Offshore Wind Mandate Advances, Cost Ignored

By Steve Haner

Smart lawyers, and the General Assembly is full of them, don’t ask questions unless they know the answer already and want the information included in the debate. Nobody down at the General Assembly is asking what it will cost Virginians on their monthly bills to build massive offshore wind facilities to generate electricity.

Case in point, a meeting of a Senate subcommittee still underway as this is being written. The Energy Subcommittee of the Senate Commerce and Labor Committee has endorsed two Senate bills that will dictate to the State Corporation Commission that it must allow Dominion Energy Virginia to build its proposed 2,600-megawatt turbine farm and pass the costs to ratepayers. 

Senate Bill 860 actually dictates that up to 5,200 megawatts shall be found “in the public interest,” including projects built off the shores of neighboring states, and covers power purchase agreements. Senate Bill 998 is tightly focused on the Dominion-built project off Virginia Beach, but goes beyond the “public interest” declaration. It tells the SCC to accept the full cost as “reasonable and prudent” and pass those costs on to ratepayers. Probably over 30 years. With an enhanced double-digit all-but-guaranteed rate of return.

This will be the financial equivalent of Virginia residents and businesses in Dominion’s captive territory paying for a new U.S. Navy aircraft carrier. It will be that many billions and billions of dollars, and it will have a shorter useful lifespan than the carrier’s 50 years.

The bills were presented this morning with barely a peep from subcommittee members. All the witnesses but one spoke strongly in favor of them, and that one speaker – Senior Assistant Attorney General Meade Browder – was the entire “opposition” line but merely expressed his office’s “concern” about the cost impact on ratepayers, not actual opposition. He spoke only on the second bill, the one that dictated “all costs” shall be deemed “reasonable and prudent.”

As previously noted on Bacon’s Rebellion, signs remain strong that resistance (against the dominant utility) remains futile despite the election flip. The legislation mentioned in that post to expands the State Corporation Commission to five judges, giving the new Democratic majority three of five seats to fill over next year, has passed its first hurdle and finally drawn attention of the news media.

The $8 billion current estimate of the cost for the offshore wind installation is just the capital amount, and does not include the financing costs and profit margins to be collected over decades. If built as planned, it will be the only such facility owned by an integrated monopoly utility directly. Other U.S. ocean wind projects are being built by investors who will merely sell the power to utilities or into the grid as merchant generators – far cheaper and less risky for customers.

Without question, the State Corporation Commission staff could explain all this and provide a solid estimate of the ratepayer impact. Its standing practice, however, is to only answer questions when directly asked. Seven months ago, during the utility’s integrated resource plan review, it was looking at a potential wind energy investment of under $1 billion. That’s now obsolete. The SCC staff was in the room today, but nobody asked.

Sen.Louise Lucas, D-Portsmouth, is the patron of the bill which dictates that all costs are reasonable and prudent. Portsmouth’s port will be ground zero, as Governor Ralph Northam announced the other day. A similar bill is pending in the comparable House subcommittee, with a Norfolk Democrat as patron. The entire Hampton Roads region is eager to start this, expecting major economic benefits (which would be the same, by the way, if it were a merchant generator project.)

Lucas’ bill now goes to the full Senate Commerce and Labor committee, probably Monday, and all concerned said negotiations on the final language are underway. Monday will produce a substitute, and changes could be made all the way to the Governor’s desk and then at the April Veto session.

Dominion lobbyist William Murray told the subcommittee all the bills may be rolled into one, and the cost concerns may be addressed by some sort of cap or “common assumption on cost estimates.” He pointed to how the General Assembly, in the Ratepayer Bill Transformation Act of 2018, dictated that the SCC approve that a major transmission line be built underground along I-66. One bad idea sets precedent for a worse one.

A few minutes later there were more expressions of concern for the forgotten ratepayers, this time over another Lucas bill setting up a program for Dominion-provided electric school buses. If you care about the details, read the impact statement, which once again says nothing about ratepayer costs. Dominion will own the buses (earning a profit) and fill their batteries (earning a profit). Browder was at the podium again expressing “similar concerns as with the previous bill,” but also said it might be worked out before a final bill passes.

