Dominion Resources will go through a second round of bidding to build two wind turbines off the Virginia coast while a group of state officials and industry executives lobby the General Assembly to save the offshore wind demonstration project.
The initial bid for the two-turbine project came in at nearly twice Dominion’s estimated $230 million price tag, sending the Richmond-based utility giant back to the drawing board.
After a series of summer meetings with 87 interested parties – among them manufacturers, engineers and environmental groups – Dominion decided to break up its request for proposals into several smaller pieces. The idea is that the new structure could foster more competition and bring down costs by spreading the risk. Dominion typically works with contractors that hire their own subcontractors and oversee entire projects.
“But with an immature domestic offshore wind market, there were a lot of layers of risk that were covered by this general contractor,” said Mary Doswell, Dominion’s senior vice president for retail and alternative energy solutions. “More of that risk falls on Dominion (under the new contract process), and we have to get comfortable with how we handle that.”
Dominion should know by the end of the first quarter of 2016 how much it will save through the new bid process.
Dominion has asked the Energy Department for a one-year extension to use a $47 million grant for the wind project.
If timed correctly, the project could qualify for extra credit under the new federal Clean Power Plan mandates to reduce the carbon dioxide output of power plants.
“This project is necessary because it’s going to inform not only the nation … but it’s also going to inform Virginia as to how we’re going to comply with the Clean Power Plan going forward,” said Art Moye, a member of the Virginia Offshore Wind Development Authority and executive vice presidents of the Virginia Maritime Association.
Offshore wind is common in Europe, but the lack of a U.S. market has meant higher costs here. Dominion, for example, expects to hire vessels from Europe to bring the turbines to the waters 27 miles off Virginia Beach.
The wind authority on Wednesday created a subcommittee aimed at persuading the General Assembly, during its session beginning in January, to help the project. Assistance could include an agreement to purchase power at a set cost from the turbines or the ability to write off certain costs related to the project, similar to the $600 million write-off Dominion was granted for costs related to development of a third nuclear reactor at its North Anna facility.
“We already have the legislative model in place,” said Bob Matthias, chairman of the wind authority.
The authority also discussed ways to drum up public support for offshore wind as a way to gain political leverage.
Environmental groups have been closely monitoring Dominion’s plans and calling for the project to advance.
“Even if the costs come in higher than Dominion and others in the state would like, from our perspective it’s critical that we move forward,” said David Carr, general counsel in the Virginia office of the Southern Environmental Law Center. “If we hesitate on the project again, we’ll get left behind, so I encourage us to do everything we can to move forward.”
Recommendations from Dominion’s summer meetings also included keeping the project’s technological innovations, which include a hurricane-resistant design, automated controls that can be accessed remotely and a drive train that could require less maintenance.
The twin 6-megawatt turbines are intended to be a test for commercial wind development. Dominion hopes to eventually install about 300 turbines across 112,800 acres near the test site.
The federal government has issued nine leases for offshore wind projects, including off the North Carolina and Maryland coasts, and is considering more. The nation’s first offshore wind farm is under construction in waters off Rhode Island.
A separate report to the wind authority on Wednesday estimated that bringing the wind turbine supply and maintenance chain to Virginia’s ports could bring down the costs of offshore wind while adding 1,500 manufacturing jobs and pumping more than $1 billion a year into the economy. But required improvements to lure the companies would cost millions of dollars and will be viable only if offshore wind becomes a more popular energy source here. Other ports along the East Coast, including in Baltimore and New Jersey, are also likely to compete for those same jobs.
Existing contracts and other issues will make it difficult for some of the ports in Virginia to clear enough space for the industry, Moye said.
“That being said, we’re going to do everything we possibly can to bring that business,” he said. “Offshore wind is going to happen, and we want those ancillary businesses. We want that in Virginia.”
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