(Credit: Dominion Energy)Dominion Energy has filed a settlement with the State Corporation Commission of Virginia asking the authority to reconsider a performance guarantee requirement to build a large offshore wind energy project.
The Coastal Virginia Offshore Wind development will have 2.6 gigawatts of capacity and will be built 27 miles off the coast of Virginia Beach. As part of the State Corporation Commission's (SCC) approval for the development, it wants Dominion Energy to pay for any costs associated with the project not producing enough energy, not stakeholders.
The SCC approved the development in August 2022 with the performance stipulation of a 42% generation capacity factor. Dominion filed a separate motion at the end of September saying it would not agree to the term and if it was a part of the overall deal the $9.8 billion project would not move forward.
The settlement agreement was made by Dominion, the Virginia attorney general's office, Walmart, the Sierra Club, and Appalachian Voices. If the SCC approves the settlement, it will resolve the Dominion motion opposing the energy performance stipulation and allow the project to proceed as scheduled, Dominion says.
According to a report in the Virginia Mercury as part of the September filing, Dominion said the SCC didn’t have the authority to make the requirement while the attorney general’s office and the environmental groups claimed it does. Walmart suggested lowering the capacity level to 40%, according to the report.
Key pieces of the settlement include a scale of cost-sharing scenarios. Those include shareholders covering 50% of the costs over the original budget up to $11.3 billion, shareholders being responsible for all the costs from $11.3 billion to $13.7 billion, and shareholders covering nothing more than $13.7 billion.
Additionally, Dominion will not be required to guarantee future energy production levels as defined in the August order, and the company instead will explain any shortfalls in reports to the SCC. Dominion also says it will provide customers with energy benefits outlined in the Inflation Reduction Act.
Dominion says since the SCC order it has mitigated some of the concerns, including working with the Bureau of Ocean Energy Management and other stakeholders to support the project’s timeline, advancing engineering and design preparation for the immediate release of construction equipment, advanced purchasing, onshore work, and a comprehensive cost and schedule outline.
"Development of the project has continued uninterrupted to maintain the project's schedule,” says Bob Blue, Dominion Energy chair, president, and chief executive officer. “We expect over 90% of the project costs, excluding contingency, to be fixed by the end of the first quarter in 2023 as compared to about 75% today, further de-risking the project and its budget.”
Costs of renewable energy development have seen increases this year, according to BloombergNEF, but demand remains strong. That is due to numerous clean energy incentives and the cost of energy from fossil fuels is 40% more than wind or solar.
Virginia, which had 661 megawatts of wind and solar energy capacity by the end of 2021 which made up 3% of its power capacity, has set significant renewable energy targets. Those include establishing a 5.5 GW capacity of renewable energy by 2028 with 30% of its electric system powered by renewables by 2030 and all of it by 2050.
The offshore wind project is estimated to be completed in late 2026 and is expected to save $3 billion in energy costs over its first 10 years of operations. Dominion says the settlement will help it serve its 2.7 million business and residential customers in Virginia.
"Given the now-significantly de-risked status of the project's development and given its continued 'on-budget' status, we feel that this settlement reflects a balanced sharing of financial impacts in what we currently see as unlikely scenarios of material delays or cost overruns," Blue says.
