Dominion offshore wind farm cost climbs to $9.8B

Dominion Energy Inc.’s offshore wind farm will cost about $2 billion more than expected, the Richmond-based Fortune 500 utility’s chair, president and CEO, Bob Blue, said during a third quarter earnings call Friday.

Instead of the previously estimated $7.8 billion, the 2.6-gigawatt Coastal Virginia Offshore Wind (CVOW) commercial project will cost approximately $9.8 billion, Blue said, attributing the roughly 25% cost increase to rising commodities expenses and general cost pressures across a number of industries right now amid mounting inflation. Additionally, Blue cited costs associated with the need to build about 17 miles of new transmission lines and other onshore infrastructure associated with the project.

Dominion plans to build the 180 wind-turbine farm 27 miles off the coast of Virginia Beach, with construction beginning in 2024. When completed in 2026, the wind farm is expected to power 660,000 homes. The wind farm will cost residential customers about $4 per month over the estimated 30-year lifespan of the wind farm, a Dominion spokesperson said.

Dominion submitted its application for the wind farm project to the Virginia State Corporation Commission Friday. As part of the filing, Dominion is also requesting SCC approval to build the 17 miles of new transmission lines and other onshore infrastructure needed to deliver the energy generated by the wind turbines to homes and businesses across Virginia. The route chosen was the shortest of the potential routes and would impact private property the least, the utility maintains, with 92% of the route within the former Southeastern Parkway and Greenbelt corridor, owned primarily by the city of Virginia Beach and/or co-located with existing Dominion Energy transmission line corridors.

Blue also outlined agreements in the competitive bidding process. Five major agreements represent about $6.9 billion, he said, and the remaining project costs are $1.4 billion for onshore transmission facilities and projected system upgrades and another $1.5 billion for other project costs including contingency onshore transmission facilities necessary to interconnect offshore generation components reliably and to maintain the structural integrity and reliability of the transmission system in compliance with mandatory North American Electric Reliability Cooperation (NERC) standards.

“We believe decisions we’re making around onshore engineering configurations will result in the best value for customers,” he said.

Last month, Dominion announced that Siemens Gamesa Renewable Energy S.A., a Spanish wind turbine company, will invest $200 million to build the first U.S. offshore wind turbine blade manufacturing facility at the Port of Virginia’s Portsmouth Marine Terminal. Siemens Gamesa will make 176 14.7-megawatt turbines to be installed in the 112,800-acre commercial lease area.

Dominion also announced other contractors on the project Friday.

“We are moving the CVOW project forward by working with industry leaders as we bring utility scale offshore wind generation to our Virginia customers,” Joshua Bennett, Dominion Energy vice president of offshore wind said in a statement. “These contracts will allow us to manage costs for the benefit of our customers and take advantage of the developing domestic supply chain to deliver on our promise to bring clean-energy jobs to Hampton Roads.”

Germany-based EEW SPC will produce steel pipe and corresponding pipe components to manufacture 176 steel monopile foundations, the largest of which will be 268 feet long and weigh 1,175 tons. EEW SPC will process more than 200,000 tons of steel and production is scheduled to begin in 2023.

Denmark-based Bladt Industries will manufacture 176 transition pieces, which weigh as much as 800 tons and bind the monopile foundation and turbine together while providing physical access to the turbines.

Bladt and Denmark-based Semco Maritime will manufacture components for the three offshore substations, which are multi-story units weighing 4,000 tons each, a topside platform with helicopter landing pad 157 feet above the water and support structures installed in the sea floor.

Belgium and Boston-based DEME Offshore U.S. LLC and Italy-based Prysmian Group, as a consortium, will provide balance of plant services, including the transportation and installation of the foundation and substation components, and install the subsea cables. DEME Offshore U.S. LLC said in a news release that the contract value is up to $1.9 billion.

Prysmian Group will also provide all of the subsea inter-array and export cables that will deliver energy to shore. The cables will be produced in Arco Felice, Italy, and Pikkala, Finland, while the inter-array cables will be manufactured in Nordenham, Germany, Prysmian said in a news release.

The monopile foundations, transition pieces and turbine components will be staged on 72 acres Dominion will lease at Portsmouth Marine Terminal, as part of a 10-year-agreement with the Virginia Port Authority. The lease is valued at $4.4 million annually and has an option for two five-year renewals.

The CVOW wind farm will help Virginia reach its target, mandated by the Virginia Clean Economy Act, of having 100% carbon-free energy production by 2045, and Dominion Energy’s goal of net zero carbon and methane emissions by 2050. President Joe Biden’s administration has set a 2030 target to have installed 30,000 megawatts of U.S. offshore wind power capacity.

The offshore wind project is expected to create 900 jobs and generate $5 million per year in local and state tax revenue and $143 million in economic benefits annually during construction, according to Dominion. During operation, it will create 1,100 jobs, generating $11 million per year in local and state tax revenue and almost $210 million in ancillary economic benefits annually.

In July, the federal Bureau of Ocean Energy Management began its two-year permitting and environmental review of the project.

Dominion announced third-quarter earnings of $654 million and 79 cents per share, compared with a net income of $356 million and 41 cents per share for the same period in 2020. Operating earnings for the three months ending Sept. 30 were $918 million, compared with $916 million for the same period in 2020.