Dominion poised to build massive offshore wind project years in development

About 27 miles off the coast of Virginia Beach, Va., barely visible on the horizon from shore, two 620-foot turbines spin above the Atlantic Ocean. In about five years, if Dominion Energy Inc.'s plans work out, there will be dozens more.

With the 12-MW Coastal Virginia Offshore Wind project, which began generating power in the fall of 2020 and is the first operational offshore wind project in federal waters, Dominion executives believe they have established the launching pad for the robust development of offshore wind generation along the U.S. East Coast.

The project entered service a few years after the 29.3-MW Block Island Offshore Wind farm, now owned by Ørsted A/S subsidiary Ørsted US Offshore Wind, was brought online in late 2016 as the nation's first commercial-scale offshore wind project. Block Island is located in state waters about 3 miles off the Rhode Island coast.

Dominion plans to expand from two 6-MW turbines to as many as 180 14-MW turbines by the end of 2026. If successful, Dominion will be among the first major utilities to show that large offshore wind farms supplying the population centers of the U.S. East Coast are a viable strategy for reducing carbon emissions. But it has been a long road to this point, and construction has barely begun.

Regulated utility subsidiary Dominion Energy Virginia, known legally as Virginia Electric and Power Co., announced plans in September 2019 to build the 2,640-MW Virginia Beach Offshore Wind Project in three phases of 880 MW each.

"This project is about generating carbon-free electricity for our customers and also about economic opportunity across the state and, frankly, across the country," Dominion Chairman, President and CEO Robert Blue said during an Oct. 12 panel discussion hosted by S&P Global Ratings.

Blue noted that the project is being built at a scale "that we couldn't do onshore."

Costs and benefits

During a recent five-hour boat ride to visit the pilot turbines, G.T. Hollett, director of offshore wind for Dominion, said one of the advantages to being offshore is "the wind is relatively present compared to onshore."

The turbines cut through the warm fall air in more than 80 feet of open water, sending electricity through an undersea cable to an onshore substation near the Camp Pendleton military reservation in Virginia Beach.

The U.S. Energy Information Administration projects the capacity factor for offshore wind, which is the amount of time the turbines actually produce power compared to continuous operation, will be about 44% in 2026, compared to a capacity factor of 29% for standalone solar resources.

Offshore wind cost is also expected to become more competitive as the nascent industry grows. The levelized cost of energy for the Virginia Beach project is estimated at $80 to $90 per MWh, according to Dominion.

"We expect that you'll see the cost of offshore wind coming down as the industry builds here in the U.S.," Hollett said during the tour.

Dominion told the investment community it will seek approval for cost recovery of its nearly $8 billion venture from the Virginia State Corporation Commission.

The development plan

The proposal, the largest U.S. offshore wind project in the development pipeline, will be constructed in the 112,800 acres the company is leasing from the U.S. Bureau of Ocean Energy Management.

Hollett said the company expects to receive approval for the construction and operations plan from BOEM in the summer of 2023 and intends to install more than half the necessary foundations between May and October in 2024. The goal is to have the entire project operational in 2026.

"We're going to construct the full 2.6 GW continuously," Hollett said in a follow-up phone interview.

Dominion, however, must halt construction activity in the winter months during the North Atlantic right whale migration period. While the foundations for the turbines are installed, Dominion can also begin laying cable to connect the turbines to offshore substations as part of "electrically preparing" for the next round of construction.

"We'll start putting wind turbines up in the summer of 2025," Hollett said. "We'll finish whatever foundation positions are there, but as the wind turbines come up, you want them to come into service."

Dominion plans to bring "strings" of six to eight turbines online at a time.

"As you put up turbines and fill up an offshore substation, you just kind of keep moving your way through the project area," Hollett said.

Siemens Gamesa Renewable Energy SA will supply the turbines, which are expected to be more than 800 feet tall. Each 14-MW turbine can produce up to 15 MW of electricity using power boost technology.

At the end of August, Dominion entered into an agreement with the Port of Virginia to lease the Portsmouth Marine Terminal in the Hampton Roads region to stage project components and construction vessels.

Gaining experience, building confidence

While expanding from two to nearly 200 turbines seems like a heavy lift, Dominion officials said they are adjusting to the permitting and construction process.

"Having been through it with the two turbines, it gives us confidence in the steps and the different reviews and interactions that are going to happen," Hollett said. "We also sort of pressure-tested the regulations with BOEM that are now getting applied to all of these commercial projects that are out there."

The permitting process overall is time-consuming, with the full project expected online 13 years after Dominion executed the lease with BOEM.

Outside of permitting, Dominion also gained valuable experience in installing, constructing and fabricating offshore wind turbines through the pilot project.

"I would say that with each successive project that is moving through the BOEM process and then the commission process, I think you get more confidence in that regulatory timeline," Hollett said, "and we're building the industry in the U.S., right? So, I think it becomes advantageous, and you start to get economies of scale as you would in any sort of developing technology."

Offshore wind ambitions

Policymakers in Virginia and at the White House are pushing for companies like Dominion to embark on offshore wind generation at scale.

The Virginia Clean Economy Act requires Dominion to procure 100% of its electricity from renewable resources by 2045, with up to 5,200 MW of offshore wind in service by 2035.

"From a state perspective, we have great, supportive policy for all renewables and, in particular, in this case for offshore wind," John Larson, Dominion's director of public policy and economic development, said during the tour of the pilot turbines.

Larson noted that there are "a number of projects already in the queue, up and down the East Coast."

These projects include the 2,400-MW Beacon Offshore Wind Project in Massachusetts and the 2,076-MW Boardwalk Offshore Wind project in New York, which are a collaboration between the U.K.'s BP PLC and Norway's Equinor ASA.

In late July, the BOEM said it will begin a review of the construction and operations plan of Avangrid Inc. subsidiary Avangrid Renewables LLC's proposed 2,500-MW Kitty Hawk Offshore Wind Farm off the coast of North Carolina.

"A lot of the permitting, a lot of the construction is yet to come," Dominion Senior Policy Director Kevin Hennessy said. "It's going to be a fascinating decade."

The projects all contribute to U.S. President Joe Biden's goal of installing 30 GW of offshore wind capacity by 2030.

"We're investing in the industry to support the industry," Hennessy said, "so we sure hope it's achievable."