Most speakers lined up to applaud. Children understand that climate change is ruining their future, one said. They stress over “the idea that they are going to school every day on something that is actually detrimental to them,” she argued.

Why would self-centered ratepayers complain about solving that problem with a new standing charge on their monthly bills? What’s a few more pennies a month?

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37 responses to “Offshore Wind Mandate Advances, Cost Ignored

  1. The total disregard of costs is incredibly depressing. The current roster of legislators appears to have no concept of fiscal or economic limits. Their pursuit of social and environmental justice knows no bounds.

  2. Here is an article about the competition (NJ and NY) who are planning (on paper) offshore larger projects than we are. I was looking to see if the proposed Paulsboro NJ (my old stomping grounds) turbine foundation construction plant was progressing. Sounds like not yet:

    “Although many of the major components for the first few waves of large-scale U.S. offshore wind farms will be imported from Europe, the growing list of contracted projects and state targets is starting to bring the shape of the future supply chain into focus.

    New Jersey is competing with states across New England and the mid-Atlantic region for offshore wind supply-chain investment and jobs. Only New York has a more ambitious deployment target, legislated at 9 gigawatts for 2035.

    As part of its winning bid for Ocean Wind, Ørsted committed to helping Germany’s EEW establish a plant for turbine foundations in Paulsboro, New Jersey. EnBW, a German utility and renewables developer looking to crack into the U.S. offshore market, recently opened an office in Jersey City.”

  3. Looks like the Democratic patron of the Bill is from down Williamburg way so I’m sure he’s angling for the jobs more than cost-effectiveness.

    But I’m curious, isn’t the money from this already taken from ratepayers via excess profits or the tax windfall ?

    If not, how does this cost get allocated to all ratepayers and not just Dominion ratepayers?

    Somehow, I HOPE there is a second shoe dropping to deal with Dominion and the SCC as a whole and the GA will do something.

    It could be that the Dems don’t think the SCC is the “right” way to deal with utilities and they have some other reforms in mind to modernize regulation.

    OR, it could be some good old quid pro quo going on with Dominion agreeing not to oppose RGGI in return for goodies for themselves?

    oh bite my tongue!

  4. “If built as planned, it will be the only such facility owned by an integrated monopoly utility directly. Other U.S. ocean wind projects are being built by investors who will merely sell the power to utilities or into the grid as merchant generators – far cheaper and less risky for customers.”

    First, the project will be built by Orsted, which is also leasing the property in Portsmouth for an onshore base, that should work for VA, NC, maybe MD too. Md has onshore space designated in Baltimore, but Portsmouth is much better access to the turbine areas.

    It will be owned by Dominion, a fact that Tom told us would make the electricity generated more expensive.

    There is one issue about the cost that we haven’t discussed and that is … this project includes the cable installation to “connect the turbines to energy grid”, from 27 miles offshore. The cable has to be a piece of the high expense for just 2 turbines and I presume will do the connection for all the additional turbines that will actually be built in the VA, and maybe other, lease areas.

    Info from Dominion old news release … July 2019
    “Cable will be installed undersea next summer to connect turbines to energy grid
    – First offshore wind project in U.S. federal waters
    – Two 6-megawatt turbines will be located nearly 27 miles off Virginia Beach coast”

    “Ørsted, an experienced offshore wind developer headquartered in Denmark, has been contracted for the offshore portion of the project. The L. E. Myers Company will perform onshore construction work. Customers will see no increase in rates for the pilot project under the provisions of the Grid Transformation and Security Act of 2018, as the project will be recovered in existing base rates rather than a rider. The CVOW project is on-schedule and on-budget. ”

    So evidently Dominion is applying its huge excess earning to the pilot project, which also means the cable to shore for all the rest of the lease area, and others in the future …

    Re buses … “Electric buses can deliver efficient public transportation at a reasonable cost while producing significantly fewer carbon emissions and reducing harmful air pollution in our communities” says the study from 3 environmental groups.
    The study looked at early adapters and their recommendation include having a relationship with the utility from the beginning.

    This looks maybe like Dominion is looking for more ‘stuff’ to own, and maybe that could be worked out with towns and with school systems, but both the GA and the SCC need to dive into our monopoly regs before we can really chart a future path.
    PS … could bring up anything readable with the ”impact statement”???

