Thursday, October 3, 2024

Dominion Wins Second Offshore Wind Lease Area with Lone Bid

A test wind turbine for Dominion’s Coastal Virginia Offshore Wind project. (Charlie Paullin/Virginia Mercury)

VIRGINIA BEACH — Dominion Energy is spending $17.65 million for another piece of the ocean to expand its offshore wind energy.

Virginia’s largest utility was the lone bidder for the lease of 176,506 acres about 35 miles off the mouth of the Chesapeake Bay in a Bureau of Ocean Energy Management auction Wednesday.

The win means Dominion Energy has the potential to produce up to another 4 gigawatts of electricity, enough to power up to 1.4 million homes, directly adjacent to its $9.8 billion Coastal Virginia Offshore Wind (CVOW) project currently being built.

The additional lease area also means Dominion is closer to — and could actually satisfy — part of its requirements of the Virginia Clean Economy Act to produce a total of 5.2 gigawatts of offshore wind electricity by 2035. The 2020 law seeks to decarbonize the electric grid by mid-century.

The new area also joins a 40,000-acre area, renamed CVOW South, off the coast of the Outer Banks in North Carolina that the utility announced in July it would purchase to produce up to 800 megawatts of electricity as part of an effort to meet increasing power demands.

That demand is coming from data centers proliferating in Virginia, surrounding states retiring fossil fuel sources, localities in Virginia pushing back against solar and battery storage sources, and problems with the regional grid.

As questions shroud the viability of lofty small modular nuclear reactors to provide around-the clock, carbon-free electricity generation, the ability for offshore wind to provide power by cranking its spinning turbines has become increasingly appealing.

“Offshore wind is critical to our all-of-the-above approach to meet the unprecedented growth of our customer electric demand over the next decade,” said Robert M. Blue, chair, president and chief executive officer of Dominion Energy. “Winning this lease area gives us another low-cost option to meet that growing demand while providing our customers with reliable, affordable and increasing clean energy.”

The bidding

Dominion spent about $1.7 million in 2013 for the 113,000-care area about 27 miles off the shore of Virginia Beach being used for the CVOW project, which will consist of 176 wind turbines — the points of which will be 836 above the water — on monopile foundations.

The final price for the second area is a good one, said Eileen Woll, offshore wind energy program director at the Virginia Chapter of the environmental non-profit Sierra Club, after some predicted the sale could go for as much as $200 million.

A reason for the price concern is because the Bureau of Ocean Energy Management, which runs the auctions for the areas it designates as suitable for offshore wind development, whittled the options down to two.

The second lease area auctioned Wednesday, a 101,443 acre spot off the coast of Maryland and Delaware, had five opening bids at the minimum $10,144,300 price, but escalated to a $75,001,001 offer from Equinor Wind.

“That price, $17 million is a bargain,” said Woll in an interview, adding third-party developers saw an opportunity in the northern Maryland and Delaware area. “I think it’s real legit for us to push [for a goal of] 8 gigawatts [of offshore wind] and it’s very realistic.”

In the most recent legislative session, Sen. Creigh Deeds, D-Bath, introduced a bill to allow Dominion to procure its offshore wind electricity from a third-party developer, which argued the steep competition for the limited sites could escalate bids, but the legislation was pushed to 2025.

The argument centered around the idea that if Dominion was forced to buy electricity from one of those developers, the third-party providers would have to compete to keep their bids low as part of an overall effort to keep electricity costs down when entering into an agreement with the utility, instead of allowing Dominion to increase its bid to an exorbitant amount that is recoverable by ratepayers.

But the third party developers ended up not bidding on the area Dominion won and instead focused on the northern area.

Evan Vaughan, executive director of Mid-Atlantic Renewable Energy Coalition (MAREC) Action, in a statement said, the results show that policy and electricity demands are “attracting major interest from our growing industry.”

“It isn’t surprising to see the different level of competition between [the Virginia area] and [Maryland/Delaware] area, as Virginia’s policies do not allow for non-utility developers to sell electricity directly into the Virginia market,” he added.

What’s next

The utility will have to submit an application to the State Corporation Commission for a certificate of public convenience and necessity for the second offshore wind project before constructing its own facility.

“At this time, the company does not have an estimated timeline or cost for development of either CVOW South or the new leasehold,” Dominion’s release stated.

Dominion has attributed the “on-time and on-budget” work underway currently at CVOW to regulated oversight from the SCC that required the utility to lock up contracts years ago before inflation and supply chain issues led to third-party projects in New England states closing.

The utility announced on Monday the 50th monopile of CVOW had been installed for the project that is expected to cost ratepayers $4 a month over the life of the 35-year project.

A lawsuit from conservative and fossil-fuel-funded groups challenging the CVOW project, alleging a harm to the North Atlantic right whale that scientists dispute, is still proceeding in District of Columbia U.S. District Court.

Virginia Mercury is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Samantha Willis for questions: info@virginiamercury.com. Follow Virginia Mercury on Facebook and X.

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