Dominion Virginia Power has lost $40 million in federal money to help it build a wind turbine demonstration project, a major setback that could further delay the development of wind energy off the state’s coastline.
Mary Doswell, senior vice president of the company’s Dominion Energy Solutions unit, said in a statement that the utility was disappointed in the Department of Energy decision “because we still believe that offshore wind has a great potential to deliver clean, renewable energy to Virginia.”
Dominion, Virginia’s largest electric utility, said it will evaluate options for the project without the funding.
The Sierra Club accused Dominion of essentially inviting federal officials to pull the money, however, and said the utility is signaling that it has no intention of seriously pursuing offshore wind energy.
Dominion has proposed building two 6-megawatt turbines about 27 miles off the Virginia Beach coast, and recently has been evaluating a second set of bids for the project that would put its total cost between $300 million and $380 million. The first bid round yielded an estimate of $375 million to $400 million. Dominion’s initial projection was $230 million.
The turbines would help Dominion demonstrate the potential for a commercial wind farm off the Virginia coast that could sprout hundreds of turbines generating 2,000 megawatts, enough to power 500,000 homes. Dominion beat out several other bidders for a federal lease to develop the larger farm in Atlantic waters.
The utility has won broad, bipartisan political support for the project, and the state created an offshore wind development authority and has invested in research to help move it along. A report last month from a group called the American Jobs Project predicted the potential for as many as 14,000 Virginia jobs in offshore wind energy over the next 15 years if the industry takes off as many have hoped.
But Doswell said in Dominion’s statement Friday that “unique regulatory and cost challenges involved in our project” have complicated the utility’s plans. She said the Energy Department has a “desire to support other projects that may have an earlier opportunity for fruition.”
Dominion originally had proposed a startup date for the two turbines in 2017, then pushed that back a year. In the utility’s statement Friday, Doswell said federal officials balked at continuing the grant to Dominion because the utility could not guarantee a startup earlier than 2020.
Doswell said there are too many unknowns to meet that request, including the higher-than-projected cost, difficulty in obtaining firm construction contracts and the “increasing complexities of gaining regulatory approval” for such projects.
Dominion officials have previously said they are concerned that the State Corporation Commission, which regulates utility rates, might reject the demonstration project as too costly.
Bob Matthias, a Virginia Beach city official who chairs the Virginia Offshore Wind Development Authority, said the loss of federal backing won’t help the utility make its case with the SCC. Now Dominion would face asking for ratepayer reimbursement for $300 million, assuming that it could nail down the project at the low end of its latest cost estimate, he said. That would have been $260 million with the Energy Department funding, he said.
Still, Matthias said he believes Dominion should pursue the project, and that the SCC should allow the utility to recover its cost from ratepayers. He cited estimates that it could add about $1 to the monthly bill of an average residential customer, and said that’s a justifiable cost given the promise of new jobs and the potential of cleaner energy.
Matthias said he believes Dominion has pursued offshore wind energy in good faith.
Glen Besa, the Sierra Club’s former Virginia director, argued otherwise. He said Dominion’s loss of the federal money is a major blow and a result of the utility’s foot-dragging.
“Dominion has really blown it on this thing,” he said in an interview.
The Sierra Club later issued a statement accusing Dominion of “sabotaging offshore wind” and being “disingenuous about their intentions.”
It said the utility has instead put its focus on building a third nuclear-powered unit at its North Anna plant and developing new natural-gas-fired plants that would be supplied by the proposed Atlantic Coast Pipeline.
Dominion has been slower than many other utilities to make big commitments to alternative energies like wind and solar. At one time, it was positioned to potentially be the first out of the gate in developing U.S. offshore wind energy. But a project off Block Island, R.I., now is to set to claim that distinction. Meanwhile, Maryland, New York and several other East Coast states are ramping up efforts. A large Danish wind company called DONG Energy last month took over development rights for a commercial wind farm off New Jersey. It also owns the rights for a large farm off Massachusetts.
If anything, Besa argued, Dominion is moving backwards on wind. He noted that the utility’s 2016 “integrated resource plan,” its annually updated long-term strategy document, doesn’t include a commercial offshore wind farm as an alternative. Last year’s plan did.
Nevertheless, David Botkins, a Dominion spokesman, warned against writing the utility out of the offshore energy story. Despite the latest setback, he said in an email: “The wind is not out of the sails (for this project).”
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