Dominion May End $10B Offshore Wind Project Over Performance Clause
The giant utility Dominion Energy has found itself in a disagreement with state regulators over a proposed performance guarantee for its $10 billion Coastal Virginia Offshore Wind project, one of the largest planned wind farms in the U.S. development pipeline. The clause is enough of a concern for Dominion that it has threatened to scuttle CVOW altogether and walk away - a seismic shock for the budding U.S. offshore wind industry.
Dominion has historically been one of the most committed players in the U.S. offshore wind business. It was an early and enthusiastic entrant, beginning its planning for a small pilot project as early as 2012. The pilot stage was completed in 2020 and is one of only two (small) offshore wind farms operating in the U.S. today.
To build the full-scale 2.6 GW facility, Dominion is buying the only U.S.-built wind turbine installation vessel on the market, the future Charybdis, at a price of half a billion dollars - a financial commitment that no other developer or shipowner has been willing to match yet. Construction on the vessel is already well under way.
However, the Virginia State Corporation Commission (SCC) - a regulator with a broad mandate governing insurance, railroads and utilities - has made a decision that may make CVOW untenable, according to Dominion. The SCC will allow Dominion to bill the cost of CVOW's development to household ratepayers in the form of a miniscule rider fee - but only if its turbines perform at a 42 percent capacity factor or better in any three-year period. Any shortfalls would be Dominion's to cover.
Dominion has appealed the decision, describing it as unprecedented and "unlawful." The firm warns that the guarantee is so broad that it would leave Dominion on the hook for any decline in power output - whether caused by a hurricane, cyberattack, climate change or any other factor.
"The Commission’s unprecedented imposition of an involuntary performance guarantee condition on its approvals, however, is untenable. As ordered, it will prevent the project from moving forward, and the company will be forced to terminate all development and construction activities," Dominion wrote in an appeal. "As recognized by the Commission, the project is favored by the General Assembly’s support for offshore wind generation as a cornerstone of the Commonwealth’s plan for a clean and reliable energy future."
The disagreement follows a just few weeks after Dominion celebrated formal approval from the SCC for the project to move forward. The initial order was released August 8, and it noted that there would be some form of performance requirement, but did not give any details - until now.
Dominion's appeal to the SCC begins a rehearing process, and the company sounded an upbeat note in a statement to local TV media.
"We look forward to completing the Coastal Virginia Offshore Wind Project as a regulated project to build on our long record of affordability and reliability," a Dominion spokesperson told local media.