Virginia clean energy advocates are elated about the prospect of Dominion Energy’s 2.6 gigawatt offshore wind farm coming online in 2026.
They just want assurance that the $9.8 billion project will deliver power as promised and not burden ratepayers with surprise bill increases.
Those demands are now fueling a standoff over what would be the country’s largest offshore wind farm. After years of planning, Dominion says a consumer protection clause added last month by state regulators is “untenable” and will force it to shut down the project.
The condition, known as a performance standard, would require Dominion to refund customers with credits if the wind farm generates less power than expected. It prohibits the utility from collecting money from ratepayers to pay for any replacement power it needs to cover shortfalls from poor performance.
Dominion wants the performance standard removed from the conditional approval the State Corporation Commission granted the project on Aug. 5. However, customer and renewable energy advocates are rallying around the standard, claiming it’s a pivotal safeguard for consumers.
“It’s very evident in the filings that nobody opposes the wind project,” said Cassady Craighill, deputy director of Clean Virginia. “We’re all on the same page that this unprecedented project is a critical contributor to clean energy and a huge economic boom.
“But wind is also something Dominion has very little experience with, and it’s their largest and most profitable project in history.”
An ‘unprecedented imposition’?
The wind farm would consist of 176 turbines installed 27 miles from Virginia Beach. Dominion customers would cover all development and operation costs, which add up to an estimated $21.5 billion over 30 years. That figure includes the investor-owned utility’s guaranteed rate of return, estimated to be in the neighborhood of $7.2 billion.
Earlier on, Dominion had projected a capacity factor between 38% and 46% over 30 years. Last month, regulators said ratepayers shouldn’t be responsible for any shortfall in output below an annual net capacity factor of 42%, measured on a three-year rolling average.
Briefly, capacity factor is the ratio of the average load carried by a system for a given time period to the rated capacity of that same system for the same period.
In its Aug. 22 petition, Dominion attorneys asked the SCC to reconsider the performance standard, calling it an “unprecedented imposition of an involuntary performance guarantee.”
“As ordered, it will prevent the Project from moving forward, and the Company will be forced to terminate all development and construction activities,” they wrote.
The utility has until Thursday to respond to the filings that Clean Virginia and other groups submitted by a Sept. 22 deadline.
Dominion spokesman Jeremy Slayton did not comment further on the potential halting of the project. The company plans to submit a filing this week, he said.
“Coastal Virginia Offshore Wind has many benefits for our customers,” Slayton said late last week. “We look forward to completing CVOW as a regulated project to build on our long record of affordability and reliability.”
Katharine Kollins, president of the Southeastern Wind Coalition, emphasized that it’s up to Dominion to work with regulators to find a compromise that protects ratepayers and ensures the project comes to fruition.
“Virginia needs offshore wind not only to meet decarbonization goals, but also as an economic engine,” Kollins said. It can bring “new life to the ports, incredible job options for the trades and billions of dollars in supply chain investments. That will allow the commonwealth to supply offshore projects up and down the East Coast.”
Green groups back standard
Appalachian Voices said it “strongly supports” the commission’s decision to impose a performance standard on the proposed offshore wind project.
Its filing was submitted Sept. 20 by Will Cleveland, a senior attorney at the Southern Environmental Law Center who specializes in Virginia utility issues.
Despite Dominion’s claims, Cleveland said, regulators are not barred by statute from imposing performance standards on offshore wind projects. On the contrary, commissioners have validly imposed performance guarantees on Dominion solar projects, and it is permitted to do so for the Coastal Virginia Offshore Wind Commercial Project, as well.
He noted that the pair of solar projects carried some degree of performance and financial risk because Dominion pursued a self-build option.
“Dominion agreed that the Commission could impose performance standards in those earlier cases, yet it now asserts that authority does not exist,” he continued in the 17-page document. “Nothing about the CVOW Project or the Virginia Clean Economy Act alters the Commission’s inherent authority to impose a performance guarantee as part of its general regulatory oversight powers.”
While Appalachian Voices doesn’t object to the specific performance standard imposed by regulators, Cleveland said the environmental nonprofit would defer to commissioners’ judgment and expertise should they opt to clarify or adjust the performance guarantee.
Cleveland emphasized the CVOW performance guarantee does not affect Dominion’s ability to recover costs relating to constructing, operating, and maintaining the wind farm, provided they are reasonably and prudently incurred.
The Sierra Club put a slightly different twist on its Sept. 20 filing. The environmental advocates back inclusion of a performance guarantee as long as it doesn’t render the offshore wind project “economically infeasible to complete.”
In that argument, University of Virginia law professor Cale Jaffe pointed out that an overly burdensome guarantee could undermine development of the CVOW Project as “in the public interest,” as laid out in the 2020 Virginia Clean Economy Act.
Jaffe, who directs the university’s Environmental Law and Community Engagement Clinic, also said imposing a performance guarantee on the wind project “must be read” as a precedent for similar requirements on other types of generation facilities.
“This asymmetric treatment between fossil-fuel generation and renewable energy cannot be justified,” he wrote in the13-page filing.
Sole remaining consumer benefit
Those tracking Dominion’s significant headway on the project are understandably confused by the utility’s threat to scrap it over a single measure touted as protection for ratepayers.
For one, the far-reaching 2020 Clean Economy Act requires construction of at least 5.2 GW of offshore wind by 2034.
To show its commitment, the company navigated multiple logistical challenges to assemble and install its pilot project — a pair of 6 MW turbines in federal waters adjacent to the planned larger wind farm — that went online two years ago.
As well, Dominion’s parent company has committed $500 million to building this country’s first offshore wind turbine installation vessel. Dubbed Charybdis, after the daunting sea monster of Greek mythology, the vessel is on track to be an installation linchpin up and down the East Coast.
Craighill, of Clean Virginia, called the performance standard the most significant consumer protection that regulators adopted when approving the wind project.
“No other consumer benefits are included,” Craighill said about why groups that represent industry, the environment and low-income residents are united in ensconcing a permanent performance standard. “If this goes away, there are no other protections in place for consumers.”
Commissioners did not adopt other consumer-friendly measures backed by the consumer protection division of the state attorney general’s office, such as requiring an independent monitor, a cost cap, and an evaluation of alternative ownership models. The idea of a performance standard came from that same division of the attorney general’s office.
“It’s natural behavior for a monopoly utility to maximize money for its shareholders and have ratepayers pick up those costs,” Craighill continued. “But as we transition to clean energy, we need to ask how we do it in a way that is affordable and not a burden.
“I don’t think anybody thought Dominion would take its ball and go home.”
Walmart: Not a ‘heads I win, tails you lose’ proposition
Even though Walmart did not initially testify in support of a performance guarantee, the company agreed that it provides vital protection for utility customers.
Walmart submitted a Sept. 20 brief to regulators saying that while it would not oppose revising the performance guarantee, it is against providing further financial benefit to Dominion.
For instance, Walmart lawyers said regulators should have the discretion to make reasonable alterations, such as reducing the capacity factor from 42% to 40% or lengthening the rolling average from three to five years.
In addition, Walmart said it would be comfortable limiting the performance guarantee to the 30-year useful life of the wind farm, rather than the life of the project.
Walmart disputes Dominion’s claim that it receives no benefit when it performs in excess of the 42 percent and that the performance guarantee is a “heads I win, tails you lose” proposition.
“Dominion stands to recover a $7.22 billion return on its investment—a more than sufficient benefit to compensate the Company for its share of risk,” Walmart attorneys wrote. “Dominion should not receive further benefit via the terms of the performance guarantee, which is solely intended to operate as a backstop for customer risk.”