The State Corporation Commission reluctantly approved Dominion Energy’s $300 million offshore wind energy pilot project off Virginia even as it slammed the plan to put ratepayers on the hook for “essentially all” financial risk and cost.
In a 20-page order issued Friday, commissioners said they normally wouldn’t consider such a project “prudent,” but multiple recent amendments to state code mandated that they “liberally construe” the law to find such offshore wind projects to be “in the public interest.”
The SCC regulates utilities in Virginia, although under the new state provisions Dominion wasn’t required in this case to seek – or receive – the commission’s approval.
Dominion spokesman Dan Genest said the entire $300 million cost of the project will be covered in existing base rates.
“Virginia customers will not see any rate increase, while reaping the benefits of a new form of carbon-free, renewable energy as we explore the viability of a 2,000-megawatt installation that could power up to 500,000 homes,” Genest said.
Dominion is partnering with the Danish energy company Orsted on the Coastal Virginia Offshore Wind project.
The plan is to place two 6-megawatt turbine generators in federal waters 24 nautical miles off Virginia Beach. The turbines are supposed to be operational in December 2020 and act as a test-bed for a possible larger commercial project that could deploy by 2024 at a cost of about $1.77 billion.
If fully developed, the lease-sale area could provide power to half a million homes.
But the commission noted that other utilities pursuing offshore wind “have done so through a power purchase agreement model, which generally places all or some of the risk on the developer.”
By taking on the construction itself, Dominion places “essentially all the risk on Dominion’s customers.”
In addition, the commission said, based on Dominion’s previous risk assessments, the contingency amount built into the project “appears low.” The plan makes ratepayers responsible not only for construction costs, but for potential cost overruns.
The commission also noted that the project’s energy costs are many times higher than those of other renewable or even non-renewable alternatives.
Solar and onshore wind, for example, would offer the same fuel diversity and emission reductions, but at much lower cost and without the maintenance and reliability issues of offshore wind.
Finally, the commission complained that ratepayers will bear the financial brunt of a project that won’t, under any scenario in Dominion’s long-term energy plan, be competitive with other resources for the next 25 years.
But Genest said Dominion believes costs for offshore wind energy will decrease as the infrastructure gets established in this country. Europe has seen “significant” cost reductions in this way, he said.
Sierra Club Virginia, which has been pushing offshore wind power for years, lauded the SCC’s overall decision.
Kate Addleson, director of the Virginia chapter, said it sets the state up to become a leader in the industry.
“Offshore wind energy is an unparalleled opportunity for Virginia to build a clean, renewable source of energy that will secure a safer future for all Virginian families, including those disproportionately vulnerable to climate change and sea level rise,” Addleson said.
Dominion still has to obtain several permits for the project, including final approval from the Bureau of Ocean Energy Management, plus approval of the final turbine design.
In its order, the commission also approved Dominion’s plan to buy solar power from an independent developer of an 80-megawatt facility set for Halifax County.
Unlike the offshore wind project, the solar project involves purchasing power from a third party, which protects customers from financial risk. The utility also engaged in a competitive bidding process for that project that produced a market-based price.
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