With a winning bid of $1.6 million, Dominion Virginia Power snapped up a long-term lease on nearly 113,000 federal acres off Virginia’s coast Wednesday to build a large-scale commercial wind farm.
The investment signaled a commitment to offshore wind energy by Virginia’s biggest power company that earned applause from elected officials but only qualified praise from cautious environmentalists.
“Offshore wind has the potential to provide the largest, scalable renewable resource for Virginia if it can be achieved at reasonable cost to customers,” Mary C. Doswell said after the announcement. Doswell is senior vice president of Alternative Energy Solutions at Virginia Power.
The tract lies about 23 1/2 miles east of Virginia Beach on the U.S. Outer Continental Shelf. If fully developed, it could generate about 2,000 megawatts of electricity, or enough to power about 700,000 homes. Dominion has 2.4 million customers in Virginia.
Sen. Mark Warner, a longtime supporter of offshore energy development, called the lease acquisition an “important milestone in the development of Virginia’s renewable energy industry.”
“It not only helps make Virginia a leader in energy diversity and efficiency,” Warner said in a prepared statement, “it also provides an opportunity to create the jobs and the supply chain needed to support an offshore energy infrastructure.”
Gov. Bob McDonnell called it “another great step forward in ensuring Virginia is the ‘Energy Capital of the East Coast.'”
But along with the kudos came concerns from environmentalists unsure about Dominion’s commitment to renewable energy over its bedrock business of fossil fuel-based power generation.
“As a monopoly and Virginia’s largest utility, Dominion has a moral obligation as a good corporate citizen to address climate change,” said Glen Besa, director of the Sierra Club in Virginia. “Today’s winning bid is a positive sign that Dominion is starting to move in the right direction.”
Beth Kemler at the Chesapeake Climate Action Network points to the company’s latest long-range energy plan which “prioritizes new fossil fuel projects over offshore wind power development, rejecting offshore wind power even as a back-up plan.”
“While Dominion came out on top (Wednesday), that unfortunately doesn’t guarantee that the company will actually erect a single turbine,” said Kemler. “The company could rent the wind energy area for years without moving forward with any development, preventing a more eager company from doing so.”
Eight companies were prequalified to bid in Wednesday’s auction, but only one other besides Dominion did so – Apex Virginia Offshore Wind LLC. The others sat it out.
The federal Bureau of Ocean Energy Management set the opening bid at $225,598, or $2 per acre. Just after noon, the bidding had reached over half a million dollars, and within an hour had doubled to more than $1.1 million before reaching the final bid of $1.6 million.
It was the second such auction, or competitive lease-sale, for renewable energy in federal waters ever conducted by BOEM, In July, it auctioned 164,750 acres offshore Rhode Island and Massachusetts as two separate leases for a combined $3.8 million.
Technically, Dominion is still a provisional winning bidder until the U.S. Attorney General, along with the Federal Trade Commission, completes an antitrust review within 30 days.
Dominion now has six months to submit a site assessment plan, then another 4 1/2 years to submit a construction and operations plan. The total lease term is 38 years.
Experts say Virginia is ideal for offshore commercial wind farms because of its existing ports and shipping routes and its eager, trained workforce. They also note that Dominion and the Newport News Shipyard are partnering on potential turbine development.
Jim Lanard, president of the Offshore Wind Development Coalition, said Dominion has the wherewithal to build an offshore wind farm, but that it remains to be seen if it has the will.
“Dominion could do this,” Lanard said. “The question becomes, Will they do it? Will they decide to build an offshore wind farm as part of its portfolio of (energy) assets?”
The anticipated timeline for commercial wind farm development:
•Sept. 4: Virginia lease sale auction
•May 2014: Deadline to submit Site Assessment Plan (SAP)
•May 2018: Deadline to submit Construction and Operations Plan (COP); BOEM conducts an Environmental Impact Statement (18-24 months)
•2020 (projected): first phase of construction begins
•2022 (projected): first phase complete, turbines operational; second phase begins to add 500 megawatt generation
•2024 (projected): third phase begins to add 500 megawatt generation
•2026 (projected): fourth phase begins to add 500 megawatt generation
•2028 (projected): full build-out complete, with a total 2,000 megawatt generation.
Timeline approximations courtesy of the Sierra Club, Virginia chapter.
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