Dominion’s offshore wind project no longer eligible for $40 million in DOE funding

Published May 27, 2016 by Jessica Sabbath

Dominion Virginia Power announced Friday that it is reassessing options for its offshore research project after it was dropped from a Department of Energy program, making it ineligible for $40 million in funding.

Dominion said in a statement the DOE withdrew the funding because the company could not guarantee the project would be in service by 2020.

“Naturally, we are disappointed in the DOE's decision because we still believe that offshore wind has a great potential to deliver clean, renewable energy to Virginia,” Mary C. Doswell, senior vice president, Dominion Energy Solutions, said in a statement. “However, we also recognize the unique regulatory and cost challenges involved in our project, and appreciate the DOE's desire to support other projects that may have an earlier opportunity for fruition.”

Doswell said Dominion plans to consult with other members of the project team, known as the Virginia Offshore Wind Technology Advancement Project (VOWTAP), before deciding on next steps.

VOWTAP was one of seven projects in 2012 selected by the DOE to receive $4 million for preliminary engineering, design and planning. It was one of three projects selected in 2014 to receive an additional $6.7 million to complete the final engineering, design and permitting plans. Other research projects will continue on in the demonstration program and be eligible for additional funding.

In a statement, a DOE spokesperson said Dominion's project had been helpful for the development of offshore wind:

“While Dominion’s Virginia Offshore Wind Technology Advancement Project will be leaving the Department-funded demonstration program, the lessons learned during the project’s development over the past several years will benefit the burgeoning offshore wind industry moving forward.

“Dominion’s work helped to streamline the permitting process for offshore wind projects and identified several ways to cut costs going forward. Additionally, the diligent efforts of Dominion and the U.S. Department of the Interior’s Bureau of Ocean Energy Management led to the first approval of a wind energy research lease in federal waters, and the optimization of a twisted jacket foundation design that is resilient to hurricanes will be critical to future U.S. deployments on the Atlantic and Gulf coast.”

The VOWTAP project would install two 6-megawatt wind turbines in federal waters about 24 miles off the coast of Virginia Beach.

At peak production, the turbines would generate enough electricity to power up to 3,000 homes.

The company re-bid the project after original estimates came in between $375 million and $400 million — almost twice the estimated cost of $230 million.

In its second round of proposals, Dominion split the proposal into four separate packages. The company announced in April those bids came to between $300 million and $380 million.

The project is complex, particularly because the U.S. does not have a supply chain for the offshore wind industry. The costliest part of the project is the delivery and installation of the turbines, which can only be done by few companies in the world. None operate in the U.S.

Doswell said the complexities made Dominion unable to promise a delivery date, including the project’s high cost, the inability to get firm construction contracts and the complexity of regulatory approvals.

“This project is a first in many ways,” Doswell said. “As such, you need to account for many variables when attempting to lock in on a date with any degree of certainty.”

The research project is seen as a key research vehicle for a full-scale build out of offshore wind off Virginia’s coast. In 2013, Dominion won a competitive bid process to lease 112,800 acres of federal leases off Virginia’s coast for future development of an offshore wind farm. The area could hold an estimated 300 turbines.

The Hampton Roads region also believes it could be an ideal location for development of an offshore wind industry on the East Coast.

VOWTAP's other partners are Alstom Power Inc., (recently acquired by General Electric Co.), a wind turbine manufacturer that will supply the turbines;  KBR, a global engineering, construction and services firm with experience in offshore wind; Keystone Engineering, the designer of the substructure; the National Renewable Energy Laboratory, a federally funded research and development center; Newport News Shipbuilding, a division of Huntington Ingalls Industries; and the Virginia Tech Advanced Research Institute, representing the Virginia Coastal Energy Research Consortium.