Posted on August 10, 2022
State regulators on Friday approved an application from Dominion Energy Virginia to build an enormous offshore wind farm off the coast of Virginia Beach and recover the cost from ratepayers.
No parties to the monthslong proceeding had opposed the approval of the project, which will help the utility boost the proportion of its generation that comes from renewable resources. But many had raised concerns about affordability and possible risks to the utility’s captive ratepayers.
The commission’s order also approved facilities that will connect the wind farm to the existing transmission system.
Robert Blue, Dominion Energy’s president and CEO, said in a statement that the company was pleased with the approval but was reviewing the specifics of the order, “particularly the performance requirement.”
The project, which will be located about 27 miles off the coast, has an expected capital cost of $9.8 billion and has drawn broad support from local officials, policymakers, business groups and trade unions, who say it will help fight climate change and create jobs. Backers quickly celebrated the commission’s decision.
“We applaud the SCC for greenlighting new offshore wind power in Virginia. As the largest offshore wind project in the country, this project is a critical piece of our clean energy transition because it complements solar by generating power at night when the sun isn’t shining,” Will Cleveland, a senior attorney for the Southern Environmental Law Center, said in a statement.
Regarding costs, the SCC order said that over the wind farm’s projected 35-year lifetime, including the construction and its 30-year projected useful life, a typical residential customer is expected to see an average monthly bill increase of $4.72, with a peak monthly bill increase of $14.22 in 2027.
“To be clear, total Project costs, including financing costs, less investment tax credits, are estimated to be approximately $21.5 billion on a Virginia-jurisdictional basis, assuming such costs are reasonable and prudent. And all of these costs … will find their way into ratepayers’ electric bills in some manner,” the order said.
Dominion said in a news release that because offshore wind turbines have no fuel costs, the project is expected to save Virginia customers more than $3 billion during its first 10 years of operation.
The consumer protections in the commission’s order include a requirement that Dominion file a notice within 30 calendar days if it finds that the total project costs are expected to exceed the current estimate or if the final turbine installation is expected to be delayed beyond Feb. 4, 2027. Annual filings will also have to address “any material changes” to the project and explain any cost overruns.
The SCC also ordered that beginning with the commercial operation and extending through the life of the project, customers will be “held harmless” for any shortfall in energy production below a certain threshold.
Such a performance standard will protect customers who are paying for the project “from also having to pay for replacement energy if the Project does not generate the amount of electricity upon which Dominion bases its request and its cost estimates,” the order said.
The order goes on to warn that the performance standard, however, will not protect customers from cost overruns, or if the project is abandoned.
Commissioner Judith Jagdmann emphasized in a concurring opinion that the project was “legislatively favored.”
The 2020 Virginia Clean Economy Act, a sweeping overhaul of the state’s energy policy enacted by Democrats, included a number of renewable energy mandates intended to help address the threats of climate change and paved the way for the project.
The General Assembly, Jagdmann wrote, could consider implementing additional consumer protections.
Friday’s decision came after months of voluminous filings in the case and a multiday evidentiary hearing in May.
The company already has a two-turbine pilot project up and running. The 2.6-gigawatt, utility-scale project’s schedule calls for construction to be complete in 2026. Dominion expects the project to generate enough clean energy to power up to 660,000 homes.