    • Re: “There is one issue about the cost that we haven’t discussed and that is … this project includes the cable installation to “connect the turbines to energy grid”, from 27 miles offshore. The cable has to be a piece of the high expense for just 2 turbines and I presume will do the connection for all the additional turbines that will actually be built in the VA, and maybe other, lease areas.”

      — You would hope so. But I have seen nothing to indicate that this subsurface, buried transmission cable will be capable of handling much expansion; rather, it was to “experiment” (i.e., get a foot in the door) with the logistics of permitting, construction, maintenance of termination facilities, and staking out the on-shore substation.

      • The Dominion lease stipulates that they would not be required to interconnect with wind farms to the north through what was once on the drawing boards as the Atlantic Wind Connection … connecting the offshore wind farms at sea and limiting the number of onshore connections. Not sure where that project stands …

        Here is the only thing I found about the 2turbine connection. Maybe you know what this means in terms of size …
        “Q: How will the electricity be delivered to shore from the CVOW project? (12MW)
        A: We will bury a 34 kV distribution line in the ocean floor that will run from the turbines to a connection point to our system near Camp Pendleton.”

    It worked when I just tried it. There it is again, the FIS on the school bus bill….

    There are 100 moving parts on the potential cost of the wind project, and the calculation to be fair should include the savings on fuel over time. I just wish they bloody cared!

  6. Excellent reporting, Steve.

    In my view, this statement of yours says it all:

    “Smart lawyers, and the General Assembly is full of them, don’t ask questions unless they know the answer already and want the information included in the debate. Nobody down at the General Assembly is asking what it will cost Virginians on their monthly bills to build massive offshore wind facilities to generate electricity.”

    The bottom line here is that the Virginia General Assembly cannot be trusted by the citizens that it falsely claims to represent.


    These so called “representatives” obviously do not look after the public interest. They instead look after their own private interests. Thus they ignore the public interest in order to represent the private interests of special interests, that is groups that pay them money, and sell their votes to them.

    Earlier, I was very disappointed to learn that this apparently includes Chap Petersen. Guess Chap has been around too long. So he needs to be replaced along with many others.

    A government that fails the public interest, needs to and should be removed and replaced with a government that works for the public good, not for the private advantage of an elite few who successfully corrupt politicians.

  7. The “USS Dominion” has a certain ring to it.

  8. What about the birds? There is not a great deal of data from studies that conclusively measures the impact of wind farms on the migratory birds of Virginia. Silent Spring Part D’eaux?

    • on the birds – we need to compare and contrast the impact on birds from all power sources – not just look at one.

      ALL power sources have impacts. In fact, there are quite a few things that have bird impacts.

      We just need to maintain a rational perspective

      • Wow I never thought of it in this manner before. I seriously would like to see a detailed environmental and wildlife study. For just a bit of fun, we have got to do something about all of those bird deaths by windows. Where is the bill that limits how many cats birds they can catch?

  9. “AWEA panelists” … at a conference in Boston last year … “ also agreed that careful siting and construction practices can limit harm to wildlife. Siting wind farms 25 miles or more out to sea puts them beyond the paths of migratory birds; and according to Dr. Stuart Clough, President of environmental consulting firm APEM, European data shows birds tend to avoid wind farms altogether, or keep to shipping channels that transect them.” from Ivy Main at P4People

    For two decades, the industry’s threat to birds has been at the center of a highly politicized debate. Critics point to turbines killing hundreds of thousands of birds annually—mostly songbirds, but also larger species, notably Golden Eagles. The wind industry responds that those mortalities pale in comparison to the deaths caused by cats or power lines.

    “After Audubon released its 2014 Birds and Climate Change report, which showed that climate change will threaten more than half of North America’s birds if we don’t rapidly reduce emissions, it became abundantly clear that the organization needed to focus more on expediting properly sited renewable energy. Audubon’s goal is to ensure that 50 percent of America’s energy comes from renewable sources by 2030.”

  10. I’d rather have the aircraft carrier.

    At least it will have a nuclear reactor on it…

  11. The bigger issue for electric-powered vehicles is where do they get the power to recharge them?

    If we say solar – does that mean those vehicles have to be recharged during the periods of time when solar is available?

