A Major Setback for Virginia OffShore Wind

We won't be seeing any of these off the Virginia coast any time soon.

We won’t be seeing any of these off the Virginia coast any time soon.

The U.S. Department of Energy (DOE) has withdrawn $40 million in funding from the Virginia Offshore Wind Technology Advancement Project (VOWTAP), dealing a major blow to plans to build two experiment wind turbines off the Virginia coast and jeopardizing the prospect of major offshore wind development in the foreseeable future.

Dominion Virginia Power had hoped to build turbines incorporating features capable of withstanding Category 3 hurricane winds, considerably stronger than those faced by wind farms in Europe. Demonstrating the viability of the technology would reduce a major element of risk and, hence, the cost of financing construction of a large-scale wind farm capable of supplying hundreds of thousands of homes.

Dominion’s early estimate to build the two turbines was $230 million, which would generate enough power to supply 3,000 homes. The first solicitation yielded a bid of $375 million. Subsequent efforts to squeeze costs out of the project resulted in bids ranging from about $300 million to $380 million. Dominion has said that even a cost as low as $230 million would be a challenge to win approval from the State Corporation Commission. The cost per kilowatt hour for electricity would be astronomically high compared to other energy sources, and the project was justifiable only as a proof-of-concept opening the way for cheaper, large-scale wind development.

The loss of DOE’s $40 million project puts the VOWTAP project that much further out of reach.

“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‒Dominion Energy Solutions in a press release. “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.”

DOE made its decision after Dominion could not guarantee an in-service date for the project earlier than 2020, according to Doswell. The inability to get firm construction contracts and the increasing complexities of gaining regulatory approval for energy infrastructure projects have made it impossible for Dominion to guarantee an earlier date.

“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.”

Dominion said it would consult with other VOWTAP stakeholders on how to proceed.

There are currently no comments highlighted.

55 responses to “A Major Setback for Virginia OffShore Wind

  1. I don’t know what to make of it, except to say the other coastal states MD, DE, NJ also have an interest in the proposed Northeast offshore wind project. We should see what they are doing on it. I thought originally Google was pushing the overall project…where are they now?

    • Google was planning to contruct and off-shore transmission line that would provide an under the seabed “highway” for expected wind generation projects up and down the Eastern Seaboard. Google was never identified as a potential backer of generation, only the transmission backbone. That project has been languishing for many, many years because the power that would be produced is just too darn expensive. Another casualty of cheap natural gas.

      I suppose the Clean Power Plan, if ever finalized, might revive this to some extent.

  2. Just too gosh darn expensive, eh jim?

  3. Maybe Google is pushing it, but there are better places to push it than coastal VA. The unfortunate fact is, VA’s coast has some wind, but it’s not optimal for wind power development. Look at this map from NREL:

    You see the east coast has some of that light purple color — fine. But look at Hatteras to the south (where the coastal barrier island actually juts into the darker purple, and that’s still Dominion territory) — finer! Or, look up there in New England, off the Massachusetts coast and up to Maine — that’s in the red color — finer still! Or if you really want to see some wind, look out there at the Northern California coast. Oh, you want land-based wind generation? Well, glance at the shores of the Great Lakes. Or look at that patch of purple in Illinois and Indiana (which is where most of PJM’s wind generation is located). Let alone, out west in that broad band from Texas to North Dakota. Compare that with VA’s wimpy shade of green! You see, Virginia simply isn’t at the top of the list when a wind turbine developer goes looking for possible U.S. wind sites to invest in.

    It’s also true that good wind locations tend to block vacationer’s views. Now, solar power, compared to the competition, that’s a better deal for Virginia entrepreneurs, and you can put that on a field hidden from thr road by trees.

  4. Not sure if the goal is to find the top places or places that are viable and much of Virginia offshore looks to be in the “viable” range.

    Further – Virginian’s Eastern Shore – a lot of it is not Vacation homes with a view – in fact rural crop lands and Perdue chicken raising country and vast saltwater swamps – places where I bet property owners would be happy to get a monthly lease payment…

    https://docs.google.com/document/d/1Z0UHAmNwfj7RBbIQQPOu20bu0jezmuxyebY6KUHfQSA/edit?usp=sharing

    • The federally designated development area is about 22 miles off shore of Virginia Beach, I believe. It’s not as far north as the Eastern Shore. There is a federal agency, BOEM, that controls the sites. I think its in the Department of Energy.

  5. Why is Dominion the projected recipient of these grants instead of other companies and electric cooperatives?

    I would think the worst candidate to do this -would be Dominion.

    • Dominion won the bid to develop the site off-shore of Virginia. None of the cooperatives have any interest in this. The grant was specifically for off-shore, not just wind in general.

  6. Virginia’s offshore wind is absolutely fine and on Virginia’s coast the continental shelf is far from the shoreline, the view and the bird migration. There is a section that is limited because it is security related.

    The article called Dominion’s loss of funding from the DOE for their 2 offshore wind ‘test’ turbines a “major blow” to offshore wind development. Instead, it could actually be a boost to the development of offshore wind on our “wind desert”, defined by the edge of the continental shelf from Cape Cod to Cape Hatteras. A Block Island wind farm is underway right now, and at last, more offshore farms are in the works.

    The potential is spectacular. The ‘sea breeze effect’ of wind farms that far offshore, 15 miles or more, means that the power generated from the offshore turbines occurs during times of high electricity use. The wind itself is steadier and the blades used can be larger. Finally, transmission loss is minimized as the power is produced close to the 75% of the population who live in relatively proximity to our coastline. Virginia’s coast alone is capable of generating the equivalent electricity of 6-9 nuclear plants or 15 coal plants, 85% of the electricity we used in 2013.

