Customer protections a requirement for offshore wind in Virginia

Virginia is poised to continue its leadership on offshore wind, with the State Corporation Commission recently approving Dominion Energy’s application to construct the Coastal Virginia Offshore Wind Commercial Project. Once completed, the offshore wind generation facility off the Virginia Beach coast will consist of 176 wind turbines, generating enough energy to power up to 660,000 homes, according to Dominion estimates. 

In October 2020, Dominion began operation of a two-turbine test facility, and this second project will make Virginia home to the largest offshore wind farm in the country. Since this is the only wind farm owned by an electric utility, the project is unique – it is the only such project paid for by customers of a monopoly who have no choice in their electric supplier. In its approval, the Commission recognized this reality and imposed strong protective measures to ensure the customers get the clean energy they will pay for. 

Wind is vital to our clean energy transition, both in terms of its ability to complement solar generation but also to protect against volatile fuel prices.

Senior Attorney Will Cleveland

Offshore wind’s importance for a transition to clean energy 

The Southern Environmental Law Center has encouraged Dominion to move forward on offshore wind since the company acquired the development rights for the area 27 miles off Virginia Beach in 2013. Passage of the landmark Clean Economy Act in 2020 finally paved the way for this project to proceed. Among other things, the Clean Economy Act puts Virginia on track towards a zero-carbon grid by 2050, including measures such as mandatory retirements of nearly all coal- and oil-burning power generation from Dominion Energy and Appalachian Power Company by 2024, and mandatory energy-efficiency standards for Dominion and Appalachian Power by 2025. SELC played a vital role in getting the legislation passed. 

CVOW will play a critical role in reducing emissions from electric power and in the state’s clean energy transition as it complements solar power by generating power at night when the sun is not shining and during winter hours when solar performance falls.

Will Cleveland, a senior attorney in our Virginia office said, “Wind is vital to our clean energy transition, both in terms of its ability to complement solar generation but also to protect against volatile fuel prices. Dominion’s over-reliance on coal and ‘natural gas’ recently caused Dominion to ask the Commission for permission to charge its customers more than a billion dollars in unexpected fossil fuel costs. In this case, the Commission struck the right balance in advancing the project while simultaneously protecting customers from unnecessary costs.” 

Protections for customers 

The most critical protection is a performance guarantee. As part of its case, Dominion made certain claims about how well the project would perform once operational. That performance level, called the “capacity factor,” would produce an estimated amount of electricity each year. 

Power plants don’t constantly produce their maximum electricity, but the capacity factor is stated as a percentage of the electricity generated if they could. In its Order, the Commission effectively required Dominion to walk the talk. If the project’s performance does not reach the promised levels, and Dominion must buy replacement energy, then those replacement costs fall on shareholders, not customers. This is a reasonable approach given that according to the Commission, Dominion is guaranteed to earn $7.2 billion in profits on this project. Specifically, customers will not be on the hook for any shortfall in energy production below an annual net capacity factor of 42%, as measured on a three-year rolling average. This is the capacity factor Dominion itself estimated, in part because its test project hit 47%, and it relied on this number when justifying the project to the Commission. 

SELC represented Appalachian Voices in the proceedings and fought for these customer protections alongside the Virginia Attorney General’s Office of Consumer Counsel, Clean Virginia, and Walmart.  

Dominion also estimates the operation of CVOW will create 900 jobs each year during construction and 1,100 jobs each year during operation.