    If those vehicles need to be in service during daylight hours, what is the plan?

    If we say we have offshore wind to recharge them – are we really using ONLY offshore wind to recharge or are we saying that we can use – from the grid – the amount that offshore wind put into the grid – when it was “generating”?

    It’s important to explain this because the opponents will say that you’re really getting recharged from the grid and not from offshore.

    Ditto – same argument for solar. If Google buys enough solar in megawatts to match Google’s demand of megawatts – are they getting it from solar or from the grid and solar is “reimbursing”?

    If Google/facebook/whoever is paying for solar – why can’t they have their own on-site solar instead of buying through 3rd parties?

    There is a need to sort this out, because like I said up-thread, the opponents are using the lack of explicitness to claim that wind/solar really are not viable sources.

    • Re: recharging vehicles: the key is to price the power according to the cost to generate/deliver it at the time consumed. That’s what a regional wholesale energy market like PJM does. If it’s cheaper to generate at night from lightly-loaded baseload units, or if it’s cheaper to generate mid-day because of all the inexpensive solar available at that time versus light electrical loads, whatever — so be it. Let the market sort this out by pricing the power according to its marginal cost at that instant and let people charge their cars and trucks when they wish, taking the (fairly predictable) varying market price at different times of day into account.

      Of course you are charging your vehicle using power purchased at retail; the State Commission gets into this by regulating the middle-man markup that retailers like Dominion get to apply to the wholesale market price.

  12. Good question, but transportation is now the largest climate change inducing sector. Replacing 75 diesel buses results in a lifetime reduction of nitrogen oxide, particulate matter as well as heat-trapping gases equivalent to removing 3,500 cars from the road, according to the Department of Environmental Quality.

    Dominion has another reason to own the buses. They are clear that the electric buses are first and foremost a grid resource. Schools are selected based on the value of batteries to the local grid. “The vehicle-to-grid technology leverages the bus batteries to store and inject energy onto the grid during periods of high demand when the buses are not needed for transport.”

    A woman from Fairfax claims it could take Dominion until 2046 to convert Fairfax’s 1,625 school buses, so Fairfax backs another bill … HB 1140 Clean School Bus Grant Fund and Program; Introduced by: Mark L. Keam …
    Here are the basics ….“Establishes the Clean School Bus Grant Fund and requires the Department of Education to establish the Clean School Bus Grant Program for the purpose of (i) awarding grants from the Fund on a competitive basis to school boards for (a) the complete replacement of existing diesel school buses with electric school buses no later than 2030, (b) the implementation of recharging infrastructure or other infrastructure needed to charge or maintain such electric school buses”.

    So, the schools would own these buses and it sounds like the Governor said funding could come from the VW fees. The schools would probably do the recharging onsite between runs and Fairfax school are installing solar. These buses do save monies for the school systems, or should say the ‘Big Brothe’ VA budget?

    • Here is nice greenie fix for Fairfax County schools. Juniors and seniors are driving cars by the thousands each and everyday to school. Fairfax is charging $200 for a school parking pass on top of that. At the school I teach at a whopping $80,000 was collected in September. Why not have the youngsters pile on the school bus and deny students the right to drive to school? It would have a positive effect on Northern Virginia rush hour traffic. It would guarantee on time arrival and departure from school. It would make rush hour driving so much safer. Teen drivers are ill equipped to drive in today’s modern times. It is not 1970 anymore. You should see the school parking lot at 4 pm. It is like a Zombie End of the World movie. I don’t know how much particulate matter and green house gas could be avoided but every little bit counts right? Mom and Dad don’t have to sweat an extra car, expensive teenie car insurance, and that $200 parking fee. How much would this cost? Nothing.

    • “Here is nice greenie fix for Fairfax County schools. Juniors and seniors are driving cars by the thousands each and everyday to school. Fairfax is charging $200 for a school parking pass on top of that. At the school I teach at a whopping $80,000 was collected in September … It is not 1970 anymore. You should see the school parking lot at 4 pm. It is like a Zombie End of the World movie … (Ban student cars, a great solution!) Mom and Dad don’t have to sweat an extra car, expensive teenie car insurance, and that $200 parking fee. How much would this cost? Nothing.”

