Dominion outbids Apex to win Interior offshore wind auction

Dominion (NYSE:D) subsidiary Virginia Electric Power Co. outbid Apex Virginia Offshore Wind, LLC and was named the provisional winner of an Interior Department auction on Sept. 4 for a large wind energy development area in federal waters off the Virginia coast.

The Bureau of Ocean Energy Management (BOEM) said that Dominion had bid roughly $1.6m for the lease to the Wind Energy Area that consists of 112,799 acres on the Outer Continental Shelf.

Following the auction, the Attorney General, in consultation with the Federal Trade Commission (FTC), will have 30 days in which to complete an antitrust review of the auction.

The sale follows a July 31 auction of 164,750 acres offshore Rhode Island and Massachusetts for wind energy development that was provisionally won by Deepwater Wind New England, LLC, generating $3.8m in high bids.

During a conference call with reporters, BOEM Director Tommy Beaudreau said Deepwater recently cleared its antitrust review.

The Interior Department believes the wind area has the potential for 2,000 MW of wind generation. In its most recent integrated resource plant (IRP), Dominion said it envisions developing 1,600 MW of offshore wind along the Virginia coast after developing a 12-MW demonstration project.

BOEM chief defends interest in offshore wind auctions

Beaudreau told reporters he was not disappointed by the level of interest in Interior’s first two wind auctions. There were only three bidders in the first auction and only two in the Virginia coastal auction.

Beaudreau said the participation shows developers are serious about “standing up” the nascent offshore wind energy industry. “I’m actually very pleased,” Beaudreau said.

There are also upcoming sales involving offshore, Maryland, Massachusetts and New Jersey, Beaudreau said.

Eight companies had qualified to bid in the Virginia wind area auction, but only Dominion and Apex filed the required deposit in August to be allowed to submit bids.

Interior did much up-front vetting to ensure the bidders had technical and financial resources to develop a commercial wind project.

The BOEM chief, Beaudreau, said the wind lease area would not necessarily prevent potential offshore extraction of oil and natural gas in the region. This is not the same federal area often cited as having potential for oil and gas development near the Virginia coast, Beaudreau said.

Maureen Bornholdt, BOEM’s program manager for the Office of Renewable Energy Programs, said the wind turbines probably won’t be visible from shore given they are 23 miles out.

The wind lease area is also in a relatively shallow area of the Atlantic Ocean, so the base of the structures could be “bottom-fixed,” rather than floating.

Offshore wind energy off the Virginia coastline could also benefit from its proximity to the Norfolk ports, the Interior officials said.

The auction lasted one day, consisting of six rounds before determining the provisional winner.

The lease will have a preliminary term of six months in which to submit a Site Assessment Plan to BOEM for approval. A Site Assessment Plan describes the activities (e.g., installation of meteorological towers and buoys) the lessee plans to perform for the assessment of the wind resources and ocean conditions of its commercial lease.

After a Site Assessment Plan is approved, the lessee will have up to four and a half years in which to submit a Construction and Operations Plan (COP) for approval, which provides a detailed outline for the construction and operation of a wind energy project on the lease. If the COP is approved, the lessee will have an operations term of 33 years.

Offshore wind has the potential to provide the largest source of renewable generation for Virginia; but offshore wind is much more expensive than other renewable generation alternatives, Dominion said in its recent resource plan.

In December 2012, a Dominion-led team was among seven projects selected by the DOE for a $4m award for initial engineering, design, and permitting for an offshore wind turbine demonstration facility off the coast. The DOE will select up to three projects for follow-on phases that focus on detailed design, construction, installation, and data collection.

“Offshore wind has the potential to provide the largest, scalable renewable resource for Virginia if it can be achieved at reasonable cost to customers,” said Mary C. Doswell, senior vice president of Dominion’s Alternative Energy Solutions. “We will now proceed with the BOEM timetable for development of the commercial wind energy area while advancing our research proposal and looking for ways to lower the cost of bringing offshore wind generation to customers.”

Others that BOEM had approved to bid were Apex Virginia Offshore Wind LLC of Charlottesville, Va; Energy Management of Boston; EDF Renewable Development of San Diego; Fishermen’s Energy LLC of Cape May, N.J.; Iberdrola Renewables of Portland, Ore.; Sea Breeze Energy LLC of Philadelphia; and Orisol Energy U.S. of Ann Arbor, Mich.

“Virginia’s coast is ideal for wind development,” said Virginia Gov. Bob McDonnell in a statement.

“The gradual slope of the Outer Continental Shelf and consistent offshore wind speeds make this a natural geographic location for the commercial utilization of offshore wind resources. At the same time, Virginia enjoys a robust commercial ship building industry poised to become the center of construction for the component parts needed to build the specialized ships, turbines and towers necessary for these upcoming leases, and potentially for additional future wind leases on the east coast,” McDonnell added.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.