    Here’s the issue. Dominion holds the leases to 2,200 offshore acres, capable of producing the equivalent electricity of 2.5 nuclear plants or 4 coal plants. The won the contract by outbidding 7 other companies. Their contract prescribes a five year term for the company to develop a ‘site asssessment’ of the lease area. By renieging on the time frame to develop those 2 windmills, has Dominion also renieged on their lease contract to have submitted a site assessment for the whole project? The lease contract calls for site assessment to be completed by 2018. A look at the progress assessments that Dominion is required to file every 6 months, would tell us just where this offshore wind farm development stands.

    Interestingly, only Dominion’s auction bid contained the requirement that the leases be separated from the underwater regional transmission grid, the proposed Atlantic Wind Connection, an underwater connection that plans to link wind frams from NY to Virginia Beach. The underwater transmission line was endorsed by “Virginia Offshore Wind Studies July 2007 to March 2010”, a careful state study that brought together a variety of stakeholders, including academics, environmentalists and legislators.

    Dominion’s rejection of the Virginia study recommendation should raise red flags. It should also raise doubts about their understanding of the enormous potential of our ‘wind desert’ and how to maximize it’s potential. Our ‘most significant’ wind energy will come from a coordinated development of connected wind farms, spread across a very wide area. The interconnection of offshore farms from NY to VA will smooth the power generated from the effects of weather systems along any part of the line while feeding the wind production into the eastern grid at a limited number of places, limiting grid connection costs.

    In 2013 I wrote that Dominion seemed to have won those lease contracts with the idea of putting the lease area ”on layaway”. No funds were allocated by their long-term plans. Now the company has balked at spending $150,000 over their budget, even while they maintain lease rental costs of $350,000+ every year. Since the company is unwilling to committ to even 2 test windmills before 2020, maybe DOE is also wondering if Dominion’s leases are on ‘layaway’ and should be re-auctioned.

    • Very good observations here, CA&W. The costs you mention in your last paragraph, however, appear to be off by an order of magnitude. I really don’t know whether the leasehold has an expiration date.

    • I agree with Larry that Hawaii makes a fascinating case study, as do other island states and nations. Generating electricity by burning oil is incredibly expensive. If there is anywhere on the planet that ought to be embracing renewable energy, it’s Hawaii. Yet, despite the fact that Hawaii is one of the most politically liberal and environmentally friendly states in the country, progress has proven frustratingly slow. Why is that? Is Hawaii “dragging its feet?”

      No, the reason has to do with the intermittent nature of wind and solar production, the necessity of maintaining back-up capacity, and the challenges of integrating that intermittent production into the islands’ electric grids. The day will come when we have figured out how to store large amounts of electricity in batteries, fly wheels, compressed air or other means. Until then, it’s a huge problem.

  7. it’s a little hard to tell about wind -and to a certain extent, solar because there are literally thousands of islands in this world that have both top notch locations for wind and solar – and yet almost all of them STILL burn oil for electricity –

    I’m no defender of Dominion – they’re clearly in a “prevent” defense for renewables… but if wind/solar are so ready – why don’t we see many of the islands in the world switching over?

  8. Here is a nice little video of Aruba’s progress.
    https://www.youtube.com/watch?v=oK_aH0MGKgA
    The island is part of the 10 Island Challenge set up by Richard Branson’s Carbon War Room and now joined by RMI. The project is showing us it is not only a question of investment money. It is also “how to get to 100%?” The answers are developing, as they are in the states that are building distributed resources.

    Then there is Hawaii … http://www.utilitydive.com/news/getting-to-100-renewables-how-hawaii-plans-to-get-fossil-fuels-off-the-gr/416176/
    “The state wrote its place in the history books last year when Gov. David Ige (D) signed into law a 100% renewable energy mandate that the state must meet by 2045.”
    “The ambitious move makes sense for Hawaii — the state is historically reliant on petroleum for fuel generation, and has long suffered from the highest electricity prices in the nation. It was already dealing with nation-leading penetrations of rooftop solar — above 30% of single family homes have it,” but the timing of the renewable generation is the issue and there are 2 approaces … “Shifting renewable energy to fit customer demand, and reshaping customer demand to better align with renewable energy generation. The state’s biggest utility, Hawaiian Electric Co., is trying to do both.”

    “A recent grant from the Department of Energy to explore a System to Edge-of-Network Architecture and Management System (SEAMS) aims to fix that. While the existing system sees behind-the-meter resources simply as load reduction, the SEAMS system will combine short-term forecasting and weather predictions to provide grid-responsive controls to link DERs with the larger utility system. ”

    “Going forward, the ability to shift energy production and reshape customer demand ‘requires the ability to make those shifts through equipment and appliances that exist behind the customer’s meters,’ he said.”

    That is the future. The islands are helping to show the way. With their very high priced electricity changing their rules is a bit easier. NY is going there too.

  9. The pending EPA Clean Power Plan does not really encourage the states to pursue off-shore wind and/or home roof top solar, as these options are both relatively expensive (compared to cheaper on-shore wind and utility scale solar).

    Of course, the Clean Power Plan is really a 2030 plan, which is already almost short term planning in the utility business.

    However, it is not too soon to be considering 2030+ options. As the nuclear fleet ages, we either need new nukes, new natural gas, and or enormous amounts of new renewable capacity.

    • off-shore wind looks to be twice to 3 times as expensive…

      but putting wind turbines on the Eastern Shore would be “on-shore” so don’t know why that’s not worth pursuing..

      I think if Virginia allowed unfettered wind turbines proposals from other companies – it would happen long before 2030.

      What’s going on right now is that Dominion has convinced Va to make it harder for others to do it .. and allow Dominion to not…

      Ultimately, in the end – this is going to turn out to be a failed strategy for Dominion.

      with regard to the Nukes – aside from the idiocy of putting it on an active earthquake fault – the question is – how much more BASELOAD does Virginia need by 2030?

