“De-Risking” Offshore Wind

Ørsted’s Hayes Framme. Photo credit: Philip Shucet

by James A. Bacon

In its original incarnation a few years back, the two-turbine wind project Dominion Energy proposed to build off the Virginia Beach coast was billed as a “research” project. In the hope of winning a $40 million federal research grant, Dominion wanted to see how well the two wind turbines held up in hurricane conditions of the mid-Atlantic before committing to a large-scale wind farm.

That grant never materialized, but the project lives on. According to the latest project time-line, if all goes according to schedule, the two turbines will be complete by August 2020. Now Dominion and its contractor, Ørsted Energy, are calling the $300 million investment in Virginia’s renewable energy future a “demonstration” project.

The Coastal Virginia Offshore Wind (CVOW) project will have no new technology and little new engineering. The turbines will collect data that might be useful when planning the final configuration of far bigger wind farm proposed by Dominion. But there is no assurance that the turbines will encounter hurricane conditions before Dominion builds the wind farm. Subject to regulatory approvals, the utility says it ” plans to invest up to $1.1 billion in offshore wind” by 2023.

What, then, is the purpose of the two turbines, which will produce the most expensive electricity on a cost-per-kilowatt basis in the entire Dominion system? I posed that question to Dominion a month ago and got this response, which contained the answer but, for lack of context, I did not appreciate. Accordingly, when invited to chat with Hayes Framme, an aide to former Governor Terry McAuliffe who now handles government relations and communications for Ørsted, I jumped at the opportunity to ask the question anew.

It turns out that the two demonstration turbines have served much of their purpose of “de-risking” the larger project already. They provided the impetus for developing the regulatory framework governing wind turbines in federal waters, Framme explained. “The turbines have been certified in Europe for a decade,” he said. “But that doesn’t translate directly into U.S. regulations.”

The first wind project to be built off the U.S. east coast was the Block Island wind farm; located in the state waters of Rhode Island, it was subject to state regulations. Dominion leased 112,800 acres from the Bureau of Ocean Energy Management (BOEM) in federal waters 27 miles off the Virginia coast. CVOW is the first offshore wind project to apply for a federal permit. Before approving a project, BOEM first had to write the governing regulations.

Many stakeholders were consulted, from the U.S. Navy to commercial shippers to the fisheries industry. Rules had to be written governing safety and environmental conditions during construction. Certain activities are prohibited during the migration of right whales through the area, for example. When hammering the massive pylons 60 feet into the seabed, contractors will have to create “bubble curtains” to blunt sound waves that might be disruptive to marine life.

By writing the rules for erecting and operating wind turbines, BOEM has significantly reduced regulatory uncertainty for the bigger second phase, Framme said.

The demonstration project also will help Dominion collect data to validate and refine its weather modeling, said Framme. “Bad weather costs money,” not just when the turbines are operational but during the construction phase. Dominion’s contractor for the bigger project — Framme hopes it will be Ørsted but that hasn’t been determined yet — will have to order and/or lease specialized vessels to transport and erect the massive pylons and blades. There is a two-year lead time for securing expensive jack-up vessels, which sprout legs that extend to the ocean floor and serve as the assembly platform. The contractor will need to lease the vessel for long enough to install dozens of turbines, while allowing for bad weather. The more it knows about weather conditions, the more accurately the contractor can control the weather risk.

The European wind-power industry has built turbines capable of withstanding brutal North Sea storms, but Framme said that Mid-Atlantic hurricane conditions will be different. In North Sea storms, wind and waves assault the turbine monopoles and towers from different directions. In a hurricane, wind moves in a vast circle in a consistent direction. Ideally, Ørsted would like to see if the different wind patterns stress the turbines differently.

While there is no guarantee the demonstration turbines will encounter hurricane conditions in time to influence the design of the bigger second phase, Framme said the data collected will help tweak the design to bolster electricity generation by a few extra percent, which can provide a big payoff over the life of the project.

The State Corporation Commission has suggested that the value of the demonstration project will come only when the turbines start spinning and generating electricity, said Framme. But the front end of the project — getting the regulatory framework — has value, too. “Virginia should not sit on its hands and watch [the turbine blades] spin before deciding whether to go bigger.”

