Dominion says off-shore wind project could cost far more than expected 

Dominion Resources Inc.’s plan to install two wind turbines about 24 miles off the coast of Virginia Beach could cost nearly twice what the company originally expected, and the price tag likely will delay the project.

Dominion originally had estimated it would cost about $230 million to install a pair of six-megawatt turbines as part of a project to determine whether offshore wind power was economically viable. A $47 million grant from the U.S. Department of Energy would help cover some costs.

But Mary Doswell, Dominion’s senior vice president for retail and alternative energy solutions, said the only complete bid the company received quoted a price of $375 million to $400 million, with no price cap, which means costs could escalate due to bad weather or construction delays.

On Thursday, Doswell told the Virginia Offshore Wind Development Authority, a group of state officials and private industry executives, that Dominion wants to hold meetings with state and federal officials, shipping companies, other electric utilities and turbine manufacturers to discuss ways to reduce or share the project’s costs before signing any contracts. Doswell is a member of the authority’s board.

If the project’s costs do not end up closer to the $230 million estimate, Doswell said, Dominion may struggle to win approval from the State Corporation Commission, which regulates the company.

“We were comfortable with the $230 million figure and thought it was doable,” Doswell said. “We need to figure out where the pressure point or tradeoff is. We haven’t asked the SCC about the $400 million price.”

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News of the possible cost increase prompted the wind development authority to delay a discussion about how it could help Dominion win SCC approval for the project.

Instead, the group will participate in the meetings, which Dominion plans to hold this summer. Dominion will report the results of those sessions at a fall meeting of the authority.

Environmental groups criticized the possible delay.

“We were highly skeptical of Dominion’s ability to follow through with development of up to 2,000 (megawatts of) offshore wind when Dominion won the rights to develop off the Virginia coast from the federal Bureau of Ocean Energy Management,” said Glen Besa, director of the Sierra Club’s Virginia chapter. “Today’s announcement confirms that our skepticism of Dominion’s ability to deliver offshore wind to Virginia was justified.”

Dominion had planned to submit paperwork to the SCC in July, hoping it could begin construction in the summer of 2016 and begin operations in 2017. That timeline is likely to be delayed by a year, Doswell said.

“I think a 2018 start to commercial service is more realistic,” she said. “2017 was a really tight timetable already.”

Dawone Robinson, Virginia policy director at the Chesapeake Climate Action Network, said Virginia needs to start immediately developing more power that does not contribute to global warming.

“Every step Dominion takes to delay developing Virginia’s vast offshore wind resources is a delay in building up urgently needed solutions to climate change,” Robinson said in a statement.

Because the federal government’s $47 million grant was based on plans for the turbines to enter service in 2017, Dominion would need to receive an extension from the Energy Department. Doswell said federal officials seemed open to that possibility, but she said they would not hold the money forever.

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Offshore wind energy is relatively new in the United States. Dominion’s project, as well as a proposed development off the coast of Rhode Island, are considered major test cases for the industry, said Brian Redmond, managing director at Paragon Energy Holdings and a member of the authority’s board.

Redmond told the board Thursday that there are 2,300 offshore turbines providing more than 7,300 megawatts to European countries as of July 1, 2014, with another 3,000 megawatts worth of power under construction.

The estimated cost for the Rhode Island project, which involves five turbines that each generate six megawatts of power, is about $300 million, Redmond said.

Power companies do not need to buy fuel for wind turbines, which makes them cheaper to maintain and operate. But $400 million would be an enormous investment for 12 megawatts of power, even though future turbines likely would be much cheaper as Dominion orders large numbers for commercial service, provided the initial test is successful.

The company recently announced plans to build a 1,600-megawatt natural gas plant in Greensville County. That plant, which could enter service in 2019, has an estimated cost of about $1 billion.

Dominion’s integrated resource plan, which provides a 15-year look at the company’s plans for new power plants and its estimate for future power demand, shows that Dominion believes it could begin generating large amounts of offshore wind power within a decade.

The company previously has said it believes the area it has leased off the coast of Virginia Beach could provide 2,000 megawatts of energy.

“So we do have time to figure out how this works,” Doswell said. “I think we’d want a couple years of data.”