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Why Dominion's Approach to Offshore Wind May Prove Costly to Consumers

Dominion Energy

This fall, Dominion surprised industry experts when it announced plans to build a massive wind farm off Virginia’s coast. 

The company has no experience with offshore wind, and critics say customers could be stuck with big bills if the company is not required to compete for the right to build. 

Dominion says it’s determined to cut carbon emissions 55% in the next decade.  That means burning less gas and coal while boosting production of clean power. 

Energy blogger Ivy Main says that’s why the company has now decided to tap this state’s considerable potential for wind power.

“They are planning to build out the entire Virginia wind energy area  27 miles off of Virginia Beach.”

Dominion’s first estimate of cost is $7.8 billion, but that’s based on using resources from Europe according to spokesman Jeremy Slayton.

“That would include things like manufacturing of the turbines, because right now the turbines themselves are manufactured in Europe and then have to be transported by boat over to the United States.”

The company says costs will come down as the United States gears up to supply a new industry off American shores.  And state government is likely to provide support.

“The economic development and the job prospects are  terrific for Virginia,” says Main.

But there’s something else that could keep costs down – competitive bidding.  At the University of Virginia, Professor Bill Shobe studies the economics of energy. He says about a hundred countries have already shown how powerful that approach can be.

“They set a renewables target, and then they announced they were going to hold an auction, and what interested firms would do is bid a price for an amount of renewable power that they would agree to provide, and the results of those auctions have been astonishing,” he explains.

Using this model for production of solar power helped lower costs by 62% over a four-year period, and Main says costs to produce offshore wind power dropped 32% in a single year. Shobe says it’s the only way consumers will know they’re getting the best price, and it might not keep Dominion from building the wind farm.

“If Dominion wants to bid to build the turbines themselves, by all means.  If they are really the low cost provider, then they’ll win the bids.”

If Dominion moves forward, Main hopes it will partner with another, more experienced firm.  It’s already working with the world’s largest wind energy supplier – a Danish company called Orsted – on a demonstration project involving two turbines, but the big wind farm would involve 220 of them.

"I had been given a heads up early that they had not consulted with Orsted before they made the announcement that they were going forward with the big farm," she recalls. "Then another developer told me that he had checked with them as to whether they might want another partner, and they’d said no – that they were going to do it themselves, and then Dominion held its quarterly earnings call and confirmed there that it planned to develop, own and operate the wind farm by itself.”

Since she published her concerns, Dominion has said it’s undecided on the issue of whether to fly solo.  

“We are evaluating how best to proceed with our commercial  offshore wind project," says Dominion spokesman Slayton.  "No specific decisions have been made regarding partners or suppliers or those sorts of things.”

The company says the wind farm will come online in three stages – in 2024, 25 and 26.  Noting many other states plan wind farms in that same time frame, Main says federal regulators could be overwhelmed – unable to grant permits quickly enough to keep Dominion on schedule.

Sandy Hausman is Radio IQ's Charlottesville Bureau Chief