      Great comment. Who would have guessed. This off the charts expensive and coddling Fairfax high school of progressive teaching is not your father’s high school. Not even close.

      These Fairfax County schools are far richer and far more expensive to operate, and increasingly so, as they become populated by and produce far more pampered, coddled, privileged and narcissistic Peter Pan and Princess Children.

      Children who never grow up. Little people who instead become far more aggrieved, far more angry and far more fragile children, ready upon high school graduation, to be morphed into little social justice warriors organized into perfect little mobs of cannon fodder led by their leftist college professors who themselves have never grown up, so are equally aggrieved, angry and fragile.

      It’s plain to see now, all around us.

      This potent mix is today creating a nation of snivelers, whiners, and complainers, one generation of petulant children who never grow up but instead pile atop one another decade after decade.

      We can see this now in action, happening all over the country every day, year after year.

      For example see today’s Wall Street Journal:

      “Georgetown Law students shamed the university last semester when they exercised a heckler’s veto against a Trump … official. Now they’re claiming that disciplining those who disrupted the event “would have a chilling effect on free speech and expression across campus …”

      BUT, remember too that the social justice bottom line goal of these Progressive educators pushing their “teacher centered education in K-12 schools” is cleverly disguised as “child centered education.”

      In fact, the real goal here is too demand one social justice warrior teacher and staff member for every child enrolled in school.

      It they get their way, what has happened to our colleges and universities all over the nation, uncontrollable and ever expanding costs, combined with ever more intrusive and ineffective teaching of students, doing them far more harm that good, will overwhelm our k -12 public schools as well.

  13. What are we going to do when we’ve constructed so many wind turbines that the prevailing winds are altered? How might that affect the planet?

    Reducio ad absurdum?

    Perhaps, but there was once a time when no one would have seriously believed that humans could burn enough stuff to affect climate change.

    • Wind turbines rotate 360 degrees and can make use of wind from any direction. Although, strong prevailing winds do generate more electricity. When wind speed doubles the amount of electricity generated increases 8 times.

  14. Excellent article Steve, you raised all of the important points.

    I don’t think anyone in Virginia knows how many billions of dollars will be added to Virginia energy bills as a result of the 2018 bill and what is being proposed in the GA today.

    Three separate interests are supporting offshore wind development:

    1. Those wanting more jobs and economic activity as a result of developing infrastructure for offshore wind in Virginia.
    2. Environmental and consumer groups hoping for more clean and what they think will be lower cost electricity in Virginia.

    Both of these groups would be best served if the offshore wind generation is developed on a fixed price basis by an independent developer that assumes the risk of the project. This is what all of the other states are doing on the east coast.

    3. The third interested party is Dominion. Adding $8 billion in new assets could provide many billions of dollars in additional profits to the utility, while cost overruns and storm damage risks would be paid for by the ratepayers. Independent developers have an incentive to keep costs in check because their income per kWh is bid at a fixed price. A more expensive project results in more profits to the utility.

    The SCC is capable of requiring the information and determining if Dominion’s investment is prudent. That is why the utility is working so hard to create legislation that cuts them out of the picture.

    I have never encountered a state that has such a head-in-the-sand approach to energy issues.

    Where are the legislators that were elected to protect the interests of their constituents? Where are the consumer groups? Why are the business and labor leaders throwing their support behind legislation that will cost their organizations dearly for the much higher than necessary costs for offshore wind projects owned by the utility? Are the environmental groups unaware that they will get as much clean energy at a far lower cost if someone other than the utility builds it? Use the savings to improve energy efficiency in low-income housing. Those families will be paying far more 5-10 years from now for the same amount of electricity than they are today.

  15. “Head-in-the-sand” is not the most likely place that comes to mind.

  16. Several of the environmental groups have been noticed that the states to our north are buying their offshore wind from developers and that allowing Dominion to own the turbines will be more expensive. It is a complicated calculation, I guess, and the information, like the immediate need to redo our still basically monopoly utility regs, has not seemed to sink in.

    The development of thoughtful plans isn’t helped by the fact that the GA is very part-time and there are so many bills put forth.