      That’s the question – peak loads can be easily handled by strategically located gas turbines peaker plants or for that matter combined cycle gas plants.

      but we need to know how much more baseload we need .. that’s the key issue because that’s what Nukes provide – not peak loads.

  10. Just got back from Hawaii – the Big Island. We drove around a significant part of the Island over several days. I did not see any wind energy devices, but many homes and businesses had solar panels on their roofs. Substantially more than anywhere in the Mid-Atlantic.

    • I visited Hawaii four or five years ago and remember vividly sailing on a cruise ship along the coast of Maui and seeing a long string of ridge-line wind turbines. It was quite a stirring sight. I never could understand why people get so upset by the prospect of viewing wind turbines. It’s the same NIMBYism that obstructs building anything anywhere.

      • You want to see Wind Power? You don’t have to go to Hawaii. Take a drive out US 48, the new Corridor H Highway, west from Wardensville WV and between Moorefield and Davis, WV, where it passes right over the Alleghany Front near Mt. Storm. You’ll get spectacular views from this new highway — both from a distance, and close-up — of the biggest wind farm area in the mid-Atlantic. If these wind turbines were ever opposed on NIMBY grounds, there’s no evidence of it today. Yet, interestingly, I have never seen an article about these wind turbines in our NoVa newspapers.

  11. I wonder if Hawaii has the same lop-sided rules for utilities that Va has or do they encourage residential solar?

    Wiki thinks there is wind energy in Hawaii: ” Wind power in Hawaii has the potential to provide all of the electricity used in the U.S. state of Hawaii. The 114 commercial wind turbines in the state have a total capacity of 206 MW. In 2013, they produced 5.1% of Hawaii’s electricity”

    https://goo.gl/maps/AK18fcxEAS52

    • I figured there must be some wind energy, but did not see it anywhere we drove. And that was a lot around much of the Big Island.

      Good question about residential solar.

  12. When I was on Kaua’i 2000-2005, we were actively assessing wind energy with one of the two remaining sugar plantations in the state. Prices have come down since then, but the consensus was that all of the good locations for wind on the island were in special viewscapes. Tourism was by far the major economic sector, so saving a bit with wind was not worth the potential harm to tourism.

    Hawai’i is made up of 30,000′ mountains that sit in 25,000′ of water so offshore is not really an option for them.

    As Acbar pointed out, other areas have more offshore wind potential that is more easily accessible than in Virginia. With Dominion dragging its feet for several years, the DOE probably decided it was better to invest their money elsewhere. There are several other port and shipbuilding areas that would love to develop the infrastructure for offshore wind.

    Iberdrola owns several utilities in the northeast. Besides the Danes, this Spanish company is one of the leading developers of wind generators in Europe. Part of the reason they bought up U.S. utilities was to develop wind generation here.

    Remember, electricity generated from a wind turbine is based on the cube of the wind speed. So 2 times higher wind velocities yield 8 times more electricity with the same turbine. So areas with “very good” wind resources are a whole lot better than areas with just “good” potential. Areas, such as the Great Plains, with “excellent” wind resources, yield a huge amount more energy from the same investment in wind turbines. This is tempered somewhat by the expense and difficulty in building transmission lines to get the energy to the markets in more densely populated areas.

    Exceedingly high winds from hurricanes also make design of offshore units more expensive in the southeast than areas farther north. Ice complicates designs in the Great Lakes which is not an issue with ocean based wind turbines.

    • Tom, aren’t Iberdrola’s US holdings primarily gas utilities? That’s an interesting pairing of asset bases.

      • They own New York State Electric and Gas, more of an electric utility than gas with service territory with Great Lakes access and high ridgetops in other areas. Good for wind. I think they own another in Maine – I don’t know the proportion of electric vs gas.

  13. Here is a nice little video of Aruba’s progress.

    The island is part of the 10 Island Challenge set up by Richard Branson’s Carbon War Room and now joined by RMI. The project is showing it is not only a question of investment money. It is also “how to get to 100%?” The answers are developing.

    Then there is Hawaii …
    Last year Gov. David Ige (D) signed into law a 100% renewable energy mandate that the state must meet by 2045. Hawaii has both the highest electricity rate in the nation … from imported diesel fuel … and 30% of single family homes have solar. Solar and storage are actually cheaper than the utility electricity.

    The timing of generation is the issue and there are 2 approaches … Shifting renewable energy to fit customer demand, and reshaping customer demand to better align with renewable energy generation. The state’s biggest utility, Hawaiian Electric Co., is trying to do both.

    The state received a recent grant from the Department of Energy to explore a System to Edge-of-Network Architecture and Management System (SEAMS). “Going forward, the ability to shift energy production and reshape customer demand requires the ability to make those shifts through equipment and appliances that exist behind the customer’s meters.”

    No offshore wind in Hawaii yet … although there are proposals in the works. The waters are deep and require floating turbines. The reason our offshore wind potential is so great is because our shelf edge is both distant from the shoreline with its ecological issues and shallow enough to anchor the turbines on. Wind speed is just fine too, just no good onshore Virginia wind.

    • Kaua’i, the island where I lived, has gone quite far in displacing their diesel generators. The island utility is a co-op so they are not inhibited by the stranded cost issues that have caused the investor-owned utilities on the other islands to prohibit or slow down customer installations of solar.

      At this time, Kaua’i can meet as much as 95% of daytime demand with solar. They are installing a 52 MW battery storage system to provide power during 5-10 PM when demand increases and solar power declines. This is cost effective now because the rates are so high ($.30 – .35 /kWh). But it is a harbinger of things to come. Larry asks if it makes sense – why aren’t people doing it. Well, they are doing it right now. Costs will have to come down more for large-scale storage to be competitive in other areas. But new technologies are often used in high marginal cost areas first.