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11 responses to ““De-Risking” Offshore Wind

  1. My wife loves that real estate TV show, Love It or List It, and I hadn’t realized Framme is a dead ringer for the broker on that, who of course is….always selling something. We should name the towers Tim and Terry for the politicians likely to reap the most benefits with our money. This remains a giant boondoggle, an outrageous expense for a small amount of energy and very little new engineering information. We’ll see where Hurricane Dorian goes but a similar or stronger storm hitting the complete project might be instructive. These guys seem excited to see it happen? Be careful what you ask for…..

    Jim invited me to attend and had I done so, I would have behaved. My former employer/client had me involved in OSW and the technology does fascinate me. I’m curious how the Jones Act is impacting both this project, Block Island and any other U.S. proposals, and if there really is any work underway to build a U.S. flagged jack ship. If the installation ship cannot actually enter a U.S. port, it’s going to be hard to build a U.S. industry. I’m curious about the economic and energy loss impact of the distance from shore, and we’ll find out more about that when and if Dominion does push forward with the 852 MW proposal it included with its “Sustainable Investment” outline in the IRP update. And I’d love to see hard capacity factor and cost data on the existing fields around the world. Way, way too much information even on the “demonstration” project application was kept confidential and one has to assume that’s because it was bad news for us ratepayers. If not, show the data – all of it.

    • Steve demands “show the data – all of it.”

      The demand should be made for UVa.’s hyper-ventilated claims of designing and making possibly mind blowing revolutionary advancements in off-shore wind technology.

      What happened to that claim?

      Perhaps that research money intended for building off shore wind towers larger than the Empire State building went instead to fund the $10,000,000.00+++ renovation of UVA president’s house, the man who claims that his goal is to make UVA “not only great, but also good.”

  2. This sounds like an answer given by an aide to a politician. Ørsted is developing a project in federal waters in New York, as is another developer. Apparently they were all too happy to have Virginia ratepayers pay for the development of the federal regulations rather than doing it on their own dime. They also intend to use much larger wind turbines for those projects. Why not tell Dominion that the “demonstration” project they are doing will not be a realistic test of the types of turbines that would be used to build-out a commercial offshore wind project in Virginia?

    Dominion Energy has said that they plan to build to build an American flagged vessel that can be used to develop offshore wind projects that will be leased to developers. Offshore wind developers in New York and New Jersey plan to use jack-up transfer devices to transfer equipment from foreign vessels before they enter port, thus avoiding any Jones Act complications.

    An unasked and unanswered question is why Virginia is the only state that is allowing the development of offshore wind projects to be done under the auspices of a utility, thus making the costs of the project the responsibility of ratepayers. Putting the project in the ratebase guarantees the utility a huge profit, thus making the wind energy generated far more expensive to customers than that produced by independent developers. The NY and NJ projects are expected to be sold to utilities and perhaps other customers on a fixed price basis, as far as I know.

    The lack of transparency for this Virginia/Dominion project is unconscionable when billions of dollars will be extracted from families and businesses in Virginia unnecessarily. Offshore wind could be a good for us if it was done in the way that other states are doing it. As it stands, it will drain billions from our pockets to be transferred to Dominion shareholders. Our political leaders are facilitators for this transfer rather than the protectors of their constituents and the state economy.

    • One article I saw suggested Dominion was the only major US utility involved in this early part of the off-shore wind process (lucky us).

      Also the article stated the reason for the urgency in Va. is this construction would be completed under the current federal wind credit subsidy program, which is expiring.

      I believe the NY project might also be completed at the lower cost with the credits, but the NJ project is higher cost presumably due to loss of the wind credits. Exact deatails of the NY/NJ cost structures are not public, all we know is what the total offer per kwhr.

      But yes I do not think Virginia is going to willingly sit idly by and watch NY and NJ take the lead. We want to be involved with them as well as offshore Va (against my better judgement).

  3. The production tax credit for wind begins to scale down in 2020 (as the does the tax credit for solar). By the end of 2022 only the 10% credit for utility-owned projects remains. There is some discussion in Congress about extending the credits, since they only partially offset the much larger subsidies for fossil fuels (including gas) and nuclear.

  4. If (1) the real value of this Dominion proposal, all along, was to force the federal government to put its offshore-wind-turbine regulatory framework in place, and now that has been done; and (2) the projects are now so outrageously expensive (compared with the alternatives) they make no economic sense to build at this time — why build them? The proposal has already accomplished its main purpose; the SCC should kill it now based on what’s good for the ratepayer. Let others demonstrate in New England how far offshore wind technology and scale has progressed while Dominion has futzed around with this. [They can’t demonstrate that in Virginia, since Dominion bought up all the lease blocks off the Virginia coast, despite no plans to use them all — presumably to prevent any competitors from building wind turbines here.]