    • No names (people can guess), but late yesterday I ran into one of the subcommittee members. We had a brief chat about this, and with 528 other things to think about he really wasn’t focused on what happened that morning. For much of the meeting he and others were shuttling back and forth to a Senate Finance meeting across the hall. I really do not envy these people in the middle of this information hurricane and pressure cooker, made far worse this year by the flood of bills and the flips in leadership and staff.

      And while I was out pounding out this story (just like the good ol’ days on a PM paper), the subcommittee started killing the bills that would change our regulatory structure. Resistance is Futile.

  17. The consumer has been told that renewable energy is far cheaper than fossil fuels already, and furthermore the cost of renewables is falling exponentially fast. So the average comsumer has no clue that offshore wind is wildly expensive, and more so under Dominion. Not to mention that we are being killed by fossil fuels.

  18. Steve … “wildly expensive” …. ????
    That has been true but only because the industry has not developed enough onshore components to begin the price decline we have seen in onshore wind and utility scale solar. Now, market predictions from just about everywhere show a huge increase in offshore installations is on the way. The US has an offshore resource with the technical potential of double the nation’s current electricity use.

    “Global offshore wind installations will hit 165GW by the end of the decade and are on track to reach 418GW by 2040, according to new research by UK analysts Rethink Energy. … Dr. Fatih Birol, executive director, International Energy Agency, said that global offshore wind power capacity is set to increase by as much as 15 times over the next 20 years.

    And from BNEF … “we expect a bumper year of new-build investment volume in 2020; including gigawatt-scale projects off the U.K., the first commercial-scale financing in the U.S., and a rush to build in China.”

    The US development pipeline has grown to a potential generating capacity of 25,824 MW across 13 states. Technology improvements … new larger turbines, economy-of-scale advantages, standardization and clustering … are expected to deliver the record-low winning bids here in the US (USD 55-75/MWh) that have been submitted since 2017 in Germany, the United Kingdom and the Netherlands. The strike prices in the UK offshore auction resolved in September 2019 with expected commission in 2025 were only USD 49-52 and DOE says that In Massachusetts, “offtake prices for the first commercial-scale U.S. offshore wind project—Vineyard Wind off the coast of Massachusetts—came in lower than expected at $65–$75 per megawatt-hour.”

    This is a huge, basically non-toxic resource. Let’s back its development along the mid-Atlantic and other coastlines. 77% of the population lives within a short distance of our coastlines.

  19. so there are LOTs of good viewpoints here but one I do like is this one:

    ” the key is to price the power according to the cost to generate/deliver it at the time consumed. That’s what a regional wholesale energy market like PJM does. If it’s cheaper to generate at night from lightly-loaded baseload units, or if it’s cheaper to generate mid-day because of all the inexpensive solar available at that time versus light electrical loads, whatever — so be it. ”

    and then I have questions:

    if offshore wind has the lowest levelized cost of power then shouldn’t it be less costly than any existing grid power even if generated by a for-profit utility?

    Or are we maybe saying that wind/solar are only cheaper if we have it generated by a non-profit utility?

    In other words are we mixing two issues here?

    I do not think the basic idea of a for-profit monopoly for electricity is inherently evil.

    And apples to apples – whether we talk about a for-profit utility or a publically-owned utility – the core economic of raw wind/solar should not be different or educate me otherwise.

    So are we arguing that it’s the terms of DOminions monopoly that make wind/solar uneconomic or are we arguing that wind/solar no matter the owner/operator is uneconomic?

    OR , are we arguing that because of Climate Change – all manner of things must change and we cannot justify it on economic grounds?

    I just wonder if some of the back and forth is caused by conflation of the issues.

    • I am not the best one to answer but …
      The monopoly was given to utilities and overseen by state utility commissions because central generation and distribution of electricity was an industry that wasn’t practical for competition. Today we are saying that only the wires are still uneconomic for competition. A duplicate grid just won’t work economically, but generation technology has changed and we can now generate electric from small scale resources that don’t have to be owned by the utility. They can be owned by a third party or the user.

      Also, economic grounds are skewed for fossil fuels. We have included in their price any of their environmental costs … coal ash ponds, air pollution water depletion, and green-house gas accumulation etc. Add the $20 billion in tax write-offs to those offloaded costs. Together they were the rationale for the carbon tax, to create a level the playing field. Fossil people complained about the renewable subsidies, but they were much less than the tax expenditures, which Obama tried to no avail to reduce.

