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Virginia climate law spurs significant clean energy push at Dominion

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Virginia climate law spurs significant clean energy push at Dominion

Highlights

Q1 2020 net loss of $270 million, execs optimistic on clean energy buildout

Could build 5.2 GW of offshore wind; 10 GW onshore wind, solar

New York — Dominion Energy updated investors Tuesday on medium-term clean power generation development plans resulting from recent Virginia legislation that include spending $3.5 billion on developing 2.6 GW of offshore wind and $5.5 billion on roughly 10 GW of onshore wind and solar, significant increases from previous guidance.

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The investor-owned utility reported an unaudited net loss determined in accordance with Generally Accepted Accounting Principles for the first quarter of 2020 of $270 million, or negative 34 cents per share, compared with a net loss of $680 million, or 86 cents per share for the same period in 2019.

However, the company's executives were optimistic on Dominion's Q1 2020 earnings call about clean energy growth prospects spurred by Virginia Governor Ralph Northam on April 12 signing the Virginia Clean Economy Act.

"The VCEA sets our company on a path to receiving the most significant legislatively mandated clean energy investment program in the United States," Thomas Farrell, Dominion's president and CEO, said.

"As a result, Virginia is poised to become a nation-wide leader in zero carbon deployment over the next three decades ... the plan also supports our enterprise-wide net-zero methane and carbon emissions targets by 2050," Farrell said.

The VCEA calls for 5.2 GW of offshore wind by 2035, 16.1 GW of onshore wind or solar power generation capacity by 2036 and 2.7 GW of energy storage capacity by 2035. The offshore wind resources can be 100% utility owned, while the onshore and storage projects can be 65% utility owned.

FUEL MIX CHANGES

"The VCEA and associated legislation will dramatically change our generation fuel mix," Farrell said, adding it is clear that less efficient and higher emitting resources like coal and oil will phase out of Dominion's system. The company is in the process of retiring about 3,300 MW of mostly coal- and oil-fired power systems, he said.

Farrell said Dominion's 2.6 GW Coastal Virginia Offshore Wind project is on track to meet three required criteria under the new clean energy law: Competitive procurement, projected levelized cost of energy is reasonable as compared with a benchmark and construction starts before 2024 or has a plan to enter service before 2028.

Early project cost estimates put LCOE at $80/MWh to $90/MWh which "compares very favorably" with the benchmark, Farrell said, adding the estimate does not include federal tax incentives.

The offshore wind development remains on schedule despite the coronavirus pandemic and components for an initial 12-MW pilot project have arrived from Europe. Pilot project construction is expected to begin this quarter and be completed by year end, Farrell said.

Dominion is also working with an industry consortium on developing a Jones Act-compliant offshore wind installation vessel capable of handling 12 MW and larger turbines. The Jones Act requires goods shipped between US ports to be transported on US-flagged ships.

The vessel will be complete by 2023 and contracted out to US offshore wind developers, Farrell said.

Dominion plans to spend $3.5 billion on offshore wind from 2020 to 2024 and possibly as much as $17 billion from 2020 to 2035 if it is approved to construct the entire 5.2 GW called for in the VCEA, he said. The previous plan was to spend $1.1 billion from 2019 to 2023.

Virginia's onshore wind resources are weaker than in other locations so Dominion expects the onshore component of the VCEA target will be focused on solar power projects. The law says 10 GW of the total mandated expansion can be utility owned, meaning Dominion plans to install an average of 700 MW of solar annually for the next 15 years which could constitute a $19 billion capital investment, Farrell said. The previous plan called for spending $3.7 billion from 2019 to 2023.

The company in its earnings presentation did not report significant load impacts from the coronavirus pandemic and said it is well positioned to handle any such demand impacts, but continues to monitor the situation carefully.