Dominion encouraged by new bids for offshore wind turbines, but no decision yet 

A second round of bids to build two wind turbines off the Virginia Beach coast appears to have lowered the price, but Dominion Virginia Power officials haven’t decided yet whether to green-light the demonstration project.

“We are optimistic, but it is a fairly hefty cost to deploy these turbines,” Mark Mitchell, a Dominion vice president, said in an interview Wednesday.

The turbines would be among the first along a U.S. coastline. The lead position belongs to a five-turbine farm off Block Island, R.I., that’s scheduled to begin generating power late this year.

Virginia officials are counting on Dominion’s demonstration to test the potential for a commercial wind farm that could eventually sprout hundreds of turbines. The utility holds a federal lease of 113,000 acres of the Atlantic near where the test turbines would be, about 27 miles off the coast.

An initial round of bidding for the two turbines last year yielded an estimated cost of $375 million to $400 million. Because that was much more than the $230 million that Dominion had forecast, the utility decided to try again – this time dividing the project into four segments instead of packaging all into one. Mitchell said the second round, which finished last month, produced a cost range of $300 million to $380 million.

The U.S. Department of Energy has agreed to kick in about $50 million, with Dominion counting on recovering the balance from ratepayers through a special rider on customer bills. That would require approval from the State Corporation Commission.

Katharine Bond, the utility’s director of corporate policy, said Dominion owes its customers “the utmost due diligence and examination” to justify the cost of the twin 6-megawatt turbines, which combined would be able to power as many as 3,000 homes.

By comparison, a new 1,588-megawatt, natural gas-fired power plant that Dominion is planning in Greensville County has an estimated price of about $1.3 billion: roughly four times the potential cost of the two turbines for about 130 times more generating capacity.

Still, Mitchell said, Dominion expects that as offshore wind power takes hold in the United States, as it has in Europe, the cost of such projects will fall. In its latest annual “integrated resource plan,” a long-term blueprint filed with regulators, the utility said the turbines have the “potential to provide a large, scalable renewable resource.”

Dominion gave an update Thursday morning to participants in a “stakeholder process” set up to help with the turbine demonstration. Officials of the utility and the Department of Energy are scheduled to meet in early May to go over the latest bids. Mitchell said Dominion has been aiming to make a final decision on whether to proceed during the second quarter of this year.

Environmental groups quickly responded to Dominion’s update, arguing that the cost of the wind project shouldn’t make the utility hesitate to present it to the SCC for approval or keep that regulatory agency from approving it.

“This new estimate still presents what Dominion calls a ‘heavy lift’ to winning SCC approval of project cost recovery,” said Eileen Levandoski, assistant director of the Sierra Club’s Virginia chapter.

But she said: “We ought to see the ‘heavy lift’ as Dominion’s plans to increase carbon pollution by over 60% by building out another 9,000 megawatts of gas generating plants.”

Seth Heald, chair of the Sierra Club chapter, called the demonstration “an important stepping-stone to the huge opportunity coming along behind it: at least 2,000 megawatts in Virginia’s first wind energy area, and potentially much more after that. Building these wind farms off Virginia Beach will put thousands of people to work right here in Virginia. It’s an important part of a 21st century energy strategy that addresses climate change by moving us to clean energy.”

In the interview, Mitchell said that the earliest the turbines would operate is late 2018. He said one big unresolved issue with the demonstration is the contracting for a vessel capable of carrying and installing the turbines. Fewer than 10 companies in the world do such work, he said, and two offered bids. But because the vessels are heavily booked for installations in Europe, Dominion would have to reserve a ship two years in advance.

That would mean having to make a “very heavy down payment or at least an inflation cost, where if you later change your mind, you still have to pay a pretty substantial amount,” he said, declining to provide price details.

At Thursday’s meeting, Mitchell said Dominion had discussions, which proved unfruitful, with a marine contractor in the Gulf of Mexico about retrofitting a vessel to handle the turbines. He predicted more vessels will become available as the U.S. offshore industry develops.