      The PPA offshore question, utilities purchasing the power from an offshore builder/owner, highlights Dominion’s desire to stick with the monopoly basis of their power … put the cost of building the turbines in the rate-base, where they collect a pile of payback in the rate. It is the monopoly rules that are keeping us from developing generation that Dominion doesn’t own.

      Those rules also keep uneconomic plants running. All of Dominion’s coal plants are actually losing money, according to one study, but many aren’t scheduled for closing. Maybe that is because they have some capital expense that isn’t fully written off. Those air pollution updates of 15 years ago?

      Finally, you know that I think changing generation because of climate change was reason enough. Now that we are seeing some effects on the VA coast, and the prices are getting competitive, maybe others agree a bit, but I am just this crazy Jane Fonda liberal type!

  20. Pingback: With High Cost Detailed, Offshore Wind Support Fades | Bacon's Rebellion

  21. I think climate change is real and we must deal with it but it can’t be part of the basic issues if we expect to make a meritorious argument on economics alone.

    When we include climate change in these discussions, the other side just totally discounts the entire argument as illegitimate.

    i.e. if it is true that wind and solar are not economic – then we’re onto a whole different problem.

    Everything I see, from around the world says that wind/solar are economic but I do point out that wind/solar is not the typical energy mix on most of the worlds inhabited islands and that does concern me if we want to make a pure economic justification.

    If we took Dominion out of the issue, would a PPP / public utility end up with a less expensive project?

    If so, the we need to go back and make Dominion behave or threaten them with other paths to building.

    A bad deal is no deal – period.

  22. The power purchase agreements for offshore wind projects on the east coast available at the same time as Dominion’s projected offshore wind project are in the $50-$60 /MWh range, from what I can tell. This is cheaper than the typical range of $60-$80 /MWh levelized cost of energy from gas-fired combined cycle units, which are exposed to higher future fuel costs.

    Utility scale solar is priced about $50 /MWh in Virginia I think, but it is hard to find published information about the exact price from these facilities. Both wind and solar projects would have fixed prices for their lifetime since they are almost entirely comprised of upfront capital costs. Conventional units such as gas, coal, or nuclear units have considerable ongoing maintenance and fuel expenses.

    Some new utility-scale solar in California is currently being bid below $30 /MWh, including battery storage.

    Let’s say we allowed an independent developer to build the offshore wind in Virginia. Assume that it offers its electricity at $50 /MWh for the 30+ year life of the facility. Dominion would buy that electricity and resell it to its customers at retail rates. But the utility would not have the profit opportunity from putting a multi-billion dollar asset in the ratebase.

    Dominion would much rather own the offshore wind project itself. It would be allowed to recover the cost of the project, the cost of debt financing, and a considerable profit over the 30+ life of the asset. Returns on other types of new generation have been in the 9-10% range, depending on the RAC.

    Ratepayers would have to pay for any cost overruns, storm damage, unexpected maintenance expenses, etc.

    Dominion would then sell the generation at market prices and make an additional profit.

    If we ever get back to regulatory oversight, the total revenues and expenses would be trued up at each review (now every 3 years supposedly), to see if the base rate profitability is not more than .7% above the authorized rate of return (about 9.5 -10% I think). The RACs continue earning their rates of return and are not part of this review).

    I am not an expert on rate-making and it seems to be particularly obscure in Virginia. But a few points seem clear.

    1. If an independent developer builds the wind project, they would likely sell electricity from it at a fixed price over the life of the project.

    2. If Dominion builds it, they get all of their costs covered, with no cap, and a hefty guaranteed profit regardless of the output of the facility.

    3. Dominion also gets to profit from the sale of its wind generation.

    It seems pretty clear why having Dominion build the project would be more expensive for Virginians, and why Dominion so desperately wants a bill that allows them to do it this way, without SCC review.

    If someone knows more about this and can tell me where I might have gone wrong in this analysis, please let me know.