  14. speaking of subsidies:

    ” The Virginia Department of Mines, Minerals and Energy is responding to growing concern about the ability of struggling coal companies to pay for their mine reclamation obligations. Specifically, there is concern that coal firms which have used self-bonding and go belly-up will leave state and federal authorities to clean up after them. The Associated Press reported this week that nationally, some companies’ reclamation costs are covered only by IOUs to the tune of $3.3 billion.”

    seems like leaving that in the hands of the coal companies is , has always been, as risky strategy and that a separate fund – funded directly from ratepayers is the way to assure that remediation does actually happen.

    and if we really want to think about this – why now “remediate” these places with wind and solar installations? Surely wind turbines are no uglier than the devastated land they would sit on.

    A question for those who might know: why would you build offshore wind instead of onshore wind if offshore wind is so expensive and hard to site?

    is it purely the scenic issue?

    • Larry. on-shore edge (shoreline) wind meets resistance for a variety of eco-reasons (eg; birds), and also tourism type issues.

    • Off shore has better winds, steadier and blowing for longer periods. You get more production over a longer stretch of hours, compared to on-shore wind.

      Of course, while the “fuel” is free and there is more of it, the capital requirements for installation are much much higher.

      And, as TBill notes, lots of opposition to many on-shore sites.

  15. A good suggestion … and NO it is not just a scenic issue. It is an issue of how the wind blows.

    Offshore it blows stronger and at a different time. Someone has done a paper on the synergy of solar and offshore wind. Working together – first solar that peaks at noon and the offshore wind that peaks late in the afternoon – we can avoid all peaking issues!

    Virginia just does not have much strong wind onshore. The WVA mountains might be a whole lot better.

    • There is no reason that that the wind power consumed in Virginia needs to be produced in Virginia. The Midwest is superbly suited to wind, and there is no logical reason that Virginians shouldn’t pull its wind-powered electricity from that region. The trick, though, is that we will need to build more electric transmission lines. Good luck with that!

    • CA&W, you are right, and Larry, this is why it’s not just a “scenic issue.” Wind is an intermittent source, so it is most valuable if you can find a place where the wind blows when the rest of the Grid most needs the power.. That map posted above is average wind-speed, not mid-day to afternoon wind speed. On the other hand, solar output is strongest when you need it (assuming the summertime weather at your location is not too cloudy on too many summer days). You’ve found the NREL website; they have good stuff there, but too much of it is not the time-specific data you need to pick an optimal location for either wind or solar. Time-of-day matters, on the Grid.

      You are right, Larry, to ask why build offshore wind if it’s so expensive. And I agree with CA&W, “Virginia just does not have much strong wind onshore. The WVA mountains might be a whole lot better.” You really have to go see the wind development in WV, in the Mt. Storm area particularly (that’s where the Allegheny Front location is already served with adequate transmission!) right where US 48 crosses the Front, to see what that potential could bring us — that happens to be where development has taken place because there’s transmission there (originally built to tie the Mt. Storm power station to the Grid, but now finding a new use). Another place, as your map shows, is out there in central IN and IL, where lots of transmission is present right where the wind is. It’s not the presence of wind alone, or existing transmission alone, but the combination of BOTH, that’s attractive to developers.

  16. There seems to be a widespread sentiment among commenters that Dominion is “dragging its feet” in adopting wind. I cannot say categorically that that’s not the case because I can’t read minds, but I doubt it. The fact is, no one else has succeeded in building off-shore wind turbines in the United States, and that’s because there are enormous obstacles to be overcome.

    The biggest obstacle is cost. At the current time, offshore wind would be mind-bogglingly expensive to build — on-shore ridge-line wind and solar are far more economical. The reason is that building off-shore wind requires all manner of specialized equipment and skills, and those things do not exist in the United States. They exist in Europe for one reason: European countries were willing to subsidize and mandate the creation of an off-shore wind energy, which was able to piggyback on the back of the North Sea oil-gas industry with its expertise in building/maintaining offshore structures.

    The big question is how to build a similar supply chain on the Atlantic Coast of the U.S. Building two experimental wind turbines won’t do it. Building a couple dozen turbines in the Long Island Sound won’t do it. The European wind-power companies need assurances of large-scale, long-term commitment to justify making the investment to set up shop in the United States. Dominion doesn’t have the wherewithal to make that happen by itself.

    Dominion’s plan makes total sense — build the two experimental turbines, test new technology that would adapt wind turbines to the conditions of the Atlantic Ocean, prove that the technology works, and thereby reduce the risk associated with building several hundred offshore wind turbines. It would be folly of the greatest order to make a multibillion-dollar investment in wind turbines only to have them destroyed by a Class 3 hurricane, and no lender (other than the federal government) would be willing to lend money for such a project except at exorbitant rates.

    Those experimental turbines would benefit not just Dominion but other entities considering building off-shore wind up and down the Atlantic. I am astounded by DOE’s decision to pull the money. If the federal government has a legitimate role in the energy industry, it is to underwrite research and development of new technologies that are too risky for individual companies to undertake themselves. Nullifying the hurricane risk might encourage enough companies, whether utilities or merchant energy producers, to enter the market that they could conceivably induce European companies to build a supply chain here.

    • “Dominion’s plan makes Total sense” Not the least bit sure I’d go there.

      Who knows why the DoE pulled funding, but we’d need to review Dominion’s plans. The last time we looked at it, I believe Dominion was proposing more of an R&D project studying some novel design ideas. I am not convinced the project was headed in the right direction.

