Dominion Energy to buy N.C. offshore wind lease for $160M

A Dominion Energy subsidiary has agreed to acquire a 40,000-acre offshore wind lease off North Carolina’s Outer Banks for $160 million, the Fortune 500 utility announced Monday.

Virginia Electric and Power Company, which does business as Dominion Energy Virginia, will purchase the Kitty Hawk North Wind lease from Avangrid, a Connecticut-based sustainable energy company, and the project will be rebranded as CVOW-South, a nod to Dominion’s Coastal Virginia Offshore Wind (CVOW) project under development 27 miles off the Virginia Beach coast.

According to Dominion’s announcement, the $160 million payment includes $117 million for lease acquisition and $43 million to reimburse associated development costs to Avangrid. The transaction is expected to close in the fourth quarter of 2024.

If CVOW-South is fully constructed, the project will generate 800 megawatts of electricity, enough capacity to serve 200,000 homes and businesses, and would connect to Dominion Energy’s transmission grid, the utility said. Dominion noted that it does not yet have detailed cost or timeline estimates for the project.

By comparison, CVOW’s 176-turbine project, which is expected to provide 2.6 gigawatts of electricity and power up to 660,000 homes, is estimated to cost $9.8 billion.

In May, following federal approvals, Dominion installed the first monopiles, or turbine foundation posts, into the floor of the Atlantic Ocean. The CVOW wind farm is being built off the Virginia Beach shoreline, starting 27 miles out and extending 15 miles to the east. The 176 turbines are expected to be fully installed and operational by the end of 2026. Dominion announced in February that it plans to sell a $3 billion, 50% stake in CVOW this year to investment firm Stonepeak.

“With electric demand in our Virginia territory projected to double in the next 13 years, Dominion Energy is securing access to power generation resources that ensure we continue to provide the reliable, affordable, and increasingly clean energy that powers our customers every day,” Robert M. Blue, chair, president and CEO of Dominion Energy, stated in a news release. “It also allows us to leverage the unique expertise we’ve gained during the very successful development and construction to date of the Coastal Virginia Offshore Wind commercial project, which reduces project risk to the benefit of customers and shareholders.”

CVOW is located about 25 miles north of the CVOW-South lease. To date, 25 monopiles have been installed at CVOW, putting the company on track to hit its target of 70 to 100 monopiles before the end of October. Workers are required to take a break from installing turbines between Nov. 1, 2024, and April 30, 2025, due to federal protections for endangered North Atlantic right whales.

Numerous residents have opposed Avangrid’s plan to bring transmission cables ashore at Sandbridge, a beach community south of Virginia Beach. In the news release, Dominion Energy stated it is aware of those concerns and is “committed to working closely with the community, the Commonwealth of Virginia, and the City of Virginia Beach as it considers this project.”

The Bureau of Ocean Energy Management and the City of Virginia Beach will need to approve the lease of CVOW-South before work can begin. Avangrid is building a large-scale offshore wind project 15 miles south of Martha’s Vineyard near Cape Cod, Massachusetts, and it still retains ownership of the Kitty Hawk South lease, which has the potential to deliver 2.4 gigawatts of power.

“As Avangrid continues the construction of our nation-leading Vineyard Wind 1 project and the development of our diverse portfolio of offshore and onshore renewable projects, this transaction advances our strategic priorities by providing significant capital infusion for reinvestment,” Avangrid CEO Pedro Azagra said in a statement. “Executing this agreement allows us to move forward with our long-term plans for the development of Kitty Hawk South, further demonstrating our commitment to accelerating the clean energy transition in the United States.”

Meanwhile, the federal government announced recently that it will auction off two more offshore wind energy leases — including one directly east of CVOW — and the other off the Eastern Shore of Maryland and Delaware. Dominion and Avangrid are among confirmed bidders in the Aug. 14 auction held by the Bureau of Ocean Energy Management.