  23. I think the economics are not clear and convincing.

    For instance, ” Both wind and solar projects would have fixed prices for their lifetime since they are almost entirely comprised of upfront capital costs. ”

    One of the concerns of offshore wind is the corrosive effects of salt and wind speed gusts. There are costs – it’s not zero. same thing with solar. In the 5000 mw facility being installed right now in Spotsylvania, it was said that each panel must be cleaned regularly to keep it at it’s design performance. Birds, dust, insects, etc… and the vegetation below it has to be cut to maintain an open site.

    There is no bigger supporter than I when it comes to wind and solar but I’m also a pragmatist and what concerns me on offshore wind is that I do not see it in places – islands – that have no native fossil fuels and have to import diesel fuel to burn for electricity. One would think of all places where the supposed superior economics of offshore wind would prevail over fossil fuels would be these places where the fossil fuels cost almost twice as much as fossil fuels on the mainlands.

    One would think on the worlds major islands – that hybrid systems that combine diesel, solar and wind , perhaps with storage, would be the gold standard for cost effective and clean(er) electricity but that’s not the case yet. Why?

    If it won’t work on islands, how will it work on the mainland where fossil fuels are 1/2 what they cost on islands?

    We can and should hold Dominion’s feet to the fire – but Dominion is one utility out of thousands and so far, very few, if any, have full-up integrated wind/solar/fossil fuel/storage grids.

    That should bother proponents – as well as give ammunition to opponents.

    We’re just not there yet. We’re going to get there… but we still have a ways to go – and it’s that fact that gives Dominon cover for how they are going to go about it. They consider it an experimental pilot project of which it has no viable economic benefit to them as a corporation. If they are going to do it – they have to get all their costs covered AND get a premium for engaging in something that to this point, is NOT profitable on it’s own.

    Perhaps I’m being too pessimistic but I see Dominion as a company whose responsibility is , in their mind, first to it’s investors and second to ratepayers and it would be irresponsible for them to engage in some activity that gobbled up their resources with scant ROI.

    We’re expecting an investor-owned company to behave like a public service utility and that’s not a reasonable expectation.

  24. It’s no secret that the Southeastern states lag behind in renewable electricity even though they face some of the biggest global warming threats in the nation. Here is what is happening in SC ….

    “Low-lying Charleston, South Carolina, is looking at spending $2 billion to gird itself against the impacts of climate change, but has done little to cut its emissions. … The city government has no solar panels on its buildings, no city vehicles that run on electric power or cleaner fuels, and it still hasn’t pushed its electric utility, Dominion Energy, to supply more renewable electricity. … A spokesman for South Carolina’s Republican governor, Henry McMaster, said, “Private industry is more than capable of adapting to a 21st century economy without imposing more regulations.” Really?

    Meanwhile, “four hurricanes and a major flood in the past five years have swamped South Carolina, killing more than 30 people, pushing toxic chemicals into people’s yards and causing billions of dollars in property damage. Heavy rains have flooded crops, causing state financial bailouts. And droughts have strained some drinking water supplies.” (Saving Capitalism)

    The idea that Dominion and the rest of private industry are only responsible to their shareholders is a fiction. Corporate Charters require no such thing, and the idea that corporations only had a fiduciary duty to their shareholders only began to take hold about 30 years ago. It is also true that the rise of ‘shareholder capitalism’ with its emphasis on quarterly earning has tracked with the decline of wages, rise in inequality, outsourcing of jobs, and abandoned and environmentally degraded communities.

    Post WWII, the dominant view was that corporations had responsibilities to all of their stakeholders, to their workers and their communities. Some corporations are returning their focus to all their stakeholders. Patagonia is for profit company whose “articles of incorporation require it to take into account the interests of workers, the community and the environment.

    So we, Dominion’s community, have the right to expect more than a simple shareholder responsibility. We have a right to expect them to find a way to transit their company away from fossil fuels. If that requires a redesigned marketplace with new market rules, then we should be heading there together, not fighting a constant battle against the amassed financial and political power of a company that appears incapable of any real change. Responsibility extends to more than their stockholders.

    Finally an amusing aside … there is now a company leasing sheep to solar companies. They keep the fields with solar panels well cut and actualy like th stand under the panels on hot days. And there is another company that prepares the fields for tortoises who evidently also love their new digs.

  25. Pingback: SCC: Clean Energy Conversion Costs Customers | Bacon's Rebellion

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