    • Here is a spring 2016 listing of offshore wind projects…
      http://www.eesi.org/papers/view/factsheet-offshore-wind-2016

      Note that VA is twice listed … The leases won by Dominion in 2013 for $1.6m with a listed completion date of 2022-2024, and the “Technology Advancement project” … the 2 windmills under discussion with their target completion date of 2018. The dates speak for themselves … “leases on layaway”.

      Here is why doing offshore is cheaper in the long-run… There are over 4,000 GWs of renewable energy potential – over four times the total U.S. electricity demand – resting just a few miles from the biggest population centers in the country with only 1 underwater transmission line and 4 connectors required.

      The first farm will be the 30 MW Block Island pilot project is on track to be online by the end of 2016. The foundations were set last summer, and now the old whaling harbour of New Bedford is refitted to serve the indudtry, something we could have done in Norfolk with state help. In early 2013, the New Bedford Wind Energy Center was established within the New Bedford Economic Development Council {NBEDC) to ensure that the activities to develop the offshore wind industry are fully integrated into the city’s comprehensive economic agenda. Jobs now advertised make $14-$33/hr and here are some development highlights …
      • The #1 value commercial fishing port in America and emerging as the national epicenter for the offshore wind industry
      • The #1 new growth gateway city in the Commonwealth with more than $350 million in private investment since 2006.
      http://www.utilitydive.com/news/only-a-matter-of-time-us-offshore-wind-struggles-to-get-off-the-ground/414215/

      “Cape Wind is an outlier because there is one really rich person who has made it his mission to destroy the project,” Sopko said, referencing billionaire industrialist William Koch, who funded many of the legal challenges over the course of more than a decade.

      While no U.S. projects have been completed, there are 21 projects representing 15,650 MW of capacity in development. Thirteen of those, representing 5,939 MW, are in some degree of advanced development, according to the recently-released 2014-2015 Offshore Wind Technologies Market Report from the National Renewable Energy Laboratory (NREL). Developers with projects totaling 3,305 MW say they will be online by 2020. Any wonder why DOE gave up on Dominion?

      DOE’s Wind Vision sets out goals …
      • Establish US offshore wind market and supply chain by 2020.
      • 22 GWs installed by 2030. 86GWs installed in multiple regions by 2050
      • A levelized cost reduction trajectory of 22% by 2020, 43% by 2030, and 51% by 2050

      Utilities in the U.S. are well-positioned to take advantage of the opportunity offshore wind offers. It is a large-scale reliable source of clean energy adjacent to population centers where it is needed most. Energy investment must occur over the next 10-20 years and is based only partially on the requirement to meet enforced and expanded Clean Air regulations. The main reason is the age of the current plants. Seventy percent of our coal plants and all of our nuclear facilities are more than 30 years old. Offshore wind can mean a long term, secure price for electricity.

  17. ” DOMINION WIND ENERGY PROJECT BACK ON ICE
    By DAVE RESS, Daily Press

    Dominion Virginia Power’s plan for a pilot program to generate electricity from offshore wind turbines is back on ice after the federal government pulled $40 million it had pledged to support the effort. The Department of Energy withdrew the funding because the electric company could not guarantee it would have the turbines up and running by 2020, Dominion Senior Vice President Mary Doswell said.”

    so what was Dominion willing to commit to instead? And if they said nothing else – then DOE would , in my view, rightly conclude that Dominion WAS “dragging it’s feet”.

    No where along the line – have I heard Dominion say – ” this is a plan that we CAN DO” and commit to doing it – and at that point if DOE pulled their funding then it would be on DOE and not Dominion.

    I think – it’s pretty clear Dominion has not moved forward and has not said much about HOW they WOULD move forward.

    If you look at this map (and I realize there are different ones):

    I think the idea that we can “get our wind from the midwest” is ridiculous.

    the whole idea of the DOE grant is to move forward with a pilot program.

    the idea is to find out not to justify it as if it has be be a ROI-positive project.

    Clearly Dominion is dragging it’s feet on a PILOT…. and the thing is – they gobbled up the leases and now they won’t even do a PILOT.

    • You may think that getting wind from the Midwest is ridiculous, but there are major projects in development to do just that–bring wind power via HVDC lines from Oklahoma, Kansas, Nebraska and the Dakotas into the East. A couple of projects have been scuttled by state commissions in Missouri and Arkansas, but the DOE, invoking a never used clause of the 2005 Energy Policy Act, just recently overrode the Arkansas commission rejection of siting for a line through that state that will connect wind power with TVA.

      http://www.cleanlineenergy.com/

      http://www.cleanlineenergy.com/projects

  18. Jim, I think you compiled a pretty good summary of the situation confronting Dominion, until you got to your statement “Dominion’s plan makes total sense — .” Unfortunately TBill is right: there are TWO huge problems confronting the utilities thinking about far-offshore wind power these days. First, there’s proof of the technology for designing a wind-turbine platform built on shifting undersea sand that’s no-where near as big as those Gulf-tested oil and gas drilling platforms yet capable of withstanding a hurricane. Dominion was working on that. But second, there’s creation of the low-tech infrastructure necessary to support and maintain such platforms and deliver the electricity to shore. There is NOTHING out there, and NOTHING on shore to support it. Creating all that from scratch is a huge obstacle to financing, and my impression is that Dominion was going to ‘wing’ it with ad hoc, solo solutions rather than get involved in any of the group efforts to build, e.g., a decently-sized transmission connection (see CA&W’s discussion of the Atlantic Wind Connection, above), a decent harbor, trained employees and support facilities, without immediate or guaranteed-future customers. IMHO Dominion is too deeply committed to controlling its own projects versus joining consortiums and other group efforts, which both spread the risk and reduce the flexibility. I don’t know enough about this particular situation to speculate why DOE pulled its funding, but TBill may be onto the truth when he says Dominion’s was “more of an R&D project studying some novel design ideas.”

