Va.’s offshore wind prospects weather financial doldrums

Source: Daniel Cusick, E&E reporter • Posted: Thursday, June 23, 2016

windfarm

Wind turbines off the shore of North Wales in the United Kingdom. Efforts to bring offshore wind to Virginia may be faltering. Photo by Allan Harris, courtesy of Flickr.

Just last year, Virginia was poised to become the first U.S. state to tap the Atlantic coast’s offshore winds.

That’s when Dominion Resources Inc., the commonwealth’s largest electric utility, doubled down on its promise to build a 12-megawatt wind power facility 25 miles off Virginia Beach, with notions of eventually siting hundreds of turbine towers across a swath of open ocean.

But if Virginia was first out of the gate in its pursuit of offshore wind power, it has fallen far behind today as it watches a handful of other Atlantic states put “steel in the water” much more quickly than Dominion.

In fact, Rhode Island will now host the first operating offshore wind farm in the United States at Block Island, where five turbines are expected to produce up to 30 MW of electricity by later this year (ClimateWire, May 31).

Dominion’s project, by contrast, is adrift in a sea of uncertainty, as the utility tries to whittle down an eye-popping price tag of as high as $380 million, 60 percent above initial estimates and significantly more than it would cost to build a combined-cycle natural gas plant or utility-scale solar array onshore.

The sticker shock has soured Dominion’s appetite for offshore wind power, at least temporarily, and cast Virginia’s larger energy agenda in a dimmer light than what many expected just 15 months ago. That’s when Gov. Terry McAuliffe (D) boasted that Virginia “was leading the way in building wind turbines in the Atlantic Ocean and taking the next step toward the clean energy economy we need to create jobs and lower energy costs now and into the future.”

This week, the closest commonwealth officials would come to embracing offshore wind power was a statement from the state Department of Mines, Minerals and Energy saying, “Virginia’s goal has not changed much” and that they “are waiting on Dominion to make a decision on how they would like to proceed at this time.”

DOE pulls $47M in support

Dominion executives, who will address wind energy experts and advocates at James Madison University in Virginia today, insist they are not throwing in the towel on offshore wind. But they will take a long, hard look at the economics of wind before committing any more money to the outer continental shelf project known as the “Virginia Offshore Wind Technology Advancement Project,” or VOWTAP.

“The company is still very much interested in offshore wind and what it represents for adding more renewables to the grid,” said David Botkins, a spokesman for Dominion Virginia Power, which retains the federal offshore lease for VOWTAP, a partnership.

But, Botkins added, the company and its partners “must make a decision about whether or not we want to proceed” in submitting the project to Virginia regulators for approval, “or whether we might take a different path, including taking a hard look at the potential for a full build-out of wind turbines across that [lease] area.”

For now, however, prospects for moving the project forward are near zero. Last month, the Department of Energy, which had bolstered VOWTAP with $47 million in grant funding, said it was ending its support for the project after Dominion made clear it could not guarantee that the turbines would be operating before 2020.

In an emailed statement, a DOE spokesman said Dominion’s participation in the Offshore Wind Advanced Technology Demonstration program was ended after “a scheduled evaluation of the full portfolio [of projects] against established milestones,” including in-service commitments of 2018 or 2019.

But there’s little doubt the Virginia project was an early favorite for DOE as far back as 2012, when it was selected as one of seven proposals to complete preliminary engineering, design, site evaluation and planning phases of their offshore wind demonstration projects. And in 2014, the list of funding recipients was whittled to three.

DOE was particularly interested in Dominion’s plan to use a “twisted jacket” foundation design that would improve wind turbines’ resilience to wind and waves generated by hurricanes. In a recent report detailing grant funding from 2006 to 2016, DOE noted that the Dominion offshore project was important “to ensure that future U.S. deployments on the Atlantic and Gulf coasts are reliable, safe, and cost-effective.”

The report also found that “Dominion’s development activities have engaged industry stakeholders, leading to an enhanced understanding of the unique aspects of offshore wind energy and identifying several areas and pathways to future cost reductions.”

But according to Botkins, cost ultimately proved too great an obstacle, at least in the near term. He said Dominion Virginia Power’s electricity rates are 20 percent below the national average and well below those of some neighboring Mid-Atlantic states. Putting Virginia ratepayers at risk of price hikes due to the high deployment cost of offshore wind was something Dominion’s executives and board just couldn’t accept, he said.

Competitive electricity rates are “good for economic development and good for the economy in general,” Botkins added. “There’s also the question of what the [Virginia State Corporation] Commission would be able to justify in terms of a rate increase to pay for offshore wind power.”

Limited prospects

Meanwhile, Virginia renewable energy advocates wait for a breakthrough.

Jonathan Miles, a professor of integrated science and technology at James Madison University and director of the school’s Virginia Center for Wind Energy, said the state now risks falling behind its peer states, including neighboring North Carolina, in developing commercial-scale wind energy.

One wind farm is under review for a site in Botetourt County near Roanoke, in the shadow of the George Washington National Forest, and another has been proposed for Pulaski County near Blacksburg. But the state has no other active wind power proposals.

Meanwhile, Miles said, potential wind energy developers enter and exit the state finding their prospects limited.

A critical key to unlocking the state’s considerable wind energy potential, Miles said, is getting the first project off the ground, whether it’s in the highlands of eastern Virginia or on the outer continental shelf.

“Dominion would like to figure out how to do this,” Miles added. “But when the rubber hits the road here, the challenge is it’s just expensive. Plus, there are those who say, ‘Sure, we can get it done technically speaking.’ But we don’t have the same level of government assistance and policies” that other states and countries have.

For now, Miles and other experts say offshore wind power will find its niche in New England and the more densely populated stretch of the Atlantic coast from Boston to Washington, D.C. That’s where a greater number of energy markets are deregulated, where state renewable energy targets are higher and where retail electricity rates tend to be above the national average.

All of those factors encourage greater competition between fossil power providers and wind energy developers, both onshore and offshore.