an agreement to purchase power from an independent 80-megawatt solar facility in Halifax County.
The approval of the wind turbines, which are to be built about 27 miles off the coast of Virginia Beach at an expected cost of at least $300 million, was clearly grudging.
“The commission determined that the company’s proposal puts ‘essentially all’ of the risk of the project, including cost overruns, production and performance failures, on Dominion’s customers,” the commission said in a news release, adding that the project wasn’t the result of a competitive bidding process and wouldn’t historically have been deemed prudent under the prior framework of utility regulation or “any common application of the term.”
It noted that other utilities have used a power-purchase agreement model for offshore wind, which shields customers from “all or some” of the risk of the project. And the commission found that the test turbines’ energy cost is more than nine times greater than the average cost of the Vineyard Wind offshore project off the Massachusetts coast, among other objections.
Dominion, its partner, Denmark-based energy company Ørsted, and Gov. Ralph Northam’s administration say the project is a first step on the road to building out more than 2,000 megawatts of offshore wind and a making Hampton Roads a key part of the industry supply chain.
The commission does not appear to share that vision.
“It appears unlikely that the cost of offshore wind facilities will become competitive with solar or onshore wind options in the foreseeable future,” the order says.
However, the sweeping utility law passed earlier this year mandates “that such a project be found to be ‘in the public interest'” and requires “that certain factual findings must be subordinated to the clear legislative intent expressed in the laws governing the petition,” the commission said.
The utility will recover the cost of the turbines, expected to begin operation in December of 2020, through its base rates and, if necessary, through the customer credit offset mechanism built into the new utility regulatory law that allows Dominion to offset earnings above its authorized rate of return with spending on certain eligible projects.
The solar project, which involves purchasing power from a private developer, Water Strider Solar, was found “to be prudent as a factual matter,” the commission said, noting that the proposal will “protect customers from bearing financial, performance and other risks” and was the result of a bidding process that delivered a price “in line with the market.”
The solar facility is expected to begin operating in the latter part of 2020.