    • Well, like I said, I’m not privy to Dominion’s inside thinking. I cannot say that Dominion is not slow-rolling wind power. But no one has presented any convincing evidence that it is. The fact is, no one has gotten East Coast wind power off the ground yet — even in states ideologically committed to green energy. Does that mean other utilities are slow-rolling offshore wind, too?

      I don’t mean to sound like a Dominion apologist here, and I’m willing to stand corrected if someone can present solid information otherwise. But at least Dominion has pulled together a wide-spectrum group of stakeholders to move offshore wind forward. Has the commonwealth of Virginia done that? Has any other state? Has the federal government? How did the onus fall upon Dominion to get a chain off the ground for the entire East Coast?

      • But we agree: Dominion is NOT “slow-rolling wind power” so much as going about it awkwardly and in an overly-controlling manner. Remember, there’s nothing today restricting Dominion to constructing new generation within its service territory; why isn’t Dominion out there building wind turbines, for example, alongside its own transmission lines and power plants right there at Mt. Storm? Why this laudable investment in off-shore site leasing and then Dominion’s failure to follow up, to get deeply involved in the Atlantic Wind Connection? Why the solar activity involving projects built by others, but none yet they’ve built from scratch? Why put supportive tariff provisions in place but make no push for solar tax credits to match those in other States like NC, for distributed solar on homes and businesses? The picture painted here is that all this renewables generation activity is tempting to folks at Dominion but simply outside their comfort zone, hence the tentativeness of all these efforts. They need to get their regulatory and financial ducks in a row and jump in, probably in partnership with people who better understand how to go about it.

        • I would agree that Dominion Virginia Power seems extremely risk averse when it comes to wind and solar.

          Meanwhile, Dominion Resources recently plunked down $1 billion for solar assets outside the DVP service area (west of the Mississippi, I think).

          • Interesting that you perceive a difference in approach between DR and DVP. Is it just the difference between analysis of investment opportunity on financial terms versus analysis on lowest-cost-electric-service terms? I guess what I’m hoping for is more analysis from both, especially DVP, on customer-involvement terms: promotion of energy efficiency and distributed generation even at some net cost/rate increase in the short run, along with a hefty, valuable political benefit. They do seem very risk-averse when it comes to that tradeoff.

          • TooManyTaxes

            Having been working with telcos for almost 40 years, its been my experience that the management of any regulated company is normally very risk adverse. And that is good behavior for those companies. We want consistent, conservative management that keeps the lights on, the gas following, and the 911 calls completed.

            By and large, most, but certainly not all, utilities and telcos that have ventured into unregulated, competitive businesses have not done too well in those more risky businesses. Many have lost money. And some become dependent on links to the monopoly side, a result that many competitors and regulators find anticompetitive.

            It strikes me that society in general does not know whether electric power generation is part of a natural monopoly (like distribution to homes and businesses that have an extremely high initial costs with declining marginal costs ) or a competitive business with a different cost structure. Clearly, building and operating a traditional coal, gas or nuclear power plant would seem to fit the former. And installing solar panels on individual homes seems to fit the latter. I’m not aware of a proposal to give the local power company the exclusive right to install solar panels on residences and to put the investments in the rate base paid for by all customers.

            Where do larger wind and solar generation “plants” fit? Certainly, a sizable capital investment is required. But these investments don’t seem to be comparable to traditional power plants, such that more than one alternative power generator can operate in a market. But that assumes the power can be distributed over the monopolist’s network to consumers. Making this work is awkward.

            In the telecom market, competitors are required to build or lease access lines to consumers, provide fulltime service and provide customer service. I don’t sense alternative power generators have this ability. So we allow consumers to purchase “clean” electricity at market price (usually higher than the monopoly price) and distribution from the franchised power company. I think of this as “feel-good” power.

            Another model requires power companies to purchase alternative energy, which of ten results in other customers paying higher prices to recover the costs of using alternative energy. That doesn’t seem to be in the public interest. (Of course, the power company should be able to purchase energy from other producers at wholesale when needed or when purchase costs are lower than make costs. But the local power company has a great desire to protect its sunk costs and may manipulate the market.)

            After considering all of the above, perhaps we won’t see substantial investment in alternative energy (i.e., at a level to displace entire existing plants or in lieu of a new, traditional power plant) until someone is willing to take on the costs and responsibility of offering end-to-end service to consumers, most likely by leasing local distribution capacity. (Note: I assume consumers will be reluctant to be 100% reliant on their own or neighborhood power grid and capacity. Therefore, they want access to backup power of a major provider.) So when does Google or some other huge entity try this?

          • Re: solar investments — as you say, Jim, DR recently bought a 50% interest in 530 MW of unfinished solar generation (five projects) located in sunny Utah at a commitment of over $1/2 billion; I guess that’s a $1 billion commitment if they intend to buy the other half interest. And not long before, they sold a minority stake (with option to sell all) in most of their smaller existing solar investments, totaling 425 MW. Hard to read what’s in those tea leaves.

  19. To TMT: What your telco comparison and energy analysis skirts is the separation of the wires businesses from the generation businesses in the electric utility unbundling spasm of the 1990s. This is a separation that Dominion, to the extent it could with the GA’s assistance, went out of its way to avoid; but nevertheless, Dominion’s operating electric utilities are all members of PJM today. Today, Dominion’s “load serving entity” or LSE in Virginia is Virginia Electric & Power Co., or DVP, and that entity has that “end-to-end service to consumers” obligation of which you speak. It is also the owner of the local distribution capacity, and through PJM it shares in the use of the entire PJM transmission network, so no leasing arrangement is required for its deliveries from generation located anywhere within PJM. By “end to end” obligation I mean that the LSE must show to FERC, through PJM, and to its State Commissions, through its IRP or equivalent, that it either owns or has under contract sufficient generation or demand-side-management to meet its forecast peak load plus reserves. In this case DVP or its DR affiliates own nearly all of its generation requirements, but there’s a small fraction bought under contract.

