Regulators OK Offshore Wind, but Say They Were Forced
David Wagman | November 06, 2018Utility regulators in Virginia approved plans by Dominion Energy to build two 6 megawatt wind turbines off the coast of Virginia Beach.
The $300 million project will be paid for through existing rates, as directed by the Grid Transformation & Security Act of 2018. Contingent on various regulatory approvals, onshore construction would start in 2019, followed by turbine installation and operation in 2020.
Dominion executed an engineering, procurement and construction (EPC) agreement with Orsted (formerly Dong Energy) in January 2018. In June, Dominion executed an EPC agreement with L.E. Myers for the onshore portion of the proposed project.
Uncompetitive?
The regulatory authority said that it would not have approved the project had it not been directed to do so by the new state statutes. Its decision said that the proposed project "would not be deemed prudent as that term has been applied by this Commission in its long history of public utility regulation or under any common application of the term."
"Customers will pay at least $300 million (plus financing costs) to demonstrate a large-scale project that, based on Dominion's own studies, will not be a competitive option for the next 25 years."
The 12 MW offshore project could cost $300 million. Source: Phil Hollman/CC BY 2.0In particular, the decision points to the three things that likely would have caused it to rule against the project, had the state statute not been in place.
- Dominion's customers bear essentially all of the risk of the proposed project, including cost overruns and lack of performance.
- The project has the highest cost of any resource modeled in Dominion's Integrated Resource Plan.
- The project's cost per kWh is "significantly more expensive" than other renewable and non-renewable resources, including onshore wind, solar and natural gas.
Risk on Customers
Regulators say that in 2008 the commission ruled against a proposed integrated gasification combined cycle (IGCC) plant because evidence showed that the cost of the project was significantly higher than other resource options; the proposed project was technologically unproven and uncertain; the cost and performance estimates were also uncertain; the project was not selected through a competitive bidding process; and customers would have borne "considerable financial and performance risks" in order to determine if the new coal technology was viable.
Virginia regulators say that unlike other offshore wind projects on the East Coast, Dominion did not choose to follow a power purchase agreement (PPA) model for offshore wind, which would have placed all or some of the risk on the project developer instead of on Dominion customers. The regulatory decision adds that the offshore pilot project is not the result of a competitive bidding process and that Dominion failed to prove that the project is needed to ensure reliable service to its customers at just and reasonable rates.
High LCOE
The regulatory decision said that the forecasted levelized cost of energy for the project is 78 cents per kilowatt-hour (kWh). That means its energy cost is 13.8 times greater than the cost of new solar facilities (5.60 cents/kWh), and 8.3 times greater than the cost of new onshore wind facilities (9.4 cents/kWh).
The decision concludes that "while we agree with the Sierra Club that, 'the General Assembly wants this project,' we do not believe that the General Assembly has directed that facts regarding cost, need or other serious issues pertinent to a prudency petition should not even be developed or included in the factual record."
The customer base saddled with this folly should turn the tables on the Sierra Club and use some of their tactics by suing for unfair practices, harmful environmental effects including infrasound damage to fishes and other wildlife....
In reply to #1
Dont know much about the ocean winds, but i can tell you all about the winds on Lake Erie as i fished years upon years.
At the shoreline there is an onshore wind that produces a 3' chop (wave), as you get out about a mile and a half, it is down by 1/2 and about 4-6 miles out there is zero waves, flat as a pancake. This is a normal day, and it usually the onshore shuts down as evening draws. All begins again starting as the sun comes up and warms the shoreline.
There are exceptions to the norm, when a front comes thru, but these turbines are shut down at winds above 20mph. I would have to believe that the people building these things would know this?
but several windmills were allowed in Lake Erie 8 miles out. Cant see shoreline when i am out this far so i would assume that they wont be seen which is why they were allowed. But they will not pay for themselves i can promise. So what is the incentive? is this to get a foot in the door? to then pave the way for more closer the shoreline where the prevailing winds blow? I would have to assume.
Does the ocean work in the same way? i would again, have to assume.
Windmills are expensive to maintain, once they break they are not repaired. Govt. pays for them to get installed but does not maintain them so no money is set aside for that. especially a repair out in the ocean or lake.