After DOE grant withdrawn, Dominion ponders offshore wind options

Dominion (NYSE:D) is weighing its options for its proposed offshore wind demonstration project in light of an announcement May 27 that the Department of Energy (DOE) is withdrawing $40m in funding.

Recent cost estimates for the offshore project were significantly higher than initially expected and Dominion could not guarantee operation before 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,” said Mary C. Doswell, senior vice president of Dominion Energy Solutions. “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.

Doswell said Dominion plans to consult with other members of the project team, known as the Virginia Offshore Wind Technology Advancement Project (VOWTAP), as well as participants in a stakeholder group of government, research and community representatives, before deciding on next steps.

The VOWTAP project would install two advanced 6-MW 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.

Current bids for constructing the project range from about $300m to $380m, compared with an initial estimate of about $230m.

Doswell said the DOE made its decision after Dominion could not guarantee an in-service date for the project earlier than 2020. While the company has been working toward an earlier date, there are too many uncertainties to meet DOE’s request. These include the high cost of the project, the inability to get firm construction contracts, and the increasing complexities of gaining regulatory approval for energy infrastructure projects.

“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.”

VOWTAP was one of three offshore wind projects chosen by the DOE in May 2014 to receive a second round of funding.

VOWTAP’s other partners are Alstom Power, (recently acquired by General Electric), 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 innovative 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.

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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.