    You postulate two alternative-energy models: sales by competing providers, some of which might be alternative power generators, directly to consumers over leased access; and, sales by alternative power generators to power companies with an exclusive service obligation to consumers including, pursuant to mandatory requirements, to supply a certain percentage from alternative power sources as spelled out in a statewide renewables portfolio standard (RPS). Your first model exists in Virginia in theory only; it’s allowed under DVP’s tariff but hardly done at all since Virginia repealed the guts of “retail access.” Virginia has promoted the second model, within the PJM/federal framework described above, except that Virginia’s RPS requirement (fixed by the SCC) remains “voluntary.” I agree with you, purchase requirements based on external considerations can be costly and disruptive in efficient markets; but the current RPS requirements are likely to be overtaken by the plummeting cost of renewables generation, particularly cheaper photovoltaic cells; most RPS percents now embedded in current State plans will be exceeded over the next couple of decades.

    Which brings me to your last paragraph. Will we see substantial investment in alternative energy without “someone…willing to take on the costs and responsibility of offering end-to-end service to consumers”? I think the answer is yes. But that’s not because of model 1 versus model 2, but because alternative energy (from renewable resources, that is) is a lot cheaper than it used to be relative to fossil generation, so it’s become viable in the wholesale markets without regard for RPS mandates or other regulatory subsidies. Does that mean Google and its ilk won’t get involved? The analogy with Google’s fiber-optic communications foray is misleading; I think it’s highly unlikely that one of those big boys will want to form a regulated LSE subsidiary with a “default” electric service obligation directly to Virginia consumers, who seem for the most part content with the power grid as it is. But it IS likely that Google etc. will get involved in the wholesale generation market by investing in and even directly building renewables generation. Indeed, Amazon committed to finance and purchase the output of a solar plant on the Eastern Shore of VA (in connection with mitigating the cost of power delivered to DVP for Amazon’s own data centers in northern Virginia). Those are the deals of the future.

  20. Acbar, your first sentence is largely revisionist history:

    “What your telco comparison and energy analysis skirts is the separation of the wires businesses from the generation businesses in the electric utility unbundling spasm of the 1990s. This is a separation that Dominion, to the extent it could with the GA’s assistance, went out of its way to avoid;”

    Virginia Power tried for several years to get the General Assembly to
    mandate generation divestiture during the mid to late 90s, but the members weren’t willing to take the political heat if “deregulation” went sideways, which it did in various places that initiated it, particularly California. Instead, the GA enacted a bill that obligated the SCC to consider electric utility plans for “functional separation,” which could include complete divestiture. Both Virginia Power and Appalachian proposed such fully divested plans to spin off their own generation to affiliated companies, but the Commission rejected Virginia Power’s plan and Apco modified its plan shortly thereafter. Both these utilities retained ownership of their generating units, but not without mounting immense political operations both at the Assembly and at the SCC to get them spun off.

    Other than that critical point, I agree with most of your fine comment. I too believe we will see increasing and substantial investment in renewables, mainly solar, in the near future.

    • Acbar & Rowing Guy – thanks for the thoughtful responses. I still remain uncertain as where wind farms or solar farms fit vis a vis traditional “natural monopoly” analysis. Also, true retail competition without regard to end-to-end customer service still seems problematic. The last mile guy can still interfere with a customer-generator experience. But what would happen if a state PUC or Congress were to require all those wanting to be electric companies to lease distribution capacity and serve end user customers? Not sure myself.

    • Rowinguy, you are absolutely right, that comment didn’t do justice to the earlier history of electric industry unbundling in Virginia, when the SCC was an independent policy force to be reckoned with. I was trying to address the [often misleading] structural parallels between the electric and wired-telco industries today. But as you know, what people envisioned in the 80s was only the beginning: now communications has wireless phone and data plans and cable with/without content and movie streaming and ISPs with common carrier obligations, and now electricity has regionwide network transmission and DSM aggregators and DG and ‘micro-grids’ and RPS requirements, all of which change dramatically the originally-envisioned, simplistic end-state (in both industries): “competing wholesale suppliers” plus “retail access to consumers.”

  21. curious about the effort to de-regulate. Has that been a failure whereever it has been tried, including Va?

    • If you mean deregulation of the wholesale electric marketplace, I disagree that it’s been a “failure” in Virginia, or elsewhere in the eastern US. It has not worked out in the manner or with the speed originally envisioned, for a multitude of reasons, but it “ain’t over yet” and there’s no going back.

      If you mean deregulation of the retail, distributed-generation business, the problems there never were, and still aren’t, regulatory. One exception might be the debate over facilitating distributed-generation equipment vendors by allowing them to package equipment leases with marked-up pricing of retail sales of the electricity their equipment generates, but I consider that a very narrow side issue.

      What other deregulation were you thinking of?

      • Thank you Acbar and Rowing Guy for the fine exposition of some options for a new energy future. Several states have studied this thoroughly, especially New York. Most seem to agree that the “wires business” is the appropriate domain of a natural monopoly to provide reliable service without duplication of equipment. The New York State Public Service Commission call this a “Distribution Systems Provider” (DSP).