  5. There is really only 1 reason why we re stuck with this 2 windmill installation … the lease terms. The lease was signed in Nov 2013. There is a 6 months “preliminary evaluation” period followed by a 5 year “site assessment term”.

    There are lots of what looks like extensive site evaluations prescribed to occur as ‘evaluation’ and to be presented and OKed by BOEM. The “site assessment term” is followed by a 33 year “operations term” when something is expected to be up and running. According to this … the end of the “site assessment period” should occur in May 2019 and it looks like it did … sorta since it’s probably a very small site.
    There is also a clause that says the lease can be vacated if the terms are not satisfied.

    It should be noted that the Federal government has had buoys out in the waters along the lease areas of the coast recording wind speeds and such for quite a few years, and that Cleveland got the money originally assigned to VA for this supposed pilot when nothing here was ready to go, and Dominion said it was all too expensive. Cleveland now has their pilot data on wind issues on Lake Erie and are ready to build their full installation.

  6. Presumably the smaller Va. project would make the larger project more cost effective, since some of the engineering would be done (on transmission lines etc).

    Look at Texas – more into renewables than Va.- is thinking maybe in 10-years from now, offshore wind is cheaper and makes sense. Virginia is viewing offshore wind as an extrenely important strategic business opportuity for Hampton Roads, so we want to get in the game now to grab as much of the business as we can. But the implication is Virginia tax payers take the burden of the getting in the game too early, rather than taking a wait-and-see attitude. “You snooze, you lose!!! mentaility” which works in America, becuase we believe strongly in new technology. But re: nuclear example, it was not the panacea we first thought.

  7. Acbar,

    I think the SCC believes its hands are tied with further regulatory action on the offshore wind project, since the GA said the project was “in the public interest.” The SCC ruling on the project said that it was outrageously expensive and did not provide an appropriate benefit to the ratepayers for its high cost. But the Commissioners said the law forced them to approve it.

    TBill – The Europeans have already developed the innovations needed for effective undersea transmission lines. There is no reason for Dominion to spend our money to discover what they already know.

    The European developers, including Ørsted, are willing to do the necessary engineering and R&D to modify their designs to work in the U.S. coastal waters and include those costs in their fixed price bids. Dominion is just adding to the ratebase and increasing our costs and their profits. There is no reason that Ørsted or others could not develop Virginia’s offshore wind resource in the much lower-cost way that they are doing in New York, except for Dominion’s desire to add billions in profits. They are doing what they believe is best for their shareholders and will continue to extract money from families and businesses in Virginia as long as our elected representatives allow it.

    We have completely lost the balance between public interest and private gain that is supposed to occur with regulated utilities. There aren’t supposed to be losers in this process, just a reasoned give and take. But the ratepayers are definitely on the losing end with our current energy policy. Meanwhile our governor and legislature enable the money seizure, our attorney general’s office is silently ineffective, and our constitutionally mandated regulators have been hindered by bad legislation and faulty rulings from the State Supreme Court. And our citizens are uninformed and naively trusting of our leading energy company. It’s not a pretty picture and doesn’t have to be this way, other states are successfully sorting this out.

    • True enough, states like Va. and NJ like the current utility structure, because is it an business area where the state can take the intiative to request plants be built, and approve them. In essence the states play judge, jury and executor. This is jobs, jobs, jobs and we do not have to wait around for free market private enterprise to wake-up one day and decide to move to a-less-than-fully-welcoming Virginia.

      • They believe that rolling over and giving Dominion everything it wants will produce more jobs. Some of these projects will produce a few new Virginia jobs for a construction season or two. Many of the highly skilled workers required for these projects will come from out of state where their paychecks will be spent.

        In exchange for a temporary blip in employment, Virginia will add billions to the energy costs for families and businesses for the next 30-40 years. Anyone willing to do the math (which excludes most policymakers) will see that this is a bad deal for Virginia. But stories can be successfully spun to make appear it’s a good deal, so those so willing to be fooled can continue to be re-elected.

        Virginia is selling its soul to Dominion shareholders and will be a higher energy cost state compared to our neighbors. It already is. It’s just getting worse. We can find ways for Dominion to prosper. They just need to do it in a way that is good for the customers too.

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