In November, the Virginia State Corporation Commission (SCC) approved Dominion Energy’s proposal for an offshore-wind pilot program, which will be the first of its kind in Virginia. The project, which was submitted for approval in August, will culminate in the construction of two 6-megawatt wind turbines off the coast of Virginia Beach. SCC approval is an important step for offshore-wind energy in Virginia; however, in a press release, the SCC expressed concerns about the project.
The SCC contends that cost of the project will be borne by the customers rather than the project developers. Specifically, it has said that the “risk of the project, including cost overruns, production and performance failures” all will fall to Dominion customers. The SCC also noted that the bidding process for the project was not competitive, which would have served to reduce the overall cost. As it stands, Dominion projects the cost of installment will amount to $300 million for only 12 MW of energy.
The SCC’s approval, despite concerns, which include cost and viability of offshore wind, is largely due to new legislation (SB966), which demands that a project such as this be deemed “in the public interest” and forgoes the usual economic considerations. In essence, the SCC had its hands tied by SB966, which can be viewed both positively and negatively. On the upside, the bill prevents the SCC from unreasonably holding up important projects that will improve the energy mix in Virginia, as well as pave the way for more renewables. The downside is that parameters set by the bill may prevent the SCC from making important considerations about risk and cost, which ultimately serve to protect the ratepayer from bearing the cost of unnecessarily expensive projects.
The SCC is correct in its assessment that $300 million to produce 12 MW of energy is an unusually high price tag. However, the SCC also has made it clear that it does not believe in the economic viability of an offshore-wind industry in Virginia. This pilot project should be seen as an initial investment in an industry that could offer great potential. As the cost of new technologies decrease and Virginia can begin to benefit from economies of scale, offshore wind will become an affordable source of energy. Dominion Energy already holds the lease for enough land to build 2,000 MW of offshore wind, depending on the success of this pilot program. By passing SB966, the General Assembly recognized the reality of the high upfront costs of renewable projects such as these but demonstrated the importance of these investments as a bridge to more cost-effective projects as time goes on. In the past, the SCC has shown reluctance to approve any renewable project, but now recognizes solar as the least cost source of energy.
The legislative oversight of the SCC resulting from SB966 has had a positive outcome. But, as Ivy Main of the Sierra Club points out, the SCC must be wary of relinquishing too much of its oversight authority. With Dominion Energy’s plans to spend billions of dollars on various projects in the near future, Virginia needs an SCC that will actively question both prudence and value.