        In this way, a utility can provide a modern grid that is a transaction and billing platform for a wide variety of players for generation, energy efficiency and demand-side management programs. The utility is fairly paid for this service. They and others can provide generation capacity for auction by the regional ISO (PJM in our case). I believe there are 19 states that have deregulated generation from distribution functions. In essence, that is how Dominion operates now, except they won’t allow other generators in their service territory to compete on a level playing field.

        Such a change would permit much more widespread development of renewables as it would be based on the financial merits of the project and not be hampered by adminsitrative and regulatory restraints.

        My statement about Dominion “dragging its feet” on wind seems to be based on the evidence. If Dominion was serious about adding wind in Virginia it would be actively exploring those sparse but still cost effective locations in Virginia, North Carolina and West Virginia for wind development. Instead, it seems to have hitched its wagon (perhaps at the request of the Governor) to a far-fetched and exceedingly expensive development of a small offshore wind project. I don’t know for certain the motivation for this project, especially as a solo endeavor rather than as part of a broad consortium interested in the laying the groundwork for U.S. offshore wind infrastructure.

        It has the appearance of a PR effort to say “look we are doing something with wind – but it’s too expensive, we should really just go slowly with all of this”. Dominion is entitled to go at whatever speed they desire, but they should not impede others who might want to pursue renewables at a faster pace. Our regulatory scheme should allow customers the choice. An independent developer should have the opportunity to bid a project into the PJM market or provide power directly to a commercial client, while paying the DSP a fair price for getting it there. Our utilities should not be incentivized for keeping a stranglehold on the market when that is not necessary to ensure reliability.

  22. Not slow rolling?

    Here is a spring 2016 listing of offshore wind projects…
    http://www.eesi.org/papers/view/factsheet-offshore-wind-2016

    Note that VA is twice listed … The leases won by Dominion in 2013 for $1.6m with a listed completion date of 2022-2024, and the “Technology Advancement project” … the 2 windmills under discussion with their target completion date of 2018. The dates speak for themselves … “leases on layaway”.

    Here is why doing offshore is cheaper in the long-run… There are over 4,000 GWs of renewable energy potential – over four times the total U.S. electricity demand – resting just a few miles from the biggest population centers in the country with only 1 underwater transmission line and 4 connectors required.

    The first farm will be the 30 MW Block Island pilot project is on track to be online by the end of 2016. The foundations were set last summer, and now he old whaling harbour of New Bedford is refitted to serve the indudtry, something we could have done in Norfolk with state help. In early 2013, the New Bedford Wind Energy Center was established within the New Bedford Economic Development Council {NBEDC) to ensure that the activities to develop the offshore wind industry are fully integrated into the city’s comprehensive economic agenda. Jobs now advertised make $14-$33/hr and here are some development highlights …
    • The #1 value commercial fishing port in America and emerging as the national epicenter for the offshore wind industry
    • The #1 new growth gateway city in the Commonwealth with more than $350 million in private investment since 2006.

    http://www.utilitydive.com/news/only-a-matter-of-time-us-offshore-wind-struggles-to-get-off-the-ground/414215/

    While no U.S. projects have been completed, there are 21 projects representing 15,650 MW of capacity in development. Thirteen of those, representing 5,939 MW, are in some degree of advanced development, according to the recently-released 2014-2015 Offshore Wind Technologies Market Report from the National Renewable Energy Laboratory (NREL). Developers with projects totaling 3,305 MW say they will be online by 2020. Any wonder why DOE gave up on Dominion?

    DOE’s Wind Vision sets out goals …

    • Establish US offshore wind market and supply chain by 2020.
    • 22 GWs installed by 2030. 86GWs installed in multiple regions by 2050
    • A levelized cost reduction trajectory of 22% by 2020, 43% by 2030, and 51% by 2050

    Energy investment must occur over the next 10-20 years and is based only partially on the requirement to meet enforced and expanded Clean Air regulations. The main reason is the age of the plants. Seventy percent of our coal plants and all of our nuclear facilities are more than 30 years old. Offshore wind can mean a long term, secure price for electricity and Virginia could help get the industry up and rolling and receive benefits as New Bedford is.

  23. TomH, I’m not clear on a couple of things. You say, Dominion “should not impede others who might want to pursue renewables at a faster pace.”

    How has Dominion impeded others? We have seen a number of other companies — Amazon Web Services, Norfolk Naval Station — develop solar projects, and Dominion has bought them out. What’s different with wind, other than the economics? Why would Dominion invest in solar and not in wind? Why would Dominion collaborate with solar developers and not wind developers?

    • TomH says, “Dominion is entitled to go at whatever speed they desire, but they should not impede others who might want to pursue renewables at a faster pace.” To my knowledge they don’t, indeed can’t, impede others; they have little discretion to favor themselves; indeed that was the whole point of creating independent system operators like PJM. If a 3d-party generation developer connects to DVP’s wires at a transmission voltage (~230kV and up), the paperwork is handled by PJM, and any construction of transmission upgrades necessary to accommodate the developer is negotiated with Dominion and PJM; so if Dominion dragged its feet, that would be highly visible to PJM, and all that’s under FERC oversight. The rate that would apply is PJM’s FERC-filed network transmission rate for the Dominion Zone, same as everyone else using transmission in that Zone including to DVP’s own use (a connection at a lower voltage might also involve a distribution rate under SCC oversight).

      All that said, I share TomH’s concern that DVP hasn’t shown much interest in on-shore solar and wind development in Virginia for its own account, other than to buy up other folks’ solar projects — and that DVP’s off-shore pilot wind project seemed more like a public relations venture than an economic investment. DVP has been more active with solar in NC, so it’s not like they don’t know how. We should be asking both DVP and the 3d-party developers, what’s holding back renewables development in Virginia? — is it just the absence of those attractive tax subsidies elsewhere, or is there some hidden factor that’s discouraging